Larry Chanen recalls the day, more than 20 years ago, when he realized he'd have to mask his homosexuality in order to advance on Wall Street. Chanen was driving through Manhattan with a senior partner at the law firm where he worked when two men dashed across the street in front of the car. "They're faggots. Let's hit them. It won't mean anything,'' the partner told Chanen, who's now 57 and head of bankruptcy-related litigation at JPMorgan Chase & Co. (NYSE: JPM).
For the next 10 years, during which he made partner at the law firm, Chanen remained in the closet. He brought a lesbian friend as a date to company dinners. During the summer, he tracked when colleagues left work for their Hamptons weekend homes, trying to avoid being spotted getting off the same Friday night train at Sayville, Long Island. That's where the ferry leaves for the Pines on Fire Island, a popular gay beach resort.
"It all added to the tension and stress I felt,'' Chanen says. "I was frightened of the consequences of being out.''
Today, Chanen and thousands of other gay men and lesbians on Wall Street are speaking out about their sexual orientation to employers, colleagues and clients for the first time. After decades in which discrimination and harassment were routine, U.S. financial firms have become more gay-friendly than those in any other industry, according to the Washington-based Human Rights Campaign, which compiles an annual ranking.
Nineteen financial companies received a 100 percent score in September based on policies aimed at creating equitable rules for gay, lesbian, bisexual and transgendered employees. Four years ago, only one, JPMorgan, got top marks. The only U.S. securities firm among the top five by market value not to score 100 this year was Bear Stearns Cos. (NYSE: BSC), which didn't participate in the survey.
The biggest New York investment banks, including Goldman Sachs Group Inc. (NYSE: GS), Merrill Lynch & Co. (NYSE: MER) and Morgan Stanley (NYSE: MS), have expanded benefits for same-sex couples, from time off for adoptive parents to help getting a work visa for a domestic partner when an employee is transferred abroad. Credit Suisse Group (NYSE: CS) and Lehman Brothers Holdings Inc. (NYSE: LEH) have medical plans covering the cost of sex-change surgery.
The firms are also funding internal networks for gay, lesbian, bisexual and transgendered employees that draw dozens of new members every month. And they're supporting gay causes with millions of dollars in donations, from the Gay Men's Health Crisis to Reaching Out MBA, an annual conference to connect gay business school students with potential employers.
"The banking and financial services industry has moved well out in front of the others,'' says Daryl Herrschaft, director of the Human Rights Campaign Workplace Project, which does the study.
The changes come after the so-called boom-boom room lawsuit by Wall Street women in the 1990s, which struck down legal barriers to securities industry workers' taking their employers to court in cases of discrimination and harassment. "That case was a strong, defining moment for us,'' says Ana Duarte McCarthy, chief diversity officer at Citigroup Inc. (NYSE: C), which has 300,000 employees. "It was an opportunity to put some new practices in place.''
A new generation of Wall Street chief executive officers has taken over in the past five years -- among them Jamie Dimon at JPMorgan (NYSE: JPM), Brady Dougan at Credit Suisse, Stanley O'Neal at Merrill Lynch and Charles Prince at Citigroup. They say gay-friendly policies help them recruit the best talent in a competitive marketplace.
"We serve a lot of people in different cultures and locations, and we need to reach out to all of them,'' Dimon, 50, says. JPMorgan's Chanen says he felt more comfortable being out at work because he had a supportive boss when he joined Chase Manhattan Bank, which is now part of JPMorgan, in 1992. He wasn't openly gay with clients for another five years or more, he says.
Welcoming gay employees may also help those banks with huge brokerage networks appeal to the community as customers. About 6.8 percent of people in the general population are gay or lesbian, according to Washington-based Witeck-Combs Communications Inc., a marketing firm that focuses on gay and lesbian issues. In the United States, gays and lesbians will have about $675 billion in disposable personal income in 2007.
Citigroup and Merrill Lynch now offer financial advice geared specifically to gay people, such as how to pass on a business to a partner without the legal benefits of marriage.
"The gay market is a jump ball right now for all of these financial firms,'' says Walter Schubert, 49, founder of the Gay Financial Network, a Web site that provides financial advice. "We are loyal to those companies that do right by us.''
Pressure to conform
Despite advances, discrimination against gays and lesbians persists. In 33 U.S. states, including many where the biggest banks in the country have hundreds of branches, workers can be fired for being homosexual.
Even in New York City, where gay couples openly hold hands on the street, many financial workers feel pressure to conform, whether it's wearing a certain hairstyle or socializing on the golf course, Herrschaft says. "There's all kinds of subtle discrimination, and it's still viewed as potentially career limiting to be open about your sexual orientation in finance.''
Often the discrimination is not subtle.
When Jackie Moran started as a floor broker on the New York Stock Exchange in 1989, she tried to keep her sexuality under wraps. The 27-year-old lesbian was already in a tiny minority of about 20 women trading in a sea of more than 1,300 men. After Moran became involved with another female broker, word traveled, even though both women tried to keep their relationship secret.
'How would you feel?'
Moran withstood endless teasing, including sexually graphic remarks from one trader in his 40s. In a rare moment alone, she finally confronted the man. She asked him whether he had a daughter. He said yes. "Then I said, 'I'm somebody's daughter. How would you feel if your daughter was treated like this?''' she says. "I had to personalize it for him, and from that moment on, he didn't say a word.''
Moran says she didn't feel accepted until 2000, when her domestic partner, who owned a specialist firm, got pregnant. After the partner broke the news to her employees, Moran's beeper went crazy. "It was everybody congratulating me about the baby,'' Moran says. "It was the greatest moment on the floor for me.'' The couple now has two kids.
Now a managing director at Citigroup, Moran is still on the floor daily in her navy blue trader's jacket. She leads trading of shares in initial public offerings arranged by the bank on the day they're issued. She also sees herself as a mentor to women, and gays and lesbians, at the exchange.
It's not a big job. Of thousands of people trading stocks, she knows about three lesbian women and no gay men.
"It says a lot about the environment, still,'' she says. While Citigroup's anti-discrimination policies apply to its employees, she says, other companies may not have the same protections. "You can have all the policies you want, but people need to understand them and start to change their behavior.''
While many gay adults are still reluctant to be out at work, a growing number are starting to feel more comfortable.
About 62 percent of 270 gay and lesbian adults polled in April would introduce their partner to a boss or other manager, up from 41 percent in 2002, according to a survey by Witeck-Combs and Harris Interactive Inc., a Rochester, New York-based market research firm that also conducts the Harris Poll. Half the respondents said they would now keep a photo of their partner on their desk compared with 34 percent in 2002.
The data were presented in Chicago in September at the Out and Equal 2006 Workplace Summit, the biggest annual conference for gay and lesbian employment issues, attended by 1,700 people.
'Time has come'
Equal benefits for same-sex domestic partners were first adopted in the financial industry in 1997, when American Express Co. (NYSE: AXP) began offering health insurance to employees' companions.
"It's an idea whose time has come,'' says Daniel Cochran, chief administrative officer of Merrill Lynch's global private client group, the biggest U.S. brokerage force. The experience of Cochran, 59, who has been openly gay at work since he joined the firm in 1989, is one reason the company adopted the benefit.
In 1997, Cochran and his partner of 30 years were living in Hong Kong when the partner, Greg Sutphin, had a stroke on a plane between Colorado and New York. Merrill Lynch immediately helped find a hospital in Manhattan for Sutphin, who was unconscious as he was taken off the plane. The company flew Cochran to New York.
Cochran spent the next month at his partner's side in Roosevelt Hospital, where Sutphin underwent speech and physical therapy, and the bills mounted.
Mary Taylor, then Merrill Lynch's head of human resources, decided that the firm should cover the cost in the same way it would cover the spouse of any other senior executive, Cochran says. Later, she went to then-CEO David Komansky and said, "We are helping this guy, and we ought to do this for all of our employees,'' Cochran recounts. Merrill Lynch began offering domestic partner benefits early in 1999.
After 18 months of therapy, Sutphin, now 57, was able to walk and play tennis, and he's now about 90 percent recovered, says Cochran, whose glass-walled corner office in the World Financial Center has views north up the Hudson River and south to the Statue of Liberty. Cochran, who's black, sees parallels between the struggle for gay equality in corporate America and the civil rights battles of the 1960s.
"It's historically inevitable, but the changes can't be taken for granted,'' Cochran says. "There are still people who are afraid, who aren't comfortable and who are private.''
For the first decade of his 37-year career, Michael Lyall didn't know any other gay bankers, he says. Lyall, 61, a managing director at Bryant Park Capital LLC, a small investment bank, says he's encouraged that so many gays and lesbians in the industry are coming out. "If you had asked me 25 years ago whether I would live to see this day, I'd have said you were crazy,'' he says.
Lyall started out as an investment banker in his native England in the late 1960s and then moved to New York for good after graduating from Harvard Business School in 1973.
After a brief marriage, he came out of the closet and often partied at night at Manhattan discothèque Studio 54. During the day, Lyall kept up appearances as a buttoned-down banker through a career that included Bankers Trust Corp. and Chase Manhattan. He recalls worrying about getting phone calls at work related to his social life.
Attitudes began to change with the AIDS crisis in the late 1980s, he says. "Far too many wonderful people on Wall Street who no one knew were gay started getting sick and dying,'' he says. "AIDS forced Wall Street to confront its own homophobia.'' The illness killed 20 people Lyall knew personally from 1985 to '95.
Until now, bankers haven't had gay role models as they climbed the corporate ladder, says Anthony Collerton, a Lehman Brothers managing director who helped start the firm's gay and lesbian network in 2002. Collerton, 39, is trying to change that by arranging to make older gay bankers available as mentors to younger employees.
In October 2005, he and Jay Coleman, Lehman Brothers' head of equity capital markets execution, took about 15 members of Harvard Business School's group for gay, lesbian, bisexual and transgendered students to a private dinner at Grill 23 & Bar, a steakhouse in Boston's Back Bay neighborhood. The Lehman executives, both of whom are gay, talked about how the atmosphere toward gay people was changing on Wall Street and assured their guests they'd get support being out at Lehman Brothers.
The dinner helped Michael Arlotto, 31, who was co-president of the Harvard group, decide to accept an offer from the firm, at which he became an investment banking associate in August. "I thought I might have to make compromises on a personal front to be an investment banker,'' says Arlotto, who grew up in Simi Valley, Calif., and dated women until he was through college at the University of California, Los Angeles. "I wasn't willing to make that sacrifice.''
Arlotto says he was impressed that Lehman Brothers would send managing directors to Boston to recruit at Harvard. They promised to be a resource for him. "That was important to hear,'' he says.
In October, he went to the Empire State Pride Agenda fundraiser with Collerton and was scheduled to host a dinner for the current crop of Harvard MBAs. "It's just good to know there is someone out there who is looking out for you,'' says Arlotto.
He says Coleman has helped him choose which industries to focus on in his first months at Lehman and has checked in to see how his work was going.
Firms have started catering to their gay employees partly because of the potential for lawsuits. Diversity departments first cropped up on Wall Street in the mid-90s, after the class-action cases at Smith Barney Inc., which was later acquired by Citigroup, and Merrill Lynch, in which female brokerage employees said they'd been harassed and were denied promotions. The Smith Barney suit, nicknamed for the "boom-boom room'' in the basement of a branch office where women were allegedly subjected to lewd partying, grew to include more than 20,000 women.
Companies are funding networks for women, disabled people and racial and ethnic minorities, including Asians, blacks and Hispanics. Pride, as Citigroup's gay, lesbian, bisexual and transgendered organization is called, has 750 members and holds events such as career workshops and community service projects, McCarthy says.
Many young bankers who've signed up for Wall Street's long hours expect to blend their work and social lives. On a rainy evening in June, at least 200 Goldman Sachs, Merrill Lynch and Morgan Stanley workers gathered at Glass, a long, narrow cocktail lounge with a backyard patio in New York's Chelsea neighborhood, to kick off Gay Pride month.
"The companies paid for the drinks,'' says Trevor Burgess, who helped organize the party. Burgess, 34, is a Morgan Stanley executive director who moved to London in October to take charge of corporate finance execution in Europe, the Middle East and Africa. Morgan Stanley also paid the moving expenses of his partner of 10 years, Gary Hess.
"In my generation, if someone isn't bringing their full self to the table, it may be limiting for their career,'' says Burgess, who joined Morgan Stanley in 1998. He was encouraged when Walid Chammah, global head of investment banking, told managing directors in an internal meeting in 2004 that the firm won't tolerate inappropriate comments to gay employees from clients. "There used to be a fear, if you mentioned the word 'gay,' that clients would run away,'' Burgess says. "It's no longer the case. Firms and clients are just looking for the best bankers possible.''
Burgess says he tries to embolden other gay and lesbian bankers on Wall Street. When he came out at age 19, while at Dartmouth College in Hanover, N.H., he says he was forced from the fraternity of which he had once been president. Gamma Delta Chi frat brothers scrawled 'fag' on the door of his room in their house, he says, and one wrote a disparaging article about him in the Dartmouth Review, a conservative newspaper.
He went on to head the college's gay and lesbian group, which led to his activism at Morgan Stanley. So far, the company's two-year-old network has 127 members out of 54,500 employees.
Leading a similar network at Goldman Sachs helped Robert Barry, 35, gain face time with senior executives, he says. Barry, the company's auto industry research analyst, was one of five diversity network leaders to make a presentation in 2004 to the firm's management committee, which included Henry Paulson, the U.S. Treasury secretary who was then the firm's CEO, and Lloyd Blankfein, who is now chairman and CEO.
"I got to know them in a way I otherwise wouldn't have,'' Barry says. "That was clearly very valuable as a young executive working my way up.''
While Barry has been open about being gay at Goldman Sachs, he still holds back on telling some clients. Barry, who has been in his current job for two years and is adding airline coverage to his duties in coming months, isn't sure whether some might find his sexual orientation a barrier. "I'm out to clients very selectively,'' he says. "As I gain momentum and my confidence builds, I may become less risk averse.''
The collective financial clout of gays and lesbians is another reason firms are working to attract and keep gay bankers. Todd Sears, a financial analyst at Merrill Lynch, drew up a business plan in 2001 about going after the gay market.
Sears, 30, now has a team of 10 brokers in six cities who offer advice on tax and estate planning as well as investments. His own clients, roughly 95 percent of whom are gay and lesbian, have about $120 million invested with Merrill Lynch, he says. "We have shown that this is lucrative,'' Sears says.
One client he won is Robert Page, CEO of Greensboro, N.C.-based Replacements Ltd., which sells tableware. Page says he invested $25 million with Merrill Lynch partly because of the company's contributions to the gay community. Page, who has a male partner and twin 7-year-old boys adopted from Vietnam, also worked out an estate plan with Sears that will help his partner circumvent punishing taxes if he dies.
Fighting for change
Chicago-based Bank One Corp., which merged with JPMorgan Chase in 2004, debated a plan to market to gays and lesbians in the past few years, says Dimon, who headed Bank One.
"Some people got upset about it,'' Dimon says, adding that the bank did it anyway with his support. "I think people should fight a little bit to help things change. It's clearly the right thing to do.''
Making sure gays and lesbians are content coming to work every day is also pragmatic, especially when it comes to hiring, says Simon Yates, a Briton who heads global equity derivatives and European equities at Credit Suisse. To win in markets like his, banks have to be open to anyone who can write complex algorithms and thrive in a fast and quantitative job. The vast in-house trading floors at securities firms have moved on from the era of raucous jokes about women and gays, he says.
"It's not like back in the Liar's Poker day,'' Yates, 35, says, referring to Michael Lewis' book depicting macho young bond traders at Salomon Brothers in the 1980s. "The culture is just about how you perform now. It's only a hard place to work if you are losing money.''
Yates graduated with a mathematics degree from England's Cambridge University and joined J.P. Morgan's investment banking program in New York at age 21. That first summer, he brought a male date to a company event. "It could have been naiveté,'' Yates says. No one made any comments, he says.
Schubert, from the Gay Financial Network, marvels at how things have changed since he says he became the first gay man to come out while working as a trader on the floor of the NYSE 12 years ago. "I liken living in the closet to living in a coffin; there is no air there," says Schubert, who abused drugs and alcohol and says he had no real human connections in the years he hid his sexual identity.
"In 1994, the floor of the New York Stock Exchange was a terrifying place to be an openly gay man,'' Schubert says. He describes a male culture rooted in traditional religious values. Traders, usually in their 50s and 60s, joked about women, minorities and gays and talked about sports. Most had never known a gay man, he says.
'Not all straight'
After Schubert came out, he stepped up his workload to make sure he wouldn't lose business, including writing a daily newsletter about the U.S. equity markets. He had 10 employees. "I tried to be the best I could possibly be because I was so worried,'' he says.
By 1997, he decided to leave the exchange. He was exhausted and no longer felt challenged by being a floor broker after 20 years. He's now a consultant and speaks at least once a month to financial groups on marketing to gay and lesbian customers.
Schubert tells his story over lunch in the half-empty dining room of the Down Town Association, one of New York's first private clubs. Housed in a Romanesque Revival building that has landmark status, the club displays photos of past members, all white men, along a long carpeted hall. "I'm sure those guys weren't all straight,'' he says.
Once, bankers and lawyers waited as long as 20 years to join. Schubert applied last year and was welcomed after being interviewed by a couple of board members, he says. Being gay didn't come up.