Wharton professor Janice Fanning Madden proves once again
that solid social science research can settle lawsuits and chip away at
discrimination. Asked to testify in class-action law-suits of female
stockbrokers against two large firms, she used company data to tease out the evidence
of gender bias and demonstrate that the firms’ arguments had no basis in fact.
Stockbrokers are the highest paid sales occupation, yet it
has the largest gender pay gap. Female stockbrokers earn 54-60% of their male
counterparts. Since stockbroker compensation is based almost entirely on commission,
the obvious explanation for the pay gap is that women simply generate fewer sales.
The trading firms were convinced that this was a matter of
sales capacity – low-performing female stockbrokers stayed while low-performing
males left, and women worked less intensely due to household responsibilities
and other factors. Professor Madden proved their arguments wrong. Through
statistical analysis of account records tied to each stockbroker, she
demonstrated that when men and women received equivalent clients and accounts,
they generated equivalent sales. Yet she found that on the whole women were
being given inferior accounts, which led to lower commissions.
The point is not to accuse male managers of blatant sexism.
In most cases, their biases were likely unconscious. Decision-making research
demonstrates that people are bad at predicting performance, and that in instances
where the workplace is overwhelmingly male, the manager is more likely to have
a subjective “hunch” that a man might do better than a woman. So if women start
off with inferior accounts, they will
generate lower sales and become less and less likely to receive a lucrative
account.
The firms protested this explanation. They claimed that
the better accounts went to more experienced brokers, who happened to be male,
a disparity that would go away as the female workforce matured. That is where
Dr. Fanning Madden really surprised them. The company records demonstrated that when a broker left, the managers redistributed more accounts to the
newer, “hungrier” brokers, not those with more experience and an already heavy
client base.
Thus both the “experience” and the “sales capacity” arguments
of the financial giants fell apart, the lawsuits were settled and the women
received substantial damage pay. Yet female stockbrokers are still earning less
than men, unconscious biases are
still shaping practice, and there is not enough pressure for systemic change.
The challenge as I see it is to take powerful research about the
causes of the pay gap beyond academia and federal court, and put it into the hands
of managers, operations professionals and HR staff the world over.
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