The excesses of Wall Street may be big news, but behind the headlines is another major story. When it comes to men and women stockbrokers, men take home bigger paychecks.

Newly published research by Janice Madden, a professor of urban studies, regional science, sociology and real estate at Penn, shows that female stockbrokers can earn up to 20 percent less than their male counterparts.

“Stockbrokers are among the highest paid workers, yet they have the greatest gender inequality among all sales worker jobs,” she says.

Madden’s paper, “Performance-Support Bias 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.

Madden reviewed data collected from two of the largest commercial brokerage houses in the United States 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 information. She analyzed the data after being retained as an expert witness for the plaintiffs in their class-action lawsuits. The information could not be published until the results had been presented in open court.

The firms provided Madden with records on more than 1 billion individual customer account transactions that occurred from 1994 to 1996, as well as employment histories of brokers from each company. Madden compared the sales generated in 1996 on accounts transferred to men and women brokers during 1995. She used the sales generated by the accounts in 1994, before the broker-recipients were managing the accounts, as a measure of the accounts’ preexisting trading tendencies. She found that women generated equivalent, or better, 1996 sales than men when given an account of equivalent quality, or trading tendencies. There was no evidence of any gender difference in sales capacities when men and women were given equivalent accounts, or opportunities to generate sales.

Madden determined that the differential in compensation by gender, then, did not come from different abilities to sell, so it must come from somewhere else. One source was a gender difference in the number and quality of accounts transferred to women brokers. 

At both firms, men and women were paid entirely by commission, using an algorithm that was the same for everyone and could not be changed by managers.

“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.”

The women brokers claimed the differences in their earnings stemmed from unequal treatment, stating that they were given less support than men and assigned inferior accounts. The brokerage houses blamed “sales capacities” for the disparity in pay. Madden, however, found 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.