(The Root) — In late August it was revealed that Merrill Lynch, one of the nation’s oldest financial institutions, would settle a class action lawsuit brought by African-American employees alleging discrimination.
By settling, the firm became one of the few major players on Wall Street to acknowledge something that has been whispered about for years but has been nearly impossible to prove: that institutional racism has made it tougher for black Americans to make it to the top on Wall Street than just about anywhere else — including the White House. Though the 2005 suit, initiated by longtime Merrill broker George McReynolds, was filed on behalf of 700 black brokers, a portion of the $160 million settlement will be available to any black broker or trainee at the firm since May 2001.
Unlike some previous discrimination cases, the Merrill suit did not accuse the firm of bias in hiring. Instead it alleged that black brokers were not provided a pathway to leadership positions. According to the New York Times, during a deposition for the case, E. Stanley O’Neal, Merrill’s first black chief executive, acknowledged that black brokers might have a tougher time because white prospective clients might not trust their wealth to black brokers.
While the size of Merrill’s settlement generated worldwide headlines, it is not the only Wall Street firm with a diversity problem, or the only firm to be sued for racial discrimination. In 2008 Morgan Stanley settled a discrimination suit brought by black and Latino bankers. A 2011 report from the City University of New York’s Center for Urban Research found that while Latinos and Asians have increased their presence on Wall Street over the last decade, African Americans have not.
Even with the increasing presence of minorities on Wall Street, the median earnings of white males still outpace those of women and racial minorities by a margin of nearly 2-to-1. Data from 1993 to 2008 compiled by the Equal Employment Opportunity Commission showed that minorities held only 10 percent of senior management positions in the financial-services industry, a number virtually unchanged during that 15-year period. In 2008 the EEOC found that white males held 64 percent of all senior jobs, while African Americans held only 2.8 percent.
So why are the leadership ranks on Wall Street so overwhelmingly white? What is the key to making senior management more diverse?
The Right Relationships Are Key
Carla Harris is the highest-ranking African-American woman at Morgan Stanley and one of the highest-ranking women of color on Wall Street. In an interview with The Root, she shared what she believes are the most important strategies for African Americans who want to ascend to her level within the industry. (She is currently vice chairman of wealth management and senior client adviser.)
When asked if she believes that her race or gender had ever hindered her career, she said no, before adding, “Coming into it, I certainly thought race might play a factor. I didn’t think that sex would play a factor, and as I started to go through the journey, I realized that race wasn’t as big an issue as sex could be, depending on who you were talking about.” She was quick to add, however, that she never sensed that internally at Morgan Stanley.
That’s an important caveat, considering that five years ago the firm paid $16 million to settle a suit brought by black and Latino brokers, and in 2004 it paid $54 million to settle a bias suit brought by female employees. But Harris explained that even when she sensed the possibility of bias, she used it to her advantage. “You can’t really control what baggage anyone else comes to the table with internally or externally,” she said. “But I never let that thought [that someone might be biased] be an impediment for me. If I thought I sensed it, then that just strengthened my resolve so I could own that relationship despite whatever happened.”
Harris said there are three essential elements that determine who makes it to the top on Wall Street and who does not (she elaborates on them in her book Expect to Win: Proven Strategies for Success From a Wall Street Vet). The most important, she said, is nurturing and retaining the right relationships. As Harris explained, women and racial minorities often spend more time focused on proving themselves at their desks through the work they do, unaware that investing in relationships is just as essential to long-term career success.