Money and Power

by William D. Cohan

  What did Goldman expect in return for providing these concierge services? “You, twenty-four seven,” explained another banker. “Conference calls, all day Saturday and Sunday. Voice mail constantly.… There were people that just sat in their house for hours and hours and hours and hours over the weekend. A lot of business there gets done over the weekend. That’s classic Goldman: all the big decisions are on Sunday and it was always that way. It was always like if anything was a rush job, you always had to do it on Sunday evening. Everything at Goldman was always getting initiated on Sunday: big deals, big capital commitments, big this thing, big that thing.… I think that those are the people that are going to be successful at Goldman, the folks that are willing to sort of just sacrifice all. All. Everything. To the greater glory.”

  Then there were the seemingly inevitable problems that developed between Goldman’s male and female employees. In this regard, Goldman was no better or worse than other Wall Street firms, which for many years had a heinous track record of mistreating their women employees. Sometimes the abuse was physical, sexual, and humiliating, as in the case of Lew Eisenberg and Karen Abraham. Sometimes the abuse was subtler and psychological, but no less devastating.

  The Eisenberg case may have been more sensational and headline grabbing, but it was hardly an isolated incident. For instance, in 1973, Anne Brown Farrell, a graduate of Trinity College and the Wharton School of Business, joined Goldman as the first woman in its fixed-income group. She worked on the trading floor with “masses of people, no privacy, food all over the place, and at the time … everyone smoked!!!” she later observed. Once that fall, all the new associates at the firm were invited to the Yale Club for dinner with Gus Levy. When Farrell arrived at the door of the Yale Club, she was not allowed to go inside. She was told, “No women allowed—club policy.” Her male colleagues streamed by her to go have dinner with Levy. “No one even looked back,” she explained. “For over half an hour, I tried every way I could think of to slip in unnoticed. It was impossible. I didn’t know what to do and I was beginning to panic. I had to be at that dinner!”

  She eventually slipped twenty dollars to a steward at the club who let her go up the service elevator. “All eyes were on me when I finally entered the dining room,” she continued. “I was late, I was young, and I was in trouble.” Levy announced to everyone that she was “a disgrace” for showing up late and gave her no chance to explain. Her boss was not happy either. She tried to explain about the club’s policy but, she said, her boss didn’t care. Fortunately, Levy overheard the conversation. “He was infuriated and demanded to know which idiot had chosen the Yale Club,” she explained. “That person turned out to be my boss, but not for long!”

  In July 1985, Kristine Utley started working at Goldman Sachs as a sales trainee in the fixed-income department in New York. In February 1986, Goldman transferred her to its Boston office as a sales associate in the money market department. She was the only woman sales associate in the department. For the next twenty months or so, the men in the Boston office made her life hell. According to someone with knowledge of her circumstances, the men in the Boston office “viewed her as a foreign body to be expelled at the earliest possible moment” and “apparently, the story goes, she was invited to a meeting in the conference room where the projector went on and a hardcore porn film was showing just to humiliate her.” In the fall of 1987, Paul Gaul, who ran the Boston office, asked Utley to consider a transfer back to New York. She refused to move back to New York as she believed “she was singled out for transfer on the basis of her sex,” according to court documents. Goldman then fired her. On December 6, 1987, she filed an eight-count lawsuit against Goldman in Massachusetts, alleging sexual harassment and discrimination and that “she was subjected to a hostile working environment in which women were demeaned.” On April 8, 1988, she filed a lawsuit claiming her civil rights had been violated. Goldman tried to get the lawsuit thrown out and to force the matter into arbitration, but an appeals court rejected the firm’s argument and said the matter could be tried in court.

  She later testified that “office humor was a source of sexual harassment” and that memos at Goldman introducing new women employees “were illustrated with nude Playboy pin-ups” and with phrases such as “beer is better than women because a beer always goes down easy.” Soon thereafter, Gaul was dismissed from Goldman. Utley received an unspecified settlement from Goldman.

  Then there was case of Jacki Hoffman-Zehner, who endured abuse from the rank and file but support from higher-ups. After graduating from the University of British Columbia, Hoffman-Zehner joined Goldman in 1988 as an analyst in the mortgage-backed securities department. By 1991, she was trading fifteen-year pass-through mortgage securities for Goldman’s institutional clients. One day that year, Frank Coulson, known as “the Big Guy” because of the size of the trades he did for his clients, asked Hoffman-Zehner to execute a huge trade, worth more than a billion dollars. “Jacki, this is as big as it gets,” he told her. She knew it would be the trade of her career and Coulson had given her an important break by asking her to execute it. Time was of the essence and she focused intently on finding the right prices to quote for the client. “Call me when you have the prices, but don’t take too long,” the Big Guy told her.

  There was no time for superfluous razzing from her, perhaps envious, male colleagues. But just as she was focusing on getting the prices for Coulson, one of the other traders on the desk—a mortgage-backed securities trader—wanted Hoffman-Zehner to help him work on a deal. “This guy was a self-described Wall Street Hitter: big paycheck, fast cars, huge apartment, and an ego to match,” she observed. “He was extremely talented and very charismatic and loved to be at the center of attention.” When she didn’t respond by dropping whatever she was doing and helping him, the Hitter took to the internal squawk box and announced: “Excuse me, everyone, but our fifteen-year [mortgage] trader cannot do two things at once, so I cannot work on pricing a CMO”—collateralized mortgage obligation—“for you currently. My opinion is that she might well be in the wrong profession.” Other traders started piling on, like lions “circling,” she explained.

  But she could not afford to be distracted by the juvenile, narcissistic behavior. She continued to figure out the prices to give to Coulson so the trade of her career could be executed successfully. Ten minutes later, she had the prices and had conveyed them to Coulson. Having completed the higher-priority task, she then walked over to her “attacker” to see what he wanted and to be helpful to him, if she could. “He could tell I was upset by his teasing and chose to acknowledge it by laughing at me as if to say, ‘What’s the matter girl, can’t you take it?’ ” she recalled. She was pissed but tried to remain calm. “You respect me, I respect you,” she said. “[T]hat is what we as professionals of this firm are called to do. Don’t you ever treat me like that again.” Just as she finished her reply, and was walking back to her desk, the Big Guy announced over the intercom: “Jacki, the trade is done.” She spent the rest of the day managing the risk related to the trade. “Never before had I felt so completely and professionally exhilarated,” she later wrote. “It was the trade of a lifetime, entrusted to me by one of the most talented and respected fixed-income salespeople ever on The Street.”

  But it had been a trying day. She retreated to the ladies’ room—her “office,” she called it—went into the last stall, sat on the toilet seat, and cried for ten minutes uninterrupted. “I had to release the stress of executing the largest trade of my career, while at the same moment experiencing undeserved humiliation,” she said. “It wasn’t until I had patted my last tear dry that the smile crept onto my face.” Eight years later, age thirty-two, she was the youngest woman and first woman trader to become a partner.

  But despite some notable exceptions, the road is still hard for the women who work at Goldman. In March 2010, Charlotte Hanna, a former Goldman Sachs vice president, sued the firm in federal court in Manhattan, claiming she was f
ired because she chose to work part-time and then took maternity leave during and after her two pregnancies. She also said that when she returned to work after the birth of her first child, her responsibilities were much diminished, her reporting lines had changed, and even her office had been taken from her. One week before she was to return to Goldman from her second maternity leave, Hanna was told her position had been eliminated. Sadly, Hanna’s lawsuit reads like many recently filed gender-related discrimination claims against Wall Street firms. “When Ms. Hanna decided to take the ‘off-ramp’ provided by the firm to devote time to her children, there was no ‘on-ramp’ that enabled her to return to full-time employment,” her complaint claimed. (Goldman and Hanna settled the suit in November 2010.)

  In September 2010, three former women employees of Goldman Sachs—a former vice president, a managing director, and an associate—filed a class-action lawsuit in federal court in the Southern District of New York against the firm claiming that it systematically discriminates against women in both pay and promotions. In the complaint, one of the women—H. Cristina Chen-Oster, who spent eight years at the firm and became a vice president before leaving in March 2005—told the story of how, in the fall of 1997, her department went to Scores, a topless dance club in Manhattan, to celebrate the promotion of a colleague. Afterward, a married male associate insisted on walking Chen-Oster to her boyfriend’s apartment building a few blocks away. But, once there, the male associate ended up “pinning her against a wall, kissing and groping her, and attempting to engage in a sexual act with her.” She wrote that she did not “invite or welcome the attempt and had to physically defend herself.” The next morning, he “apologized profusely” and asked her to keep quiet about the incident. Yet that same morning, the associate told his supervisor about what happened. The supervisor was supposedly his friend and was also Chen-Oster’s supervisor.

  Eventually, in May 1999—some eighteen months later—Chen-Oster reported the incident to her supervisor. Then, she alleged, her career at Goldman started a slow decline into oblivion. In keeping with an ongoing pattern of behavior, both her account responsibilities and her compensation were reduced over time, especially when compared with those of her male colleagues. In 1999, for instance, the male associate who had accosted her got paid 50 percent more than Chen-Oster, despite the fact the she had been promoted to vice president one year earlier. He did generate more revenue than she did, she conceded, but only because the more lucrative accounts had been taken from her and given to him. In 2000, her supervisor moved her to the opposite end of the convertible-bond trading floor from him—a sure sign of diminished status—and did not allow her to write performance evaluations for some of the people with whom she worked. In 2001, she also told her supervisor that the women on the convertible-bond desk felt that Goldman “did not treat them equally” and “felt uncomfortable with the sexual banter that regularly occurred on the trading floor.”

  That same year, the man she says attacked her was promoted to managing director, earning millions annually and twice as much as she was paid. In March 2001, her attacker was named sole head of U.S. convertible-bond sales and the next year he was named a partner. In 2002, someone she was working with sent around racially offensive e-mails, including to Chen-Oster, who is of Chinese descent. “Learn Chinese in 5 Minutes,” read one. “Our meeting is scheduled for next week.… Wai Yu Cum Nao?” and “Great … Fu Kin Su Pah.” After two maternity leaves, when she returned to Goldman Sachs, she was asked to sit among the administrative staff, even though she was a trading professional. On March 10, 2005, she resigned rather than continue to be humiliated. During her career at Goldman, she was promoted once and her pay increased 27 percent. Her attacker was promoted continuously, became a partner, and saw his pay increase 400 percent.

  Shanna Orlich, another plaintiff in the September 2010 class-action lawsuit against Goldman, started working at the firm in the summer of 2006 while studying for her JD/MBA degree at Columbia University. After graduating from Columbia in 2007, she returned to Goldman to work in something called the Capital Structure Franchise Trading Group, which had twelve professionals, two of whom were women. Throughout 2007, Orlich had performed well and her supervisor told her so. She had joined Goldman with the intention of becoming a trader, but when she started, she was told there was no trading position on the CSFT desk available and she would have to be an analyst, working with other traders on the desk. When she asked about the prospect of becoming a trader, she was told that there were no such openings at the time, even though one of her business-school classmates—a man—had started with her and had been given a seat as a high-yield debt trader. By way of explanation for how this might have happened, Orlich described how “Goldman Sachs’ managers often challenged this male classmate to do push-up contests on the trading floor.” Around the same time, a man who had been just hired from college was given a seat as a trader on the CSFT desk.

  In January 2008, Orlich spoke with a senior woman trader about the possibility of being allowed to trade. Soon thereafter, her direct supervisor assigned her to be a junior trader to another male trader on the CSFT desk. By April, though, both the male trader she had been assigned to work with and her direct supervisor had left Goldman. Once again, her trading prospects were dimmed. In July, she spoke to a male managing director and asked about becoming a trader and he told her he did not think she had the “right fit” to be a trader and was surprised she had been hired for that role. When she spoke with a partner on the Goldman senior management team about trying to be a trader, he told her to be “a team player” and stay as an analyst. She was often asked to perform clerical tasks for other traders, such as making photocopies, taking calls from wives, and setting up BlackBerry accounts.

  What’s more, even though she had played golf since childhood and was on her high school’s varsity golf team, she—along with other women traders—was excluded from company outings to country clubs to play golf. At one golf outing, where eighty Goldman professionals attended—only one of whom was a woman—she was told she could not attend because she was “too junior,” even though “several male analysts right out of college attended the outing.” In November 2008, Goldman terminated her employment.

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  IN GENERAL, GOLDMAN had much work to do when it came to making sure its employees believed they were being given sufficient opportunity to succeed. When Friedman and Rubin took over, the firm hired consultant Reed Whittle to beef up the firm’s human resources function and to create a more robust employee evaluation system. When Whittle looked at Goldman’s personnel evaluation system, he was appalled. “You’re doing everything wrong,” he told Friedman. “I don’t mean you’re doing two things wrong or a lot of things wrong, I mean you’re doing everything wrong.”

  “And we probably were,” Friedman said. He remembered once when someone came into his office after he had received his annual review and fingered Friedman for writing that he didn’t think the person was “very bright.” While Friedman wasn’t sure that’s what he wrote, he found the breach of confidentiality unacceptable. “You have to have a system of confidentiality, you have to have a system of candor, you have to have a system where people say, ‘Friedman, this is something you really have an issue with and you have to work on it,’ where I don’t sit there thinking, ‘Who is the Iago who whispered that in my boss’s ear?’ We were given the personnel reviews clearly without adequate data.”

  That’s when Goldman decided to implement a confidential 360-degree review system and to separate the annual reviews from the awarding of compensation. “I’m a huge believer in them …,” Friedman said of the 360. “If you have a bunch of people giving their views on Bill, you will discover a remarkable degree of consensus about what his strengths are and what his weaknesses are, and if it’s done in a standardized manner and it’s known that it’s taken seriously, then when your boss sits down and says, ‘Bill, here’s an issue. It’s a serious issue we want you to be working on �
� but let me just read you some of the comments.’ I never met anyone who … could stay in denial when they’d had ten different comments about them pretty much around the same weakness.”

  Then there were the conversations with hotshots Friedman or Rubin wanted to move overseas. “You say to another partner who’s an immensely talented guy, ‘We really need you—we are globalizing this firm—and the only way we’re going to get to be a global firm is to have some of our real talent go overseas.… We are prepared to make you a partner two years ahead of your class if you will go to Asia and we want you to take one for the firm,’ ” Friedman explained. “And the guy says, he’s thought about it and has come back and said, ‘I can’t do it, my girlfriend, my mother, my dog doesn’t travel well,’ We’re not at all vindictive about it. ‘We hear you, you’ll be considered together with your class in two years.’ But then you go to another guy on your list and you make that offer and he goes. He becomes a partner two years ahead of the class.” The message got around, fast, as Voltaire understood when he coined the phrase “pour encourager les autres.” Then there were the conversations about sexual harassment (which apparently were less effective). “You go to a third guy and you say—and we’ve been loud and clear about no intimate relationships, consensual or otherwise, with people in your chain of command—‘You are an intensely able person, you ought to be a partner in this firm, you’ve broken the ground rules, you ain’t gonna be a partner this time. I really want you to stay and we will really, really make sure that this is put behind you, but you’re going to pay your debt to society.’ Now I promise you that no one is going to tell anyone that so-and-so didn’t become a partner because he’d been having an affair with a woman in his department. No one is going to say the other guy didn’t become a partner because he wouldn’t move overseas, but I can promise you the organization figures it out very quickly, and the message gets across that when we say, ‘There’s a one-firm concept,’ and a culture we must abide by. We really mean it.”