We’re not even sure Sallie Krawcheck has an office at Bank of America yet. But her selection as the head of Bank of America’s wealth management group is already attracting criticism from outsiders, Bank of America stalwarts and Merrill Lynch veterans.
Krawcheck, a former research analyst at Sanford Bernstein & Co, has a stellar reputation on Wall Street. She was brought in to head up the research and brokerage at Citigroup in 2002, and is credited with cleaning up the banks image after the Wall Street research scandals that followed the dot com bust. She rose to become chief financial officer and then head of Citi’s wealth-management division. Her critics say she should have done more while CFO to reign in Citi’s excesses, while defenders say she was hampered by a management entranced with the megabank visions of former CEO Sandy Weil.
Krawcheck left the bank in September 2008 over a dispute with top Citigroup executives over whether to reimburse clients who lost money on Citigroup hedge funds. This has further cemented her reputation as a strong advocate of customers, which should boost the confidence of wary Merrill brokerage clients over the longterm.
But since we’re talking about Bank of American and Merrill Lynch, you know there will be griping and sniping. Some long time Merrill employees are upset that the bank went to an outsider for leadership. Some say that while Krawcheck is charismatic and well-known, she lacks the deep brokerage experience the Merrill job requires.
“While Sontag was not the high powered superstar necessary to lead this group he did have long term relationships with many of this people and could keep people happy,” one former Merrill employee said.
“Having him in charge of the legacy Merrill Lynch was seen as an appreciation by senior [Bank of America] management that they understood and respected Merrill’s legacy culture,” Danny Sarch, a brokerage recruiter, told the Wall Street Journal.
Others say that the choice of Krawcheck might alienate brokers outside of the New York City orbit. To them, Krawcheck seems like a Wall Street celebrity with little connection or credibility among the far-flung Merrill brokers. There’s no doubt that some brokers fear that leadership by an outsider, a Wall Streeter and a woman may be disruptive.
“She’s not really known in the heartland,” one Midwest broker told us.
At Bank of America there has also been a reaction against bringing in an outsider, a Wall Steeter connected with Citi.
American Banker reports:
Bringing a former competitor into the corporate suite before they prove themselves internally runs afoul of long-standing philosophies held by Kenneth D. Lewis, BofA’s chief executive, and predecessor Hugh McColl Jr.
“To those who know the industry and Bank of America, this is a bizarre appointment,” said D. Anthony Plath, a finance professor at the University of North Carolina at Charlotte.
Marshall Front, the chairman of Front Barnett Associates Inc., a Chicago investment firm, agreed. “This is another chink in Ken’s armour and another indication that management isn’t as strong in its position as they would like you to believe. We are migrating from a company where Lewis ruled with an iron fist.”
Observers said the mantra at BofA has long been “inclusive meritocracy,” where ambitious executives had to prove themselves to top management by producing profits and repeatedly showing loyalty to the company.
High-level promotions traditionally were given to those who came up through BofA’s ranks or made an impact after joining from an acquired institution. Rarely did an outsider immediately start in the inner circle, as is the case with Krawcheck, observers said.
“It would be totally opposite the culture of Bank of America to bring someone in — particularly from Citi — to run a major business without having them prove themselves first,” Plath said. “Who did this? Is it the board or the government? Perhaps it is a little of both.”
Lewis explained the practice in an American Banker interview last fall, using himself as an example of someone who joined a predecessor firm in 1969 and earned a chance to run BofA more than three decades later. “I sensed within the company that you would be given the opportunity to reach your full potential and it wouldn’t matter where you went to school or who your parents were,” he said.
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