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Last week’s settlement of the sex discrimination case between Morgan Stanley and the U.S. Equal Employment Opportunity Commission met two goals of the EEOC in the relatively few cases that it brings to court. � It pushed Morgan Stanley into making changes in its employment practices that can be monitored. � Because of the size and reputation of Morgan Stanley, it sent a warning to other Wall Street firms to reassess their own practices. BEHIND THE SUIT The EEOC launched the suit after a former executive at Morgan Stanley’s institutional equity division, Allison Schieffelin, complained of discrimination and accused the brokerage firm of pervasive sexist conduct. A day after filing a complaint on Sept. 10, 2001, the EEOC’s New York office was destroyed in the attacks on the World Trade Center. Despite the resultant delays, the commission pursued the case through long settlement talks that bore fruit on the day the trial was to start. Had the parties not settled on the brink of opening statements on July 12 before Judge Richard Berman of the Southern District, it would have been the first EEOC suit against a leading financial institution to go to trial. The parties agreed to a consent decree requiring Morgan Stanley to pay $54 million — $12 million to Schieffelin and $40 million to other former and current employees. The consent decree calls for intense scrutiny of Morgan Stanley’s employment decisions, such as how it hires and promotes women, along with requirements to record retention and outside monitoring. The parties appointed former Chief Judge Abner Mikva of the U.S. Court of Appeals of the D.C. Circuit to administer the claims and assigned an outside monitor to watch over Morgan Stanley’s efforts to ensure an unbiased work environment. Another $2 million of the proceeds will go to training programs inside the company. EEOC SELECTIVE In taking cases to court, the EEOC is selective by necessity; the New York office, the most active of 23 branches, resolved only 111 cases from 1997 to 2001. By policy, it picks the ones it thinks will have the greatest impact, an approach promised by chairwoman Cari Dominguez from the time she took office in 2001. “I’d like any litigation we pursue to have a halo effect,” she told this newspaper two years ago. “In other words, how can we get the greatest bang for the buck?” Class actions offer the only other avenue for plaintiffs to impose structural changes to a company’s employment practices. But some class actions focus on compensation at the expense of making structural changes within a company. EEOC attorney Elizabeth Grossman, one of the lead lawyers on the Morgan Stanley case, said the agency looks at the strength of the allegations and the potential for making new case law. It also tries to have a diversified caseload, with no one area of discrimination monopolizing its work. Geographic considerations also count. “We looked at where we can make an impact,” said Grossman of the decision to pursue this case. As one of the leading financial institutions in the world in an industry accused of systematic gender bias, Morgan Stanley seemed like an apt target for an EEOC lawsuit. The EEOC achieved its desired impact as news of the lawsuit sent warning signals to other financial institutions, said Pearl Zuchlewski a partner at Goodman & Zuchlewski and chair of the New York State Bar Association labor and employment law committee. “From what I’m hearing from lawyers and Morgan Stanley’s competitors,” Grossman said this week, financial companies are reviewing their internal policies and may adopt changes in line with the consent decree. The settlement does not serve as a legal precedent but could be a model, said Christine Webber, a plaintiffs lawyer at the Washington, D.C. office of Cohen, Milstein, Hausfeld & Toll. Employment lawyers also said that the $12 million apportioned to Schieffelin may encourage more top-level female employees to file discrimination suits. Schieffelin retained her right to pursue claims through the process established by the decree. “This has been an industry that people were reluctant to come forward into the public for many years,” Grossman said of Wall Street firms. Most enforcement actions therefore involve low-wage employees, she said. The same is true in class action settings, said Webber, whose firm represents the plaintiffs’ class in a sex discrimination suit against Boeing. The Boeing case involves thousands of low-level female employees alleging discrimination in pay and access to overtime, she said. With higher-level employees, Webber said, it is more difficult to find women to represent a class of plaintiffs because there are fewer of them. She cited the difficulty her firm faced in finding female officers at an insurance company to join a suit claiming sex discrimination and bias. “I hope this case encourages more people to come forward,” Grossman said. When the EEOC declines to take action, the only other outlet for attacking systemic problems within a company arises from class action lawsuits, Grossman said. Webber agreed, noting that injunctive relief accompanied the class action settlements her firm was involved in. Many of the class members stay on as employees, she said, and need prescriptive changes within the company to avoid further discrimination. Not all class actions turn out so favorably for class members, said Zuchlewski, a plaintiffs attorney regularly litigating suits involving the securities industry. In some instances, she said, the class lacks the leverage to pursue wholesale changes. Grossman said in others, plaintiffs seek compensation over structural changes. The EEOC has a bigger goal than reimbursing plaintiffs for their losses, she explained. The commission never settles a case without responding to systemic discrimination. Zuchlewski confirmed her appraisal in describing the Morgan Stanley consent decree. “It’s not going to be an employer who writes a check and goes back to business as usual,” she said.

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