If the market decides what stockbrokers earn, why are women on Wall Street earning less?

May 20, 2012

The recent excesses of Wall Street may be big news but behind the headlines there's another story: When it comes to men and women stockbrokers, someone is taking home a bigger paycheck.

New research shows that women stockbrokers sometimes earn as much as 20 percent less than their male counterparts. "Stockbrokers are among the highest paid workers, yet they have the greatest among all sales worker ," says Prof. Janice Fanning Madden, who conducted the research.

Her paper "Performance-Support and the Gender Pay Gap Among Stockbrokers," will appear in the June issue of Gender & Society. The study is the first to show that bias can affect performance-based pay. Prof. Madden teaches at University of Pennsylvania, Philadelphia.

Madden looked at data collected from two of the largest commercial brokerage houses in the U.S. after women at both firms sued over wage disparity, claiming sexual discrimination. Madden is the first researcher to gain access to this type of in-depth brokerage data. She analyzed the information after being retained as an expert witness for the plaintiffs in their class action lawsuits. The firms provided records on more than a billion individual transactions on customer accounts for 1994, 1995, and 1996. Madden was also given the complete employment histories of brokers from each company; almost 90 percent were men.

Unlike other studies that have looked at the gender wage , the women stockbrokers were not paid – or given raises – based on subjective performance reviews by their managers. At both firms were paid entirely by commission, using an algorithm that was the same for everyone and could not be changed by managers.

The women brokers said the differences in their earnings stemmed from unequal treatment, claiming they were given less support than men and assigned inferior accounts. The brokerage houses blamed gender differences, such as "sales capacities," for the disparity in pay.

Madden, however, found there was no difference in the ability of women to make sales compared with their male colleagues.

(Both lawsuits were eventually settled, before trial, on terms that the media regarded as "favorable to the plaintiffs." As part of the settlement, both firms revised their procedures for distributing accounts to brokers, allowing for less management discretion. They also put more standardized criteria in place.)

"Stock brokerages are less hierarchical than most organizations in that they have a relatively small number of job levels," Madden says. "Stockbrokers, in particular, are all in the same job—there's no hierarchy—and their pay is based entirely on commissions generated from their sales of securities, not on supervisors' more subjective evaluations of their performance."

Is it possible that some customers discriminated against female stockbrokers? Madden says yes, but overall the evidence points to the fact that the firms assigned "inferior sales opportunities" in the first place.

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CapitalismPrevails
2.6 / 5 (5) May 20, 2012
LOL, made by the "Sociologists for Women in Society. NO WAY they can't be biased in favor or women. NO WAY at all. I guess we need more affirmative action for the sexes.
MattChristensen
3.4 / 5 (5) May 20, 2012
There is no mention of correcting for time served, or any other factors. I would be interested to see if newer male employees were given "more favorable" commissions versus newer females. If the industry is 90% male, that means more men have been around longer than women. If length of service is a factor in getting shots at more lucrative accounts, which I believe makes sense, that could explain the disparity in pay.
Terriva
1 / 5 (2) May 20, 2012
I'd say, women are more careful and they do specialize to less risky but more reliable business. The men, who failed in their risky business don't work at Wall Street anymore, so that their (negative) salaries and loses doesn't count. This brings a statistical bias into evaluation of long-term productivity and salaries at risky business areas.
..made by the "Sociologists for Women in Society. NO WAY they can't be biased in favor or women. NO WAY at all..
It indeed may be significant factor as well, but I don't think, the 20% difference in salary levels is so significant, it would need to introduce some external bias.
dan42day
3.7 / 5 (3) May 20, 2012
I had to laugh at the first sentence of the article,

New research shows that women stockbrokers sometimes earn as much as 20 percent less than their male counterparts.


It basically says nothing because it is qualified by the words 'sometimes' and 'as much as'. I'm sure it is also true that at least SOME male stockbrokers SOMETIMES make AS MUCH AS 20% less than their female counterparts.
Vendicar_Decarian
2.3 / 5 (3) May 21, 2012
If the market decides what stockbrokers earn, why are women on Wall Street earning less?

The CapitalistFails to answer the question.

"NO WAY at all. I guess we need more affirmative action for the sexes." - Capitalism Fails.
Russkiycremepuff
1 / 5 (3) May 21, 2012
It may be best for Wall Street to transition to more equitable determination of salary for both men and women, based solely on the productivity and efficiency which should result on more successful capital for company. But also is importance of honest business procedures from all involved which would enable regaining of trust from investors and general public.
Capital is also now important in my country and it is regulated to prevent the corruption. We have learned through many years that Capital is necessary and does not hurt the Communist system itself. It is only the greed and dishonesty that is associated with Capitalism in many instances that gives bad name to it. Remove that and it is likely that Capitalism will be more stable.
But women and men should be receiving the equal pay for equal job if both have the best qualifications in that job. Less qualified should not complain but instead get more experience first.
Russkiycremepuff
1 / 5 (2) May 21, 2012
Affirmative Action brings less qualified job seekers to a business or college. Unqualified or less qualified is very much alike. The business will suffer in any case. When that occurs, differences in pay might become more pronounced when business owners discover that it is the result of Affirmative Action that is causing business to fail or downgrade. Logistics is very important. If all businesses put themselves in position of failing due to lack of common sense and regard the employment of the unqualified worker to satisfy the political correctness, then the business deserves to fail.
This is connected to dumbing down socialist ideals where socialist teachers believe that all children should be the same and equal in aptitude and scholastic achievements.
Thusly, it is now rare for the over-achiever child to be properly educated to match his abilities, but instead, he will be held back to match the slow learners for political correctness reasons. This is terrible waste of minds.
Jimee
not rated yet May 25, 2012
It sounds like women should be humble, barefoot, and pregnant from your point of view. That you would make up mitigating factors to excuse the obvious double standard is most appalling.