Goldman Sex Discrimination Lawsuit: Bad Habits Die Hard

Three women filed a sex discrimination suit against Goldman seeking class action status. It has gotten some attention in the press and on the Web for not the best reasons, namely, the complaint recounts in some detail how one of the plaintiffs, Christina Chen-Oster a convertible bonds sales rep, had had a colleague force himself on her after a business-related group outing to a strip club. When she reported it some time after the fact (the perp had asked her to keep it secret), she was increasingly ostracized and marginalized.

While the salacious allegations are a vivid reminder of the sort of indignities that women can experience even in ostensibly well run firms, they are the most obnoxious and disheartening example of the second class status that women typically occupy in male dominated fields. The fact is that Goldman has had long standing problems with women, and the lawsuit’s charges are far more damaging and potentially costly than the commentary indicates.

I joined Goldman in its corporate finance department nearly 30 years ago. Goldman had just been sued for sex discrimination, and the firm seemed eager to counter its reputation as the worst place for women on Wall Street. But it wasn’t clear to me that things has changed so much as the worst extremes were addressed. For instance, a highly respected Vice President had propositioned every woman in the department. He was finally hauled before the Management Committee and told to cut it out. I arrived to the firm to learn that there was a betting pool on whether he would revert to his old form with me. While he didn’t, a partner in the firm did make advances. When he eventually backed off, the fallback was to give me a checklist of the sort of woman he wanted to date and ask me to set him up with suitable candidates.

Fast forward, and while the firm now has policies on dating, the area where the rubber really hits the road, pay and promotion, appears to be as retrograde as ever. Some of this may result from the shift at Goldman from having a substantial investment banking business to one where traders, the most macho and individualistic players, are now dominant.

Make no mistake: the charges in the suit are serious. It seeks class action status, and gender discrimination suits with similar allegations have won class certification (the process is that the plaintiffs do limited discovery to prove they meet the four criteria for class certification). That means that should the plaintiffs prevail, every woman at the firm in a to-be-determined target time period would be considered in arriving at damages.

The central charge is a classic pay act claim, that women are paid less for doing the same work as the boys. There are multiple mechanisms by which this occurs, in addition to allegations of simple lower compensation for comparable performance. Women are also set up to do less well: the best assignments and territories go to men (the suit gives examples of plum territories and clients being stripped from women and assigned to male colleagues); are asked to do clerical work and training far more than men and receive less informal mentoring.

The suit describes how business unit managers have unlimited discretion on pay and promotion of their subordinates. This may not seem unusual, but according to the plaintiffs, a lot of “human capital management” procedures are easily and often gamed. For instance, the firm has “360 degree” reviews, but the boss picks who gets to review a particular subordinate which can be used to stack the deck, and when he gets back the ratings, he can still rank his troops as he sees fit. Perhaps most important, pay is compounded. If one person is paid 10% less than other people in their unit, their next year pay is set as a percent increase over prior year pay. So a one year setback, whether justified or not, will lead to widening differentials over time.

There is every reason to believe this suit will be costly to Goldman, yet have perilous little long term impact. One of the two firms representing the plaintiffs, Lieff Cabraser, is a class action heavyweight. Goldman is likely to be advised to settle the suit quickly. It does not want Lieff Cabraster doing a lot of discovery. Lieff Cabraster will probably go to the class certification stage (that’s when the numbers will start to get large) and see if Goldman initiates settlement talks.

Assuming this plays out according to the normal script, all affected women will get checks. Those who remain, even if the firm agrees to modify some of its pay and promotion practices to manager discretion, are unlikely to see much change. Big dealer firms delegate substantial authority to producers; a Wal-Mart, with its highly codified managerial processes, is in a far better position to curb abuses than a firm where managers operate what amount to franchises in a larger corporate umbrella.

There’s nevertheless a tendency to see people like the plaintiffs in this suit as sore losers when the reality is far more complex. Unfortunately, legal remedies can reinforce the idea that minorities and women can’t succeed on their own and need quotas or other measures to assure they are represented in sufficient numbers. By implication, diversity is in conflict with merit-based policies. As transgendered scientist Ben Barres has pointed out, citing research, “When it comes to bias, it seems that the desire to believe in a meritocracy is so powerful that until a person has experienced sufficient career-harming bias themselves, they simply do not believe it exists.” And examples are widespread in other fields. For example, a 1997 Nature paper by Christine Wenneras and Agnes Wold, “Nepotism and Gender Bias in Peer-Review,” determined that women seeking research grants need to be 2.5 times more productive than men to receive the same competence score. In 1999, MIT published the results of a five-year, data-driven study that found that female faculty members in its School of Science experienced pervasive discrimination, which operated through “a pattern of powerful but unrecognized assumptions and attitudes that work systematically against female faculty even in the light of obvious good will.”

It isn’t widely recognized outside the human resources field, but performance appraisal systems have been criticized for over 100 years as being unable to live up to their objectives. Thus, the typical defense against the failure to achieve diversity, that the company was in fact hiring and promoting based on achievement, is hollow. These systems not only are subjective (inherent to most ratings) but also often lead to capricious, even unfair results

The idea Goldman and Wall Street generally, which for decades have had their pick of top business and law school graduates, can’t find women of the same caliber as men, simply doesn’t pass the common sense test. But “diversity” has the effect of shifting attention away from the fact that companies may be inbred. Conservatism and a common preference to hire in your own image leads many firms to stick with their tried-and true profile, which in most cases is Caucasian and male. Sadly, the C level and boards at most large companies still look more like country clubs than the US as a whole, and that’s still not likely to change soon.

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  1. Robespierre

    “Christina Chen-Oster a convertible bonds sales rep, had had a colleague force himself on her after a business-related group outing to a strip club.”

    Come on these are just “animal spirits”. Capitalism can’t function if you don’t allow these things. How is Goldman supposed to attract and keep “top talent” and the “brightest and smartest this nation has to offer” if their guys can’t vent some of the steam their high pressure jobs cause with a little sexual harassment. What are you anti-business? I think the ladies should just “suck it up and cope” as a bastion of capitalism would say…

    1. craazyman

      When the whole place is a whorehouse, it’s like one whore calling the other whore a slut.

      This just makes me laugh on so many levels. It’s a real farce when multi-millionaires who work the levers of the Financial Rape Machine get muddy wrestling with each other over issues of “justice”.

      I’m sorry. I can’t stop laughing. A group business outing to a strip club? ha ha haaa ahhhah ahahaha hahaha.

      I mean really. A strip club? Puh-leeeze.

      This is why I try to watch the NFL where violence is at least choreographed in an artful and entertaining way, and try not pay too much attention to these idiots — except when they nearly destroy civilization.

      1. craazyman

        It occurred to me riding the 86th street bus this afternoon that there may in fact be a business case for a Goldman outing to a strip club.

        At first, I admit I didn’t see it. But then I began to think of all the strip clubs I’ve been to. There were many, in my wilder days. But none were on the office’s expense account (except one which I won’t go into, although it was my client and I was self-employed).

        Nothing like a belly full of beer and a naked woman standing in front of you, if you’re a redblooded hetero guy. Of course, it’s better if she’s in your apartment, but lacking that, a strip club works to a certain degree. That and the beer.

        The thing about strip clubs that got me thinking Goldman may be one step ahead of us on this (like they are on a lot of things related to money) is this: Nothing separates a man from his money faster than a strip club.

        You pay to walk in, you pay to sit down, you pay to drink and you pay to tip. It’s a machine that strips the money from clients with incredible “efficiency”.

        Truly, it’s “Naked Capitalism”, at its most sublime.

        So maybe Goldman was there on a due diligence mission relating to corporate strategy or R&D into fee structures. Maybe they were there to learn something. ha ha ha.

        I guess it’s easy to fly off the handle on this stuff. Butt sometimes that’s because you just don’t the opportunity that others do.

        And as for groping your colleague. Well, I bet that Goldman woman is pretty hot, so after a few beers and staring at all that flesh, I mean really, what guy wouldn’t be on the edge? It would be a tortorous exercise in self control not to be. Every guy has to learn the lesson the hard way: If you want to hit home runs, you gotta step up to the plate. ha h aha haha hahahahahah.

    2. MrVeryBig

      You are right, Robespierre. If you cut your balls in the name of feminism you can kiss goodbye your career as a investment banker. Feminism is just another form of socialism. Eventually it will kill very important animal spirits if you let it flourish around you.

  2. lorac

    Thank you for the excellent commentary and insight on this sensitive subject. I’ve been a woman in male-dominated schools and fields for my whole adult life. Some of what you discuss I’ve experienced (plum assignments going to men, pay disparity, rumours about my sexuality preference) and have women friends who have experienced that and the sexual advances too. We could probably each write a book on what’s happened in our careers.

    It isn’t going to change IMHO until there are more women at the top of companies, as directors of companies, as heads of university departments, on hiring and promotion committees, as organizers of meetings, etc. I’ll continue to do what I can to promote women, be a sounding board and act as a support group (of one or of many).

    1. attempter

      Spoken like a good little corporate liberal fascist.

      You just want equality among your fellow elites, while you happily seek to enslave the world. Well, decent people want to destroy all elites, of either gender.

    1. MBSLifer

      The former Goldman managing director also wrote an article on the subject.

      While her article doesn’t really shed any new light, one thing I found interesting was that she worked in the mortgage securities group. In my experience in the mortgage business, it had always appeared to be over-represented with women in leadership positions and in numbers. Many of the investment banks, issuers, law firms and rating agencies in the MBS area had women in senior positions. In addition, I worked with a woman at Goldman during the time that this author was there named Janet Bell. She was the top, or one of the top traders (along with a guy named Steve Mnuchin, who was recently part of the team that bought the IndyMac carcass). Janet also was made MD at a young age and rose to a position of prominence at Goldman over the years. I am not sure if she is still there.

      Many years ago, I proposed a theory on why MBS had so many women in it, including at senior levels. For most of the 1980s and 90s, MBS was a little loved backwater. Most bankers and lawyers did everything they could to avoid it and if they were rotated into the group many would shortly request out or leave the firm to get out. MBS had a reputation as being labor and document intensive, with lower pay and virtually no glamor. Young banker,s lawyers, etc. wanted to be in M&A, equities or corp. finance. All of the Ivy hotshots wanted to be in the more prominent fields.

      As a result, there was more opportunity for women in the MBS area. All they had to do was endure longer hours, lower pay and limited recognition.

      This is consistent with the theme of Lew Ranieri’s crew of outcasts in Liar’s Poker. It is also why firms like Bear and Lehman dominated MBS for many years – the bigger firms never wanted to invest much effort in the area.

      I must confess that the outsider feel to MBS work appealed to me as did the notion that it was a field that was more tolerant of women. I thought it was a fair trade off – less pay and less attention in exchange for not being a part of the old boys club and all of the ways of doing business in the more glamorous fields. This is a part of my previous descriptions of the unpleasant invasion of the correlation and CDO traders, post 2004 – they were injecting the more “traditional” glory-seeking banker approach to the business into our comfortable, previously hidden backwater, and we all know what followed.

      All of which is to say, this other Goldman author may have something interesting to say, but she is omitting a significant piece of her own story, in my opinion.

      Unless you were in the industry in the early 1980s, and female, you can’t comment on who had the worst reputation. And it WAS Goldman then. Bear, like Salomon (where I was a summer associate) had much worse locker room banter and petty jibes, but they were also known as firms that didn’t care who you were, background-wise, if you were productive and profitable. You could have two heads at Salomon and still get ahead. They had two former secretaries who had been promoted to associate at Salomon in investment banking then, both of whom were as well regarded as the MBAs. That would be simply impossible at Goldman. Bear was a more extreme Salomon: more sharp elbowed, totally crass and low class, but fiercely meritocratic (to the extent that can be achieved). The firm’s strong culture means you had to hew to a very specific profile (background, behavior, interests) which didn’t comport very well with “female”.

      1. Leeanne

        Couldn’t help remark, re: a guy named Steve Mnuchin. His dad, Bob Mnuchin was a trader at Goldman in 1959 when I worked in the department as a registered rep. I have some fond memories of morning breakfast served at the desk on a tray from Eberlin’s downstairs at 25 Broad, one of the very few good restaurants in the Wall Street area in those days. Every morning as I recall, Gus Levy had Mnuchin in his glassed enclosed office off the trading area, waving his finger in his face in front of everyone, traders at the their desks, the entire office.

        The trading desk in those days was no more than 20 feet long with traders on either side of the table; maybe a dozen or less.

        Amazing how much bullying and humiliation someone will take for money -or maybe prestige -or, give him credit, maybe just because he’s so respected Gus Levy, that he was grateful for the mentoring and proud of it.

        Women are different.

  3. Bam_Man

    “I am shocked, shocked to find there is sexual discrimination going on at Goldman Sachs.”

    I’m also sure that sexual discrimination/harassment isn’t anywhere near the top of the list of crimes and misdeeds that are committed daily in that evil den of vipers.

  4. ndk

    A checklist? You’ve got to be kidding me. That’s almost too embarrassing to read. I can’t imagine being its recipient, let alone author.

    I work in comp sci in R&E, a field (justly) notoriously full of nerdy men. But I’d estimate our little slice of this world is at least 20% women working in the field itself, and a proportionately large number of women who work in both management(including my boss) and meeting planning in particular.

    I have never, ever seen any behavior towards any one of them that is remotely unprofessional, much less so vile as what you describe. I’ve never even thought to discuss it with my (female) colleagues because it’s such a non-issue.

    But we also don’t do drugs at work, or visit strip clubs after it. We don’t rape and pillage companies, economies, and countries, either. We produce genuinely valuable and extensively used software that is employed in very sensitive environments. By any measure we’ve given a lot to the world, and we’ve done it all the right way, by building a better widget.

    And I think I speak for all the other widget makers in all the other walks of life when I say that the vile, inhuman scumbags in finance can for this and every other of their sins, rot in the deep circles of Dante’s fertile imagination.

    But saying that won’t change anything, just as these lawsuits won’t either. The Lord of the Flies will rule until he’s killed. Take away the Bernanke put, and put the failure back in capitalism. The invisible hand will stab these fools first.

    1. Yves Smith Post author

      So as not to sound like I was trying to settle scores, I underplayed this and other incidents. The partner had on his checklist “athletic” which was code for “good body” and “high sex drive.”

  5. Spider

    There seem to me essentially two strands in this story. One is about a specific incident when one of the women in the suit was groped. The other is the charge that GS’s culture and review system is biased against women. The former may be plausible (although it happened a long time ago) but the second is not.

    Wall Street firms and Goldman in particular go to great lengths to be fair (and to be seen to be fair) to women. I’d be very surprised if this particular aspect of the case has any merit.

    Your criticism of GS’s review system is off target. This is a system in which the reviewee (not the manager) gets to choose who will review them. That seems pretty fair to me. I’m not sure what would be fairer unless you came up with some “objective” scheme that measured people by the revenue they produce but that obviously has some significant problems.

    Oh, and Goldman has never been known as the worst firm on Wall St for women. That was always Bear Stearns.

    1. Yves Smith Post author

      With all due respect, you are incorrect and evidently did not read the lawsuit (the post provides a link). First, the suit makes NO claims re sexual abuse/harassment. The suit recounts in detail how each of the three women were treated shabbily in terms of account assignment, job definition, pay and promotion. The point of the story re the colleague forcing himself on Chen-Oster is that she was marginalized when she finally got around to mentioning it to the higher ups, which was long after the incident. Thus that aspect of her story is about RETALIATION, not about her being demoralized or traumatized as a result of the incident. Thus that ugly vignette is merely a supporting detail in a longer account about discrimination in pay and promotion, but if you relied on accounts elsewhere, you’d think the suit was about sexual harassment. It isn’t.

      In addition, the claims provide VERY considerable detail about how the GS pay and review processes work. I’ve hewed to the description there.

      In addition, I’m extremely familiar with this terrain. I wrote a piece for The Conference Board review on the subject of discrimination, which included Goldman examples. It was presented to be productive but nevertheless presented numerous deep seated problem. I received multiple messages, directly from the heads of HR departments at Fortune 500 departments (the CBR is mailed almost entirely to top executives) and indirectly from people who told me they had heard it from top HR staffers that it was the single best piece on discrimination they had ever read.

  6. Valissa

    Keeping up appearances – A new study demonstrates that how women musicians dress alters the perception of how they play
    In the 1970s and 1980s, in an attempt to overcome biases in hiring, most orchestras changed their audition policy, and began using screens to conceal the identity of the candidate. Female musicians in the top five US symphony orchestras rose from 5% in the 1970s to around 25%.

    1. Kevin de Bruxelles

      The obvious response to this survey is did they do the same study on men and if so what were the results?

  7. Kathy

    I wholeheartedly agree with the assessment of performance reviews. I’ve been subjected to them, including the 360 reviews, for most of my career in information technology, regardless of the market sector I’ve worked in at the time. Just recently my department’s staff meeting had a review of the new review system, and it was admitted by a manager in front of an HR manager in attendance, that even if an employee had a superior 360 review, the manager still had the last word. It’s been well known in this organization that reviews are crafted to suit management’s need to either promote or demote staff, depending on which way the wind is blowing. How the Human Resource area can continue to support this malpractice is beyond me. To me, it just indicates that HR is not a profession, but a lobbying tool of the corporations. There is no science in their profession, it’s all b.s. smoke and mirrors.

  8. bob

    “Women are also set up to do less well: the best assignments and territories go to men (the suit gives examples of plum territories and clients being stripped from women and assigned to male colleagues); are asked to do clerical work and training far more than men and receive less informal mentoring.”

    In my brief experience at a large civil engineering firm this is all very true. It was the same with the Engineering school.

    In one stark example, a very ham handed attempt at promoting diversity resulted in a very young woman and a young (presumably Hispanic) man put in charge of a project. They were not ready, and given very little support.

    The project was one that no one wanted to begin with. The two were overwhelmed. The project team that they handed it off to for construction all blamed “diversity”, and then proceeded to end run management on most issues. Any honest attempt at learning from their mistakes was thwarted.

  9. pitchforksforall

    “While he didn’t, a partner in the firm did make advances. When he eventually backed off, the fallback was to give me a checklist of the sort of woman he wanted to date and ask me to set him up with suitable candidates.”

    What does this kind of behavior tell you about the kind of people GS (and probably all of the financial firms) hires ?

    What a despicable human being.

    The financial business really is full of sociopaths.

    1. But how can i profit from it?

      Sounds like there’s a strong contingent of narcissists to go along with the sociopaths doing “God’s Work”.

  10. PQS

    “a pattern of powerful but unrecognized assumptions and attitudes that work systematically against female faculty even in the light of obvious good will.”

    I’ve done a little reading about this phenom, which researchers call “microinequities.” They don’t just affect women, but minorities as well. Whenever the dominant group has a certain set of behaviors and beliefs, they tend to think that outsiders don’t share them, and they act in ways that are both perceived and received as demeaning.

    Dismissiveness, conversational dominance, talking without making eye contact, and negating or minimizing someone’s contributions are all types of “microinequities” and most people who perpetuate them don’t even know they’re doing it until it is pointed out in a neutral setting.

    I’ve experienced this, as has almost every single woman I’ve ever worked with, over the course of my career in construction, in addition to blatant discrimination. Usually if you call out the discrimination, management will back off right away. The microinequities are much harder to address. I used to get utterly furious at this sort of treatment, until I started to really understand it and learned to just avoid it. Like finding another job, because unless these behaviors are pointed out and upper management makes a conscious effort to eliminate them, the culture will never change.

    PS to potential macho commenters out there: No, this is NOT a case of “hurt feelings” or “sensitivity” or not having the balls or the brains to do the work.

  11. scharfy

    Sexual “discrimination” at Goldman Sachs?


    I appreciate it that you mix up all the serious, sometimes even dire, world events with a little comedy.

    Destroying America, one CDS at a time – most likely silver spooned from birth and fast tracked by birth right – and someone could have the gall to claim discrimination.

    That’s fucking too much.

  12. YK

    Yves: “The idea Goldman and Wall Street generally, which for decades have had their pick of top business and law school graduates, can’t find women of the same caliber as men, simply doesn’t pass the common sense test.”

    “simply doesn’t pass the common sense test” should be “from a feminist’s perspective, simply doesn’t pass the common sense test “

  13. dbk


    Thanks for yet another excellent piece, backed up by your first-hand knowledge and experience.

    I entered the discussion at comment #26, and, surprised at the tenor of several of the responses, did an informal tally – to date, less than 10 responders (<40%) were explicitly supportive of the plaintiffs in the case. Disheartening, but hardly surprising.

    1. JTFaraday

      I think a lot of that comes from the fact that we can’t believe we’re still being asked to regard Goldman Sachs as a legitimate institution.

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