By Janie Ho

Being a gay employee at the PricewaterhouseCoopers office in Tampa wasn't always easy for Catheryn Sarno. Four years ago the senior associate, who wasn't open about her sexual orientation, sat in the accounting firm's break room listening to caustic remarks made about other gay colleagues. "There's no way I'm going to come out," she recalled thinking. She even considered leaving the firm at one point.

Jennifer Krause, a senior manager at PwC, felt the same way at a another financial company where she used to work. There, gay employees could not talk about their personal lives at work, she said, fearing it would affect their career growth or sour relationships with big clients. "After going to a few holiday parties alone, I realized I was not happy, and left," Krause says.

EMBRACING CHANGE. For gay employees, the financial services world hasn't always been the most welcoming environment. But the sector—once a stereotypically macho, white male environment—has been changing. And those changes are being reflected not only in the workplace but on B-school campuses.

Major companies like Deloitte, Deutsche Bank (DB ), JPMorgan Chase (JPM ), and Lehman Brothers Holdings (LEH ), have been holding recruiting dinners at B-schools for gay students, and more companies are sponsoring the 9th Annual Reaching Out MBA Conference for gay, lesbian, bisexual, and transgendered (GLBT) students and recent grads. More than 300 GLBT MBA students, 60 companies, and 300 professionals will attend this year's conference in New York this October.

Gay and lesbian student clubs have been picking up at B-schools as well. A 2002 study by Jason Lorber, a gay Stanford MBA alumnus, found that 86% of leading business schools had gay student groups, up from 50% in 1995 (see BusinessWeek.com, 8/5/04, "B-Schools Gain a Lavender Tinge").

These clubs hope to create a supportive environment, provide social opportunities, and offer a network for students, alumni, staff, and faculty. The groups also provide ways for students to explore the roles and contributions of gays and lesbians in the business community, and act as liaisons between the B-school gay community and other organizations within the schools.

Chris Schuster, an MBA candidate at NYU's Stern School of Business and a co-chair of the upcoming Reaching Out conference, says she's had no apprehensions about being out in the corporate world or at B-school. "This generation of MBA students has grown up with gay-straight alliances in our high schools, and queer associations in our colleges. We're accustomed to being in environments where we are accepted and our rights are honored."

So for this large demographic, it's not a question of "Is it ok to be gay in business?" but "At which business can I be the most myself?" As a member of Stern's OutClass gay and lesbian group, Schuster is enthusiastic about the more than 20 GLBT-targeted events per year, some of which take place at recruiters' homes. OutClass members also talk to prospective Stern students who are most concerned about what schools and companies will best allow them to be themselves.

Still, the shift in attitudes in the financial services sector hasn't been easy, as the industry strives to dispel stereotypes of imposing conservative, cookie-cutter standards. "Wall Street has not had the best reputation over the last 20 years with gay and lesbian diversity. Our challenge is convincing people," says Arden Hoffman, co-head of the Gay & Lesbian Network at Goldman Sachs (GS ) investment bank.

REACHING OUT. But given the hot job market for MBAs, the whole industry is battling for top talent (see BusinessWeek.com, 5/30/06, "Puffed-Up Paychecks"). Companies are reaching out to minorities, women returning from maternity leave, and other streams of talent (see BusinessWeek.com, 5/11/06, "The Return of the MBA Mom"). In return, they're getting employees who bring new ways of thinking to the organization. "What the GLBT community has always done is think outside the box," says Sarno, who attributes some characteristics to different hurdles they have had to overcome.

Plus, there are economic incentives. In 2006 the gay community reached an estimated buying power of $641 billion, with 69% of gay people fiercely loyal to companies with progressive work policies, according to the Human Rights Campaign, a gay rights advocacy organization. "If the business world didn't reach out to the GLBT community, years from now the result would be staggering—not only to the U.S. economy, but to the global economy," says PwC GLBT Strategy Leader Matt Milligan.

At PwC, the company has tackled the subject of gay employees in the workplace from the chief executive office on down, with employee resource groups, appointment of diversity leaders, networking circles, and a GLBT partners advisory board. "Our highest-performing people feel more included," says PwC's Milligan, "and we can't achieve that with roughly 10 percent of the firm not firing on all cylinders."

SUPPORT AND RESISTANCE. Still, leading corporations will have to do more persuasion, both in their offices and on B-school campuses. Even now, Krause says 90% of her gay friends are not out at their jobs, as most don't work in an environment that makes them feel comfortable. One way to change that, says Krause, is to educate people on who gays are, and what value they bring to the workplace.

But educating comes with adversity, as the more companies press on the diversity issue, the more people they are likely to irritate (see BusinessWeek.com, 4/17/06, "Companies in the Crossfire"). "There are hidden biases in everyone at every organization," says Milligan. "My job is to uncover those and make sure they're not affecting people's work."

When Catheryn Sarno first came out, she recalls going to the human resources department to discuss a hostility problem. Their reaction was more, "Oh I see why there was resistance there." But Sarno is happy now with her position, after joining the GLBT circle started by Milligan. That not only gave her support but also opened the culture for all employees at work.

Despite efforts to reach out, Krause still thinks companies are in the infancy stages of gay awareness. But with larger outfits leading the way, she says, more are bound to follow.