Chapter 1

THE PLAYING FIELD

Wall Street in the 1990s

Wall Street investment houses are the pinnacle of the securities industry, which mediates the flow of finance capital from investors to corporations, tax-exempt organizations, and other corporate entities like governments. Wall Street is supposedly “a citadel of pure economics, where pay for performance would seem to be the ruling ethic.”¹ The compensation system on Wall Street is a rational incentive structure in which bonuses comprise the majority of workers’ pay and are supposed to reflect the amount of revenue they generate for the firm—simple enough. Bonus structures provide incentives to invest effort, skill, and time in the pursuit of firm profits, while inequality that is not based on merit contradicts these incentives and discourages worker efficiency.

Market conditions at the end of the millennium should have encouraged greater equality. Wall Street experienced its greatest economic boom in history in the 1990s, so that securities firms had to compete for qualified employees and pay them well. Economic theories suggest that this type of competition among firms for skilled labor should eliminate inequality that is not based on merit, because discrimination is expensive if it is not relevant to performance—firms would drive away qualified workers and lose money in fulfilling an irrational impulse.²

Despite Wall Street’s rationality and the boom market of the late 1990s, we’re still confronted by systematic, if subtle, discrimination. We’ll uncover how inequality can persist even under market conditions that should reduce or eliminate it and work to understand how structural discrimination may be rationalized and institutionalized.

Wall Street in the 1990s

The late 1990s were Wall Street’s longest bull market. In 1995 the Dow Jones Industrial Average hit 4,000 and kept climbing. Before the year 2000 it had crossed the 11,000-point mark.³ The firms that provided finance capital gained global power, and more and more investors entered the markets for stocks and mutual funds. Wall Street’s revenues, number of employees, and professional compensation all swelled.

The securities industry is highly concentrated; the ten largest firms pulled in over half of the 1997 broker-dealer revenue from the NYSE. The top 25 firms accounted for 74 percent of the NYSE’s revenue and 79 percent of its capital.⁴ The financiers I interviewed worked for the biggest players on the Street: Morgan Stanley Dean Witter, Goldman Sachs, Merrill Lynch, Lehman Brothers, Salomon Brothers, Smith Barney (the latter two merged in 1997 to form Salomon Smith Barney), Credit Suisse First Boston, J. P. Morgan, Bear Stearns, and Donaldson Lufkin and Jenrette (DLJ).⁵

I asked these workers about their compensation in 1997, a year when the U.S. securities industry gross of $145 billion represented approximately 2 percent of the total U.S. GNP of $8.1 trillion and profits hit a record high of $12.5 billion. On the buy side, revenues from mutual funds and asset management also hit record highs of $10 billion and $5 billion, respectively.⁶ The firms that earned the most were led by the big three in the top tier—Merrill Lynch, Goldman Sachs, and Morgan Stanley Dean Witter.⁷ These firms were followed by second-tier firms of Salomon Smith Barney, DLJ, Lehman Brothers, Credit Suisse First Boston, and J. P. Morgan in positions four through eight.

In 1996 and 1997, professional compensation on Wall Street also hit all-time record highs, and industry employment was rising.⁸ By the end of 1997, employment in the U.S. securities industry reached 612,800, representing an 8.1 percent increase since the end of 1996, and a 36 percent increase over five years.⁹ The hottest industry for mergers and acquisitions in 1997 was financial services, in a trend toward consolidation into megabanks.¹⁰ The merger wave caused the share prices of publicly held financial firms to skyrocket. By all financial measures, securities firms were on an upward trajectory.

The 1990s also marked an increase in the number and proportion of women entering the securities industry, as well as the promotion to senior positions of some of the pioneers who broke gender barriers in the 1970s. Goldman Sachs named Abby Joseph Cohen a partner in 1998, in its last partnership selection before the company went public in 1999.¹¹ Wall Street firms are reluctant to dispense statistics on the characteristics of their workers, but many estimated that Wall Street firms hired women as approximately 15 to 20 percent of their incoming associate classes in the 1990s, an increase over earlier decades although still far from equality at the entry level—a point that has not gone unnoticed in the high-profile sex discrimination suits against the industry.¹²

While the industry as a whole was skyrocketing, securities firms (and professionals) differed in their relative success. Mergers displaced some finance professionals in 1997 and early 1998, and some force-cutting occurred.¹³ J. P. Morgan announced in February 1998 that it would dismiss approximately 5 percent of its workforce, or 700 people. After the merger of Salomon Smith Barney with Citicorp to form Citigroup in 1997, the megabank announced layoff plans with the intention of cutting 6 percent of its workforce, or 10,400 jobs. Other Wall Street firms also prepared for layoffs in the late 1990s, even as the stock market continued to climb. In this context, the MBAs of the early 1990s shaped their careers in the securities industry.

Success and Failure on Wall Street

As the markets soared, many Wall Street careers were on a clear path to success and there were abundant opportunities to advance. Deal volume, underwriting and commission revenues, salaries, and the size of the workforce all skyrocketed to record highs.¹⁴ The demand for financial services was increasing, especially in hot areas of investment banking and trading like high yield, derivatives, and mergers and acquisitions.¹⁵ Wall Street firms also faced heightened competition from commercial banks and foreign underwriters who took chunks of traditional Wall Street business and hired away many of their talented workers by offering large guarantees and signing bonuses.¹⁶ The fact that firms competed for skilled employees opened up workers’ opportunities in the industry and contributed to escalating bonus packages.

But not everyone benefited equally from Wall Street’s remarkable growth cycle in the 1990s. Even in this climate of abundance, success was a relative concept. Most men and women who stayed in a top firm and an area like corporate finance, sales and trading, or equity research were successful because compensation and rank increased over time.¹⁷ But others were derailed from the path to success despite the favorable market conditions on Wall Street, as they encountered layoffs, downturns in particular market niches, involuntary transfers, difficult managers, or hostile work environments.¹⁸ Thirty-nine percent of those interviewed (56 percent of the men and 27 percent of the women) were highly successful during the long bull market, exceeding the average pay for their area and cohort. But 61 percent (44 percent of the men and 73 percent of the women) were less successful despite the favorable market conditions on Wall Street. Many MBAs who entered the securities industry immediately before its longest bull market encountered unexpected opportunities for success, but others confronted obstacles to their career goals. Consider, for example, the diverse paths taken by the following four men drawn from the larger group interviewed for this study.

The Men

Roger¹⁹ grew up in the Northeast in an upper-middle-class family. His father was a doctor and his mother was a homemaker. He had recently married another investment banker who was working on her MBA, and he had no children. Roger attended a prestigious private university where he obtained a very high GPA. He also had a high score on the GMAT. Between graduating from college and pursuing an MBA, Roger was a financial analyst in mergers and acquisitions (M&A) at a large investment bank. Financial analyst positions are typically filled by young college graduates and are the most time-consuming and lowest-ranked positions in the investment banking world. Roger entered the MBA program to take a break from the stress of being an analyst, and expected to use the opportunity to find a career in another industry. He said, “I needed to take two years off. I was burnt out after being an analyst. I needed it to release tension. Doing an MBA is really easy compared to being an analyst. Being an analyst is very stressful.” At the end of his MBA program he did not find anything more appealing than finance and was in a good position to obtain Wall Street offers. Instead of returning to the large firm where he had previously worked, he accepted a job in a smaller firm.

Roger changed groups within his firm once. He was offered a position in M&A that fit with his previous experience and existing set of skills and he wanted to leave his first position, which involved a lot of business-related travel.

I was sick of flying to South America all week and then working weekends. Then they hired a bunch of people from [a commercial bank], and I didn’t want to work with an unknown quantity. So I was asked to join the M&A group that was in formation, and I [did].

He was promoted to vice president after four years as an associate, in accordance with the promotion time line of the industry. Roger strongly believed that Wall Street operated as a meritocracy and was confident that his performance was exceptional. When asked how he ranked among his peers, he said, “Within the firm, I’m in the top 1 percent. . . . Because I’m smart, I work hard, and I do a great job.” In 1997, four years after graduating from business school, he earned over $600,000, and he said that he loved his job so much that he would do it for half the pay. Roger followed a linear career path, amassing experience on Wall Street before obtaining his MBA. When he reentered the industry, the positive economic climate propelled him toward even greater success and satisfaction. What he attributed to his own merits was undoubtedly the result of his skills and experience combined with favorable market conditions.

Edward differed from Roger in his experience before the MBA but also encountered growing opportunities on Wall Street. He grew up in the suburban South in an upper-middle-class family with a professional father and a homemaker mother. He attended a large public university for his bachelor’s degree and graduated with a high GPA. He then worked as an accountant for four years prior to obtaining his MBA. During that time he married. He had two small children at the time of the interview (two and six years old), and his wife was a homemaker.

Edward decided to get an MBA to change careers. “I wanted a change. I had good training, but I didn’t want to pursue it as a lifelong career. I was tired of being a CPA. Getting an MBA was an opportunity to change careers. It allowed me to start over.” His experience as an accountant helped him understand financial analysis, but his only real Wall Street experience prior to completing the MBA degree was during the summer between his first and second years. At that time, he was a generalist in corporate finance at one of the top investment banks and discovered that he enjoyed the work.

I liked it. I did it for the summer because I didn’t understand it and thought it would be nice to leave business school with a better understanding of what happened on Wall Street. I didn’t do it because I ever thought that I would do it full time, but I thought it would be an opportunity and I probably shouldn’t waste it. After the summer I really enjoyed it. I didn’t necessarily like being at the office until 3:00 in the morning but I really enjoyed the work and I thought that another two years on Wall Street would be a good thing to have behind me.

The same firm hired him when he graduated, and he expected to work there for approximately two years but not to make a long-term commitment to Wall Street.

While the job required a tremendous commitment in terms of hours and the first year was the “most stressful” of his life, he found that he fit in well with the organizational culture and continued to enjoy the work. He worked on large transactions where he had substantial exposure to client companies with huge assets. He was promoted to vice president after four years and senior vice president after three more years, as was the norm on Wall Street. He then changed firms in 1998 when a close personal friend offered him a position of greater responsibility at a smaller firm. While he was satisfied with his original position and had earned over $1 million in 1997, he was drawn toward the opportunity to be a bigger fish in a smaller pond and to work with someone with whom he had a strong personal relationship. He entered the new firm as a managing director (MD)—a higher rank than his position at his original firm. While the smaller firm did not have the same reputation and high-prestige name as his original employer, he had developed strong client relationships and was able to bring in business. Instead of working on Wall Street for two years, as he had intended, he had a very successful seven years after the MBA.

Edward was highly satisfied with his career, despite tremendous sacrifices in his personal life. When asked about work-life balance, he said,

Initially I didn’t balance it. My son was born in my first year in New York City, as a first-year associate. It was the most stressful year of my life. . . . Sacrifices in the first few years were huge. Time away from family was [the main sacrifice]. You miss special occasions, you miss birthdays, you miss parties, you miss, miss, miss, miss, miss.

He made these sacrifices as he followed the opportunities that presented themselves, without a conscious decision that Wall Street would be his career forever or even a full understanding of what such a career would entail. These opportunities were a product of the favorable market cycle and the resources available in his first job at a prestigious firm. He was also able to follow these opportunities in part because had the support of a homemaker wife—a fact that he acknowledged had allowed him to focus on work. He was also able to maintain a clear upward trajectory because he worked in an area and firm where he fit in well with managers, peers, and clients, and where the market was booming and deals were happening. The clear trade-off that he made was to accept a lack of involvement with his children during the first few years of their lives.

As the industry entered a bull market, Roger and Edward encountered expanding opportunities and an upward compensation trajectory. They were able to take advantage of these opportunities because they were unencumbered by other draws on their time. The combination of their talent and effort with a favorable economic climate and a good fit with their firms’ cultures led to high rewards on Wall Street. But not everyone encountered the abundant and appealing opportunities that Roger and Edward did. Some men were pulled off the fast track by opportunities outside finance or by personal issues. Others were pushed out of the most lucrative jobs on Wall Street by market forces, the loss of a mentor, poor advice, or firm layoffs. In considering the next two men, contrast Edward’s choice to accept limited involvement with his children with Kevin’s experience.

Kevin grew up in a middle-class family in the suburban Northeast. His father worked in sales and marketing, and his mother was a homemaker. He attended an Ivy League college, where he obtained a high GPA. He subsequently worked as a two-year financial analyst in M&A at one of Wall Street’s most prestigious firms before entering an MBA program. When he graduated, he returned to the same firm in corporate finance. Like Roger, he returned because he had not found anything that he preferred more. The work was interesting and he enjoyed the quality of people in the firm. Because of his previous experience, Kevin was prepared for his responsibilities, although the hours were especially grueling during his first couple of years. When asked about his expectations for hours, he said,

I knew I would work a lot. If I had to quantify it, I thought I’d probably work maybe seventy hours a week, which is a lot. Which is a hell of a lot actually. It was worse. I don’t know if that’s the right number. I don’t know if I actually worked more hours than that but I think I ended up working more than I thought I would have to because it was a very busy time and we were a very small associate class. It was after a bad year so they had a cutback on the amount of people they hired. And it turned out there wasn’t any less work to do.

Kevin married a preschool teacher one year after completing his MBA. Their first child was born two years later, and his wife gave up her teaching position to become a homemaker. He found the hours difficult but tolerable until his first child was born, but then found that he wanted to change jobs so that he could work fewer hours and have more time with his family.

I can’t honestly say I thought about it until it happened. And then I really, really didn’t want to be working as much, basically. I wanted—it sort of made you realize that you wanted to spend—at least I wanted to spend a lot more time with my family at home. My wife and my newborn child.

Kevin was also willing to accept lower pay as a trade-off. He contemplated a position in a start-up firm, but ultimately decided that it provided too little security and began to pursue other opportunities within his firm.

I decided to stay here and look around. Around the firm in other areas but I definitely, definitely made the decision I didn’t want to do investment banking anymore. It was just too much. It was too much work and I didn’t have a true love for doing it so it didn’t match my own priorities enough. And my wife had a very big influence. She hated it. Could have cared less about the money. She was much more concerned with [my] being around and [our] being together.

Kevin found a new position in a support role where he was promoted to vice president and senior vice president on schedule. His pay, between $350,000 and $400,000, was substantially less than he would have earned if he had stayed in corporate finance. According to a survey of executive recruiters, the median pay in investment banking in 1997 for his graduating class was $635,000, with most investment bankers receiving between $425,000 and $840,000.²⁰

Kevin was unusual among men in his decision to take a less lucrative position with limited potential for growth to be more involved with his children. While the bull market provided opportunities for him to earn more money, his choices illustrate the “pull” of family life for men as well as women. A willingness to make this type of trade-off was rare, especially for men, but illustrates the desire for a balance between paid work and family.²¹

In contrast, it was not the pull of family life but the push of organizational forces that led Jacob to change both firm and function. Jacob grew up in an urban area in the Northeast in a middle-class family. His father was a medical researcher, while his mother dabbled in many different jobs. He had never been married and had no children, although he wanted to have a large family. He attended a medium-sized public university for a bachelor’s degree in engineering and then worked as a hardware and software consultant for a small firm for two years. Aside from giving him some acquaintance with the people skills necessary to work with clients, this job was unrelated to his subsequent experiences on Wall Street.

Like Edward, Jacob’s only Wall Street experience prior to finishing his MBA was during the summer between his first and second years. At that time, he worked as a generalist in corporate finance for a large Wall Street firm, where he gained experience in a variety of different groups and learned the jargon of the profession. When he graduated, he accepted a position at the same firm as a generalist in corporate finance. There he did two six-month rotations before he was approached to become a “relationship manager.”

I was then approached—and this is unique, there were only four of us of the fifty who were approached—to do something new. And that was to take people who are now only second-year associates and make them relationship managers, which is usually done at the managing director level. They needed more people out there talking to more clients so they gave me a list of clients that I was going to be second on. In other words, I spent the next year and a half working with three vice presidents who were calling on clients. And I served as their second, so I went to all the meetings and helped prepare all the presentations, try to formulate with them the strategy and learn what it meant to call on companies.

After one and a half years in this position, Jacob received his own clients and had to act as their primary officer.

Because his clients were concentrated in a particular region, Jacob also moved to that region after one and half years, where he worked in a satellite office. He remained in that position for slightly longer than a year after relocating and described it as the worst year of his life.

I decided or I discovered that I’m not a good salesman and, although I may know I’m going to a client and trying to sell something to them, it is not my forte. At least that’s what had been conveyed to me. I had been very specifically told I was too honest, too trusting, and couldn’t speak confidently about things I knew nothing about. Other people can. It’s not meant so cynically as just scamming but there are certain things you don’t have to say. There are certain things you could guess at or say with confidence even though you don’t necessarily feel that confident. Get through the moment. Look more impressive than you, I guess, perhaps are. But basically that’s why you have senior people do the job, not junior people, because they know enough to appear confident and say confident things and know what everyone’s talking about. . . . It was also frustrating because being in a satellite office in [this city] which [the firm] had not decided if they were going to support—how much they were going to support the [regional] office. . . . I got very little support and I spent a good year, pretty much alone, calling on clients, trying to drum up business. Whatever I thought that meant. Very frustrating. Whenever I thought I had something, no one really seemed to care. I got no support. And I was just waiting to leave.

Jacob felt isolated in the satellite office and thought that accepting the job as a relationship manager while he was still very junior had been a strategic error. But no one had warned him against taking a position as a relationship banker so early in his career—no one had taken him under his wing to guide his career decisions. He spent the year feeling frustrated and then received a disappointing bonus. His total compensation for 1997 was $275,000, which was lower than the median of $430,000 for investment bankers in his graduating class and less than his 1996 bonus of $335,000. This was the final push out of his job. Since he did not want to relocate back to New York, he decided to take a position involving quantitative financial analysis at another major firm’s satellite office in his region. Jacob was optimistic about his opportunities in his new position, although at that point he was behind his graduating class.

Jacob’s career trajectory illuminates how some careers on Wall Street could derail despite the upward trajectory of the industry as a whole. A lack of sound career guidance and/or strategy, organizational difficulties, the loss of a mentor, and vulnerability in particular market niches were common causes of relative failure among both men and women. As was the case for men, women could also be more or less successful in their careers on Wall Street, although some career patterns were more common among men and others among women.

The Women

Julie became a highly successful investment banker after being a financial analyst and then completing her MBA. Julie grew up in the suburban Southwest in a middle-class family. Her father was in the air force and then became a high school teacher, and her mother was a nurse. She attended a large public university for her bachelor’s degree and then worked as an analyst in a major Wall Street firm for two years. Following a common path, she did an MBA degree and returned to Wall Street after investigating other industries. At the time that she returned, she was uncertain of her commitment to remaining in finance, but she had not encountered anything more appealing.

Because of her uncertainties about the longer term, Julie initially selected a different firm than the top-tier investment bank where she had been an analyst.

My first job out of business school, I selected a firm that probably wasn’t, at the time, a great investment bank. It was a great institution . . . but it wasn’t a great investment bank—it was still pretty new at the investment banking business. I think the reason that I chose to go there was that, if investment banking wasn’t what I wanted, [that firm] was known to rotate people through various areas. It is the kind of institution that has a reputation for really working with you to find an area of finance, or maybe outside of finance, maybe in human resources or something else, where you could pursue your career. In some respects I think that I made that decision, and I turned down some other Wall Street offers, because I wasn’t completely convinced that it was what I wanted to do.

This firm was known to be female friendly and family friendly; the incoming group of associates was almost half women. But Julie found the environment at this firm “suffocating” and left after one and half years because of limited deal flow.

That firm was trying to build its corporate finance and M&A experience from within. I found that very frustrating because a lot of the senior bankers did not have the level of experience that a senior banker at another firm would have because they moved commercial bankers into that role. So I didn’t feel like I was learning from the people I was working for. I was constantly frustrated with that environment. I liked the people a lot, but just wasn’t learning. I had friends who were associates at other firms, and could just see the kind of deals that they were working on, and I felt like I was missing something.

Julie decided to move back to the firm where she had worked as an analyst. There she was pleasantly surprised to encounter substantial internal support and client exposure. Because she knew many people in the firm from before, she received the assistance of subordinates sooner than expected. The firm where she started after the MBA had also given her solid training in M&A through their comprehensive training program, which offered her useful skills when she returned to corporate finance. These skills, combined with the resources offered to her through her network ties in the firm and the hospitable economic climate, enabled her to be more successful than she had ever imagined.

More recently, Julie had changed firms again and moved from corporate finance to the buy side of the securities industry, where she was managing investments for a large and prestigious investment bank. She said, “I view that as a career change, not a job change. I would not have left my position for a similar position.” Her primary reason for changing firms was a pull toward the opportunity that was offered to her, where she was guaranteed compensation of over $700,000 in 1997. Her job change also increased her work-life balance, which she viewed as increasingly important as she moved forward. At the time of the interview, Julie was engaged to a lawyer and had no children.

Julie’s opportunities were based in part on her long-term experience in corporate finance and the network ties she had developed through that experience. Favorable market conditions, combined with skills and effort, led her on an upward trajectory. She obviously benefited from others’ perceptions that she was competent, suggesting that she was a high performer but also giving her opportunities to perform because she was assigned to revenue-generating work. Also, up to this point in her career, she had not had a lot of other responsibilities competing for her time. This permitted her to succeed at investment banking.

Unlike Julie, Emma entered investment banking with no experience in finance before business school and with a work background that was quite unorthodox. She grew up in an upper-middle-class family in a suburban area in the Northeast. Her father was a manager in a large company and her mother was a social worker. At the time of the interview, she was married to a bond trader whom she met in the training program at her first Wall Street firm. They had no children, although they planned to have children in the not-too-distant future.

Emma attended a prestigious liberal arts college. After she graduated, she immediately started a joint graduate program in public policy and business without gaining any work experience first. She had no experience on Wall Street before she completed her MBA, since her initial focus was on public policy and her previous internships had been in that area. Because she had not developed a passion for a particular policy area and saw the brightest and the best of her peers entering investment banking, Emma considered her options on Wall Street.

I looked around when I got into business school and the smartest people there were going into investment banking. And a lot of people said, “If you want to go do the public service thing, go earn some money, establish a reputation, and then go off and do something in the public sector. It’s much more difficult to go the other direction.” So I ended up, at that time, looking at investment banking. . . . I ended up at an interview for [a major Wall Street firm]. . . . The reason that someone was attracted to me as a candidate was because I had a very high GPA. I had done well at what I’d done. But I didn’t have—I was a higher-risk person because I didn’t have this demonstrated background.

A major Wall Street firm decided to hire her, providing her with an opportunity to get her foot in the door. Based on the advice of women who were already on Wall Street, she chose to enter a quantitative execution function to gain some initial experience and prove her competence. She believed that working in a quantitative area would provide her with tangible indicators of performance and would increase her probability of success.

While she received good reviews in her first job, she changed firms after one and a half years. One reason she wanted to change was that at the time of her second bonus, her manager told her that she had been paid at the top of her class but she later found out that her husband received considerably more than she did She said,

I walked into my review, got a great review, and was told that I was being paid at the top of my class. The only problem was my husband also worked for the firm and I knew what his bonus was. And it was substantially higher than mine. And I went back to my boss and said, “That was great. I walked out feeling good. Because you told me I was paid at the top of my class, but guess what—I wasn’t paid anywhere near the top of my class.” . . . That was just, to me, came down to someone trying to be a little fast and loose with the facts.

She became disappointed with her pay and disillusioned with the performance review system. Another important push factor was that the environment in her first job was decidedly hostile to women, forcing her to question her own beliefs that Wall Street was a meritocracy.

They were downright hostile, to the point where I would do a lot of the recruiting and interviewing for our group and I was told things like, “Don’t bring a woman, I wouldn’t hire a woman into this group.” These were more my colleagues than—you know, senior people couldn’t say that. . . . When I started I was very naive. I had this image that these things that people talk about don’t go on because they’re so preposterous. And, if anything, I would have been the last person to say that workplaces are discriminatory. I wanted to come to Wall Street because I’m like, “This is a meritocracy. You’ve proven that you can do things to get here. You’ve gotten through these screens.”

Her illusions shattered, Emma went on the job market and, with some experience under her belt, was able to land a similar position in one of Wall Street’s most prestigious firms.

In her second firm, she found herself in a much more hospitable environment and she fit in well with the other members of the group. After testing her competence, a senior man took her under his wing and gave her access to the most important deals. The group was growing quickly and needed junior people to manage a large flow of deals, which gave Emma opportunities to develop skills and connections. Emma was promoted to vice president on schedule, and believed that she was ranked in the top 10 percent of her class. Her compensation in 1997 was $580,000, which was above average.²² She anticipated leaving the industry to have children, but delayed having children because her hours became slightly better and her work became more interesting and lucrative over time. The opportunities that she encountered on Wall Street enticed her to continue working long hours.

Julie and Emma shared a number of traits. Both were uncertain of their commitment to Wall Street when they graduated but encountered unexpected opportunities that led them to become more committed over time. These opportunities were a result of the booming market and a demand for skilled labor that exceeded the availability of workers with conventional experience in the securities business. But these women’s early career paths were not smooth. The assistance of others in the industry along with the abundance of deal making in their fields led them on the path to success.

While some women like Julie and Emma encountered unexpected opportunities, others confronted unexpected obstacles in their careers. Sometimes these obstacles were related to family formation, and for women these tended to involve more “push” factors than were evident in Kevin’s career history. For example, Tracy’s career veered off the path to success that one might have expected from a former financial analyst, and for her this occurred upon starting a family.

Tracy grew up in suburban areas in the South and Northeast in a middle-class family. Her father worked in a scientific field and her mother was a homemaker. She was married to a portfolio manager, and they had one young child and were expecting a second. She attended a large public university and attained an extremely high GPA. She then worked as a two-year analyst in M&A for one of Wall Street’s most prestigious firms. When she entered business school, she planned to change careers to something that would be less demanding of her time so that she could have more time for a personal life.

At that point in time, I thought, “Oh forget it, I don’t want to be in finance anymore. I want to be a marketing major or something because [finance is] for the birds. It’s too difficult and I have no life.” And I like a life. So I went to business school and thought maybe I’d be a marketing major. I took my first marketing course and thought, “This is silly, they are just giving fancy names to common sense”—which isn’t true about marketing but what I learned was I really have more interest in finance and decided I was going to do something M&A related or finance related. Something that was markets related. I think because it was a little faster pace, which was the other thing about M&A, which bored me to tears, was you get on a project and you could be doing it for two years. You never see the end of it.

Tracy decided to return to Wall Street in a job that would be faster paced and less time intensive than M&A. As Julie did, she selected a firm that was slightly less prestigious than the firm where she had been an analyst but that had a reputation for being more female friendly and family friendly.

The firm that hired her tried to steer her toward M&A, but she pushed hard for a markets-related job and obtained a position in capital markets. She was promoted to vice president on schedule. Two years later, she wanted to leave capital markets in order to reduce the amount of travel that her job required. At that time she was engaged to be married and knew that she would want to start a family in the not-too-distant future. Like many career-committed women, she strategically chose to become a trader so that she could continue to work on Wall Street but to work fewer hours and travel less, thus juggling childcare responsibilities with career success. She encountered some resistance from her manager in capital markets, who attempted to send her against her will to an undesirable area of investment banking with very long hours. But she managed to obtain a trading position within the firm where she would work a predictable schedule of fifty-five hours per week.²³

One and a half years later, she gave birth to her first child. The firm offered three months of paid maternity leave, and up to six months of leave time. After her three-month leave, she returned to her trading position with regular hours, but a few months later she decided to press for a change in her work schedule.

The thought we had, myself and my husband, was that with the first child I would continue to work and we would get a babysitter during the day and I could continue to work. And I had already put myself in a career position that I was able to have a much more reasonable lifestyle. Instead of the capital markets/swap marketing, getting in to work at 7:30 and staying to 9 or 10 and flying to the West Coast, I was getting to work early at 6:30 or 7:00 but leaving at 5:30. So I didn’t make a change once I had a child. Pre-child I thought it would be no big deal. I’d do my job and come home and my child would be there and the babysitter would take care of him during the day.

But after she returned to work, Tracy tried to arrange a schedule where she would leave for a couple of afternoons a week because her field was more active in the morning. She would then work 20 percent fewer hours, with a corresponding 20 percent pay cut. She encountered substantial resistance, with managers and peers wanting to cut her salary and her bonus, while she argued that her bonus should reflect her productivity and should not have 20 percent skimmed off the top. Ultimately she was able to work out this arrangement without a reduced bonus written into the contract, but only by refusing to continue doing interviews with the press that advertised the firm as “family friendly.”

The response of her managers and peers at the end of the year revealed that the firm was not so family friendly after all. They gave her poorer performance evaluations than were warranted by her profits and losses, and she received a correspondingly lower bonus. This particular firm was known to be more “touchy-feely” than most others, and had performance evaluations that were more subjective than was the norm for trading, where relatively objective measures of profits and losses are available. Contrary to stereotypes, “touchy-feely” firm policies and organizational cultures were bad for women and the most successful women steered away from them.

Because her bonus was abysmal, Tracy left Wall Street to become a homemaker. Her total compensation in 1997 was between $175,000 and $200,000, which was very low by Wall Street standards of the day. Like Kevin, she was pulled toward involvement with family, but unlike Kevin, difficulties arranging a nontraditional schedule, not receiving credit for her performance, and the low bonus were substantial pushes in her decision to leave the industry. Notably, Kevin made twice as much money as Tracy, even though he worked in human resources, a support function, while she was a revenue-generating trader.

Pregnancy discrimination, discrimination against mothers, and difficulties using “family-friendly” policies that were formally available pushed several women like Tracy off successful career paths and into smaller firms, lower-paying areas, or out of the labor force. It is important to recognize, though, that family-related obstacles were far from the only forces that derailed women on Wall Street. Usually women who left for family reasons were also dissatisfied for other reasons. Like men, women were affected by organizational and market influences but, unlike men, women frequently encountered hostile work environments, discrimination, and sexual harassment. Consider the case of Daphne, whose experience was affected by market forces and disparate treatment due to her gender and her race.²⁴

Like Jacob, Daphne started on Wall Street with an unorthodox work background and was guided into a position that ultimately derailed her career. She grew up in a suburban area on the West Coast in a middle-class family. She was a third-generation Asian American and her parents were both entrepreneurs. She had never been married, had no children, and planned to remain childless. Daphne attended a prestigious private university and then worked for two years at a large blue-chip firm in sales and marketing. While she worked there, someone at a higher level encouraged her to pursue an MBA to open up her business opportunities.

When she was in business school, she decided to seek a sales position in the securities industry. Like Edward and Jacob, Daphne obtained some experience and made some connections on Wall Street by taking a summer job in an investment bank. While she was there, she attended networking functions at all of the major Wall Street firms and had an interview before she returned to business school in the fall. She attained a position in domestic sales at one of Wall Street’s most prestigious firms.

Shortly after starting her job, the head of sales approached Daphne to move into sales for the Asian markets.

Essentially, [the firm] asked me to cover the Asian product and that was in 1993 and, I don’t know how much you know [about] Asian markets, but Hong Kong and Asian markets were really going to the moon in ’93. That was back when they were the good markets, the glory markets. And [the firm] hadn’t hired anybody to join the Asian team and they only had one person covering Southeast Asia at the time. Or I’d say non-Japan Asia. So Dan had asked me, “Would you like to change over? Emerging markets for [a big-name firm]. Gray area. Blah, blah, blah.” And they sent me over to London and also to Hong Kong to meet the people and I came back and talked to Dan about it. . . . I think it’s almost a direction I regret now because if I think about it, from ’93 to ’98, the U.S. market has had the best bull run and ’93 to ’98, the Asian markets have come off.

While she was a third-generation American and spoke only English, Daphne believed that the head of sales had approached her because she “looked the part.” The Asian markets were booming when she accepted the position, but they crashed in the fall of 1994. All of the major investment banks cut their workforce by 15 percent in January 1995 and, because she was a junior person covering failing markets, Daphne was among those laid off. In hindsight she regretted changing her focus to Asia, because if she had not agreed to specialize in Asia, she might have been less vulnerable to cutbacks.

Through a headhunter, she found another job at a small firm that specialized in Asian markets. While the earnings potential was lower, the equity research on Asia was better at the small firm than it had been at her first firm and it had built up a reputation of being a good “boutique” research house. She said,

The actual research was much better. It covered more companies. It had much more local knowledge of firms. [My previous firm’s] research in Asia was all based out of Hong Kong so they were covering Korea from Hong Kong, Indonesia from Hong Kong, Singapore from Hong Kong, whereas [my second firm] had offices in all the local countries so they were more current and up-to-date on the talk, the rumors, the whole range. In terms of market share, if you just go with sheer client business, [my second firm] did really well in Thailand and the Philippines. . . . People in Asia had heard of it, it had built up a reputation of being a good little boutique research house so for sure it was developing almost a brand name, gaining a rep. It was a lot of fun in the beginning.

But one of her supervisors sexually harassed her, which contributed to her decision to change firms again two years later. She found a position in another small China-based firm, but she felt that “the opportunities have decreased going to a Chinese firm.”

Daphne did not have an optimistic or ambitious outlook on the future. She remarked that she had substantially scaled down her expectations and ambitions since the Asian markets had crashed.

If you look at the turnover in the Malaysian market last night, the entire market, the turnover was 12.8 million U.S. dollars. IBM trades more than that in one day. You know what I mean? If you look at the turnover of the Philippines last night, it was 11.8 million. So there’s no way that this kind of turnover can support this industry. Proprietary losses. And we’re going to go through this kind of market for six months, a year, two years, depending on who you talk to. I think it actually will take a long while for Asia to turn around. People that have a real high cost base are going to have to lay off more people. I think that the general thing that I’ve heard is that everybody’s probably going to go through a second round of layoffs, and like I said, there are firms that have gotten out of the Asian business altogether.

Because of this turn of the Asian markets, Daphne’s current ambition was only to have a job at the end of the year. Her compensation in 1997 was between $100,000 and $125,000, which was much lower than the average for her graduating class and below average for equity research.

Each of these career histories reveals links between individuals’ careers and personal, organizational, and market forces. Although these are only eight cases, as a group they illustrate the general paths to relative success or failure on Wall Street during the 1990s and some of the gender differences in these paths. While both men and women can be found on each path, the paths were not gender neutral—women encountered more obstacles to success. Informal processes like mentoring and formal practices like account allocation procedures and the bonus review process also contributed to an unequal distribution of men and women across these paths and led to gender inequality in the industry as a whole.

The reward system played an important role in creating successes and in derailing some Wall Street workers. Wall Street claims to pay for performance—by evaluating performance and awarding bonuses on that basis—but the bonus review process was not really neutral and merit based. People described how reviews could be manipulated so that the reviews reflected the bonus rather than the bonus reflecting the reviews. Performance evaluations were also subjective, especially in areas of the industry where individual contributions were hard to measure. Subjectivity could benefit workers and provide them with opportunities if their managers and coworkers favored them. But these influences could also reproduce inequality because more advantages went to white men.

At the same time, Wall Street maintains a myth of meritocracy, whereby a majority of workers view the bonus system as fair even though it produces systematic inequalities. This context provides an opportunity to evaluate the impact of seemingly rational incentive structures on the gender gap in pay. If women perform as well as men when they share the same productivity-related characteristics, work in the same organizations, and work the same number of hours, then why are there gender differences in compensation on Wall Street? What affects the evaluations of managers, peers, and subordinates? Is there more or less gender inequality on Wall Street in comparison to other industries? Are some areas of Wall Street better for women? Why? One must examine the institutionalized practices of Wall Street to understand the patterns of gender inequality that persisted in this cohort of professionals. Chapter 2 begins to provide an understanding of these institutionalized practices by exploring the bonus pay system and the division of labor on Wall Street.