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Morgan Stanley Report on the CARE Employee Dispute Resolution Program

Morgan Stanley undertook a review of the arbitration feature of its internal dispute

resolution program for US based employees, the CARE Program, in response to a shareholder

request for Morgan Stanley to report on its use of arbitration for employee claims related to

harassment or discrimination. Morgan Stanley agreed to evaluate the impact of its current use of

Morgan Stanley retained Kerrie R. Heslin and Ryan S. Carlson from the law firm Nukk-

Freeman & Cerra, P.C. (“NFC”) and Victoria Lipnic from Resolution Economics, LLC to conduct

a confidential review of Morgan Stanley’s CARE Program under the attorney-client and other

applicable privileges. NFC is a 100% women-owned employment law firm that has represented

Morgan Stanley from time to time and is an active member of the National Association of Minority

and Women Owned Law Firms (NAMWOLF). The lawyers primarily responsible for the report

both have significant employment law experience.

Victoria Lipnic is an employment attorney with nearly 30 years of government and private

practice experience who currently leads the Human Capital Strategy Group at Resolution

Economics. Prior to joining Resolution Economics, Ms. Lipnic served as Commissioner (from

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Commission (“EEOC”). She was appointed to the EEOC by President Barack Obama and

unanimously confirmed by the U.S. Senate. In her roles at the EEOC, Ms. Lipnic was responsible

for, among other things, development and approval of EEOC policies, issuing discrimination and

harassment charges, and filing lawsuits to enforce federal employment discrimination and

harassment laws. Ms. Lipnic also previously served as Assistant Secretary of Labor for

Employment Standards at the U.S. Department of Labor from 2002 – January 2009, where her

Integrity Hotline, Human Resources, other reporting channels, the CARE Program, pre-litigation

demand letters, federal and state administrative agencies, and federal and state courts. The

independent reviewers also analyzed Morgan Stanley’s policies, protocols, training, and processes

for preventing and remediating harassment and discrimination. They also interviewed the CARE

Program Administrator and the Head of Internal Investigations.

Morgan Stanley’s Policies and Procedures for Addressing Discrimination

Morgan Stanley is committed to creating a culture where every employee feels a sense of

belonging and is valued for their unique worldview, experiences, and thought processes. Morgan

Stanley maintains robust policies designed to prevent, address, and remediate workplace

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Discrimination and Anti-Harassment policies. Employees have been, and continue to be, urged to

escalate potential discrimination or harassment concerns.

Employees have multiple internal and external channels through which they may report

violations of the Code of Conduct or concerns of discrimination or harassment. For instance,

employees can report concerns of discrimination or harassment to their supervisor, a member of

the Legal and Compliance Division, or a Human Resources representative. Employees can also

disputes. Arbitration is only one component of Morgan Stanley’s CARE Program. The Program

also provides employees with the opportunity to raise concerns for redress through: (1) the Open

Door Policy (pursuant to which employees have multiple avenues to raise a concern for resolution,

in addition to contacting their manager) and (2) mediation. These alternatives to litigation are a

way for employees to quickly, fairly, and amicably resolve workplace concerns. Morgan Stanley

pays 100% of the costs and fees associated with mediation so that the mediation process is at no

cost to the employees, except for their counsel fees (if they elect to have representation).

In 2015, Morgan Stanley announced an expansion of the CARE Program to add a pre-

dispute arbitration agreement for all covered claims. Employees were given the choice whether to

opt-out of arbitration and, while most employees decided to participate, significant numbers of

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Arbitration under the CARE Program is fair and efficient: employees have the same amount of

time to bring their claims and they are entitled to the same legal remedies that they would have

been entitled to under the applicable laws governing their claims had they filed in court. Morgan

Stanley covers the cost of all arbitration filing and administrative fees with the exception of an

employee filing fee up to what they would have paid had they filed in court. The parties also

jointly select a neutral arbitrator who will hear the claims. The arbitrator applies the federal or

be compelled to arbitration under applicable law, it recently clarified that this extends to arbitration

of sexual harassment or assault claims covered by the Federal Ending Forced Arbitration of Sexual

Assault and Sexual Harassment Act of 2022 and expressly carved out such claims from the

arbitration feature for new employees.

No Impact on Prevalence of Discrimination or Harassment Claims

The CARE Program is operating as the Program was intended. The arbitration feature

under the CARE Program has not resulted in an increase in the prevalence of employee

discrimination or harassment in the workplace. There is no meaningful increase in harassment or

discrimination claims – in some years the number of claims increased, whereas in some years it

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headcount and the external trend for harassment and discrimination charges filed with the EEOC

generally. Data reviewed does not indicate that claims were in any way suppressed as a result of

the expansion of the CARE Program.

No Impact on Employee’s Ability to Seek Redress for Discrimination or Harassment

The arbitration feature of the CARE Program affords numerous benefits to employees. As

fact that arbitration is generally quicker, less expensive, more flexible, and provides employees

with some control over who will adjudicate their claims. Under CARE, more employees had their

claims heard on the merits in arbitration than in court, and the resolution of employees’ claims

took less time than in court. There is also no indication that arbitration impairs or limits

employees’ ability to receive a fair and unbiased proceeding. For example, arbitration under the

CARE Program does not limit the available remedies in any way, and employees are entitled to

written awards from arbitrators who are experienced in their field. Arbitration also provides

employees with more of an opportunity to be heard, especially for sensitive claims where

employees may not want the information relating to their performance, disability, mental health,

or family/personal medical conditions to be part of a permanent public court record.

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Arbitrating workplace disputes is not unique to Morgan Stanley. Employees who are

registered with securities broker-dealers have long been, and continue to be, required to arbitrate

most workplace disputes in FINRA’s arbitration forum. Congress and the Supreme Court have

also approved of and encouraged the use of arbitration as a fair and equitable means of resolving

employee disputes, including in the employment discrimination context.

Effectiveness of the Human Capital Management Program

The arbitration feature of the CARE Program does not discourage claims of discrimination

or harassment, and there is no evidence that Morgan Stanley is using the program to cover up

discrimination, to protect discriminators, or to encourage recidivism. Unlike other employers,

Morgan Stanley has allowed employees to opt-out of their arbitration program. Employees who

elect to opt-out of arbitration can continue to bring their claims in court. Importantly, unlike other

companies’ programs, confidentiality with regard to the claim is not required even for those

employees who elect to participate in arbitration. To the contrary, the CARE Program does not

require confidentiality and does not prevent employees from speaking about their experiences or

sharing their concerns with other employees or government agencies. All employees can also still

disputes without costly litigation, and arbitration provides a dispute resolution forum that is fair

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and efficient. These benefits are not only aligned with Morgan Stanley’s core values of diversity,

inclusion, and doing the right thing, but also with shareholders’ and business goals of reducing

adversarial litigation and outside counsel expense.

Based on the review, it is recommended that Morgan Stanley consider adopting the

Morgan Stanley should encourage JAMS to present a diverse slate of potential arbitrators for its

consideration and promote the fair representation of diverse arbitrators.

Following a review of these recommendations, Morgan Stanley has agreed to implement

them.