WALL STREET HAS

long struggled to overcome its reputation as a clubby institution dominated by men. Yet despite the big investment banks' repeated commitments to gender equality, it seems the struggle continues.

In April, Morgan Stanley agreed to pay $46 million to settle a class-action lawsuit filed by eight current and former female brokers who claimed they were discriminated against in how they were trained, promoted and paid. Three years earlier the company similarly agreed to pay $54 million to settle accusations it denied women equal pay and promotions. In both cases management promised to bolster sex-discrimination policies, and a company spokeswoman says "Morgan Stanley remains committed to diversity and to promoting equal opportunity throughout the firm."

Morgan Stanley isn't alone. In January 2006, six female employees at Dresdner Kleinwort filed a $1.4 billion lawsuit against the German investment bank, claiming they were denied equal bonuses and promotions that went to men with less experience. The case was resolved in May of this year for an undisclosed sum without admission of liability, a Dresdner spokeswoman says. In 2005 four female financial consultants sued Citigroup's Smith Barney division, accusing the brokerage firm of systematically denying equal opportunities to its women employees. The company is reportedly close to settling the case, but a Citi spokesman declined to comment.

According to Louise Marie Roth, a professor of sociology at the University of Arizona and author of "Selling Women Short: Gender and Money on Wall Street," these cases demonstrate that the glass ceiling in the financial industry is at best cracked but by no means shattered. To quantify the pay gap between men and women, Roth followed 76 male and female graduates of top business schools who began working at big investment firms in the early '90s. She tracked their earnings, performance and advancement. By 1997, the Wall Street women in her sample earned only 60.5% of what the men did, even though they entered their firms at the same time with similar credentials. Roth notes that some of the difference can be chalked up to more women opting for lower-paying specialties, while men gravitated toward more lucrative areas like corporate finance and trading. Even taking those variables into account, Roth's sample of women still earned 29% less than men of similar rank.

Roth's research is part of an ever-growing series of studies analyzing the different ways men and women are treated in the workplace. Linda Babcock, economics professor at Carnegie Mellon University, says women are penalized more than men for negotiating salary increases. And Yale University's Victoria Brescoll recently published a study showing that men who get angry at work are likely respected for it, while women who do so are viewed as "out of control."

SmartMoney.com spoke to Roth about the reasons why Wall Street women are paid less than their male counterparts. The culprits, she finds, range from classic male stereotypes of women to the ways financial firms calculate bonuses.

SmartMoney.com: Is Wall Street any different from other industries in pay inequality between the sexes?

Louise Roth: I became interested in Wall Street mainly because I was living in New York and knew a lot of people working on Wall Street. A lot of the things I found there are similar to things you can find in other settings. But what's very different is the pay structure. When I looked at Wall Street, the way people received bonuses, they rank you relative to your peers. And you're paid a bonus based on how you're ranked. In some areas like sales and trading, there's a clear relationship between how much bonus you get and how many trades you make, and your profit and loss margins. In other areas, where people work on teams, evaluations are subjective, in which case women are at a disadvantage.

SM: Why?

LR: There are universal unconscious biases. Women are held to higher standards. Certain stereotypes are made about women they're good at certain things, not others. So they are not getting credit for what they do. They're sometimes viewed as not having good quantitative skills. I heard some women tell me that they were given quantitative tests that the men wouldn't have to take. There's an expectation that women are going to be nicer. But if they are nicer, they get walked all over.... Those kinds of things work to their disadvantage when determining pay. The variance in pay [on Wall Street] is enormous, bigger than most other industries, where you have a pay scale associated with rank. On Wall Street there's a big variation when evaluated based on your peers. They try to have some linkage in areas of investment banking, investment management, equity research, where you're part of making deals and generating the bottom line. But the actual correspondence between that and the bottom line pay is not clear-cut. Just about everyone in our culture women included have these biases, which favor men in a male-dominated pack. And finance is male dominated.

SM: How can that discrepancy be fixed?

LR: The more organizations put in specific procedures and find ways to try to rationalize the performance evaluations process, like have ways of linking productivity and pay that are more objective, the better women do. The women who were more successful [in my research] worked in quantitative areas, in sales and trading, where their productivity couldn't be questioned.

The other thing is when you talk about linking commission to what you bring in, there's the question of how accounts get distributed. Sometimes women are disadvantaged at the front end. They don't inherit accounts from departing brokers because the retiring brokers give their accounts to junior men brokers when they leave. So women sometimes end up disadvantaged, and that's what the more recent lawsuits are about. The more senior men see similarities between themselves and the more junior men. They want to help these younger men.... It's a known cognitive bias that people have a preference for others who are similar to themselves. You're more suspicious of people not like yourself. And people in power tend to be white men, making it harder for people who are not white men to succeed. Another cognitive bias is assuming men are better at things and holding women to higher standards. That again leads you to give men more opportunities.

SM: How does Wall Street's workaholic culture affect pay inequalities?

LR: One of the things I argued was that there is this workaholic culture on Wall Street which pits work and family as opposites. Women are immediately associated with family even women who didn't have children. There's always the assumption that mothers would perform less well. I had some mothers who told me "my P&L [profits and losses] didn't change [when I had kids], but they paid me less, so I quit."

Companies have this suspicion that the women would have kids and leave or cut back and that would be it for their careers. Even if they didn't do that there was an assumption they would do that. And that didn't fit with the Wall Street career.... It becomes a self-fulfilling prophecy. If they do have kids, they get lower bonuses. People evaluate them differently even if their performance hasn't changed. And then they say "Screw this, I'm not going to stay here and be underpaid." And then it becomes a self-fulfilling prophecy because others can think these women left their jobs when they had children. So it's sort of a question of which came first.