Securities industry sells itself short

August 01, 1994

As the U.S. Supreme Court sees it, a worker who faces comments, gestures, actions or attitudes lewd enough to prompt a "reasonable person" to find the atmosphere "hostile or abusive" can justifiably charge the offending party with harassment. As stock brokers and other members of the securities industry see it, that standard of conduct doesn't apply to them.

That's largely the Supreme Court's fault; in 1991, it upheld the industry's right to enforce mandatory arbitration in cases of alleged bias. But because the industry also picks its own arbitrators and sets the rules for the procedures, the practical effect is immunity from complaints alleging sex, race or age bias. On Wall Street and at securities firms around the country, behavior that would put other companies at risk of serious legal damages flourishes unpunished. Women, minorities and aging workers who face unlawful discrimination are left with virtually no way to seek a redress of their grievances.

A fair arbitration process has its advantages -- it's much faster than lawsuits that must navigate the court system, building up hefty legal fees in the process. But, contrary to securities dealers' claims, few neutral observers would see their process as fair. The industry draws its arbiters from a pool that is almost 90 percent male with an average age of 60. They aren't required to follow the law or even to be up-to-date on laws on discrimination.

If that seems a daunting group for a young woman who alleges sexual harassment against her boss, it is. Even women who have cases that would almost certainly bring large judgments against defendants in court rarely succeed in winning in securities industry arbitrations. When they do succeed, their awards are minuscule compared with awards in sex-discrimination suits in the courts.

Stock trading is an essential part of a capitalist economy. A few decades ago, most accounts handled by securities firms belonged to men. But as women have moved into the work place, they have also become investors in larger numbers. Even as the industry clings to an arbitration process that makes it more difficult for women and minorities to succeed in that field, the industry eagerly courts their investments and profits from them.

This country has seen rapid progress in creating environments in which all Americans can work free of intimidation and harassment. By seizing an exemption from that progress, the securities industry has only hurt itself. After all, how smart is any business that would shrink its talent pool by allowing workers to be harassed out of the business for reasons that have nothing to do with integrity or competence?

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