As the U.S. Supreme Court prepares to issue two major rulings on gay marriage, few in the business community are watching as closely as Wall Street executives.
Almost 280 corporations, including 14 banks and asset management firms, are among the interested parties that have filed a so-called friends-of-the-court brief to the Supreme Court as it deliberates on the constitutionality of the Defense of Marriage Act. DOMA, as the law is known, defines marriage as the union of a man and a woman, and keeps legally married gay Americans from collecting a range of federal benefits generally available to married people.
The amicus brief — a legal document filed by an interested party to offer additional information on the case — argues in favor of overturning the act on the grounds that it places an undue financial burden on corporations, especially those operating in states that have legalized gay marriage, and places them at a competitive disadvantage.
A similar amicus brief has been filed in another major gay-rights case before the Supreme Court, that of California’s Proposition 8, an amendment outlawing gay marriage that was passed by referendum in 2008. Kenneth Mehlman, a partner with private equity firm KKR & Co. and a former chairman of the Republican National Committee, organized a group of over 130 prominent Republicans, including hedge fund managers Dan Loeb and Cliff Asness, to sign an amicus brief recommending that the court strike down the law.
The court is due to rule on both cases this week by June 27.
Wall Street has been providing growing support for marriage equality and for equal rights for lesbian, gay, bisexual and transgender people. Lloyd Blankfein, chairman and CEO of Goldman Sachs Group, made a video in support of marriage equality in 2012. Hedge fund manager Paul Singer has made significant campaign contributions in support of gay marriage. Singer, founder of the $21 billion New York hedge fund Elliott Management, has a son who is gay.
Some global banks are also taking steps to help protect their LGBT employees in countries where the attitude toward gay rights can be hostile. In November 2012 Citibank and Barclays, two of the largest foreign companies operating in Uganda, spoke out against proposed legislation in that country that would make homosexuality punishable by death. Despite the banks’ opposition, the law was eventually passed.
In May Blankfein spoke at a one-day conference at Goldman’s New York headquarters organized by Out On The Street, a group that seeks to rally support for the LGBT community among senior executives at major banks and financial services firms. Blankfein said his stance has probably cost the bank some business and gained some too, but that it was an ethical issue on which it was better to be “on the right side of history.”
Out On The Street was founded in 2011 by Todd Sears, a former investment banker at Credit Suisse, Merrill Lynch, Schroders, and DeSilva & Phillips. Sears spoke recently with Institutional Investor Senior Writer Imogen Rose-Smith about Wall Street and the LGBT community. Sears was calling from Singapore, where he was preparing for the group’s first meeting — taking place October 24 in Hong Kong.
Institutional Investor: Over the past decade Wall Street has come a long way in its attitude toward gay rights and the LGBT community. What do you think is driving that?
Sears: I think the States and Europe have come a long way. It’s not just on Wall Street but also in society. More and more people are comfortable with being out. That makes it harder for people to discriminate. It makes it harder and harder to exclude them. On the Wall Street side, the Street looks at it as a talent equation and a business equation. If there is a percentage of people that we are not including for any reason, we are losing them. And Wall Street doesn’t like to lose.
One of the things that struck me about the Out On The Street conference at Goldman was the emphasis on the business case for promoting gay rights. Was that deliberate?
When I built the summit I specifically did not want a human resources summit, because while HR has set standards for diversity, it can’t drive it. Look at the talent equation. Because of a ridiculously discriminatory policy, Wall Street has to jump through so many hoops just to hire people. Goldman almost lost a very senior partner because his partner was from the U.K. and couldn’t come back to the U.S. with him. They had to go through a ton of stuff to enable him to stay in the U.S.
At our European summit, participants were asked if there were places they had been offered job opportunities which they turned down because of discrimination. The two top places people had turned down were the Middle East and Singapore. Take Singapore: They have a law against gay male sex. Singapore is trying to woo Wall Street — they want to outpace Hong Kong — but to do that they have to get rid of this ridiculous law. Discrimination is the wrong thing, not just from a human rights perspective, which it obviously is, but it is the wrong thing from a business perspective.
There remain plenty of countries where it is still dangerous to be gay. For banks and financial services firms operating in those countries that are supportive of their LGBT employees, there is a dynamic where it is safe to be out at work but not at home or in your community. Is there a risk of creating a false sense of safety?
I was struck by something Grahame Wright [a Singapore-based partner with the accounting firm Ernst & Young] said. He put it this way: In a country like Singapore, where it is very challenging for gay and lesbian people to be out because of the family dynamic — they can be out at work but they can’t be out at home — gay and lesbian people create their own family, their family of choice. What he thinks is that there is the opportunity for these firms to be the family of choice for these gay and lesbian employees. I think it is a very interesting perspective. While there is potentially a danger of a false sense of security, the bigger opportunity is to lead by example and come up with an inclusive framework that is supportive that governments can then actually emulate.
Are you confident that the court will overturn DOMA?
At the risk of jinxing it, yes. The law has so many flaws, including the fact that some of the Congress folks who signed it have come out against it. Two hundred and eighty corporations, including 14 Wall Street firms, say it should be overturned. The president who signed it into law said it should be overturned. There is no constitutional reason to keep it.
