Sallie Krawcheck Out at Smith Barney
Sallie Krawcheck, CEO
of Citi’s global wealth management division, and once considered a potential
successor to the CEO role, is leaving the firm. Her departure was announced
internally to Citi employees this morning.
A spokesperson for Smith Barney confirmed her departure, but was not
available for further comment.
Krawcheck was hired in 2002 by then CEO Sanford “Sandy” Weill to help repair
the firm’s image after the research and investment banking scandals, in part,
because of her reputation as Mrs. Clean. The CEO of independent research house
Sanford Bernstein, Krawcheck had developed a reputation as a fair but tough
research analyst. Weill personally recruited her to Citi to run the newly reorganized
wealth management unit, which combined retail brokerage and stock research
under the same roof.
According to a Fortune magazine blog,
citing sources close to Krawcheck, her departure was motivated by disagreements
with CEO Vikram Pandit, who thought that Citi should have taken a harder line
with clients who lost money on toxic Citi hedge funds and auction-rate
securities. Krawcheck argued that Citi should pay clients back. Under the terms
of its settlement with clients, Citi must return $7.5 billion of the money it
lost clients. According to the blog, Pandit apparently tried to reduce her
responsibilities at the firm, and move the wealth management division under the
umbrella of the institutional client group. Sallie didn’t like that. According
to the Wall Street Journal, Michael Corbat, who runs the corporate and
commercial bank in Citigroup’s investment banking unit, will replace Krawcheck.
The announcement ends roughly six years at Citi for Krawcheck, who’s job and
responsibilities—and trajectory in the firm—seemed to have changed on a regular
basis, from head of wealth management under Weil, to CFO of the broader firm
under Charles Prince, then back to head of wealth management in early 2007
before current CEO, Vikram Pandit, took over.
Last year global wealth management posted $1.4 billion in pre-tax profits, up
34 percent from $1 billion in 2006. But brokers said the numbers didn’t tell
the whole story. Many in their ranks were increasingly unhappy (for more, read Registered
Rep.’s March 2007 cover story, Sallie’s
Back) due to a suffocating compliance regime, a stock price that wouldn’t
budge, multiple tweaks to their payouts and other issues.
On the surface, it appears Krawcheck was pushed out to make room for Pandit’s
new order. Indeed, many Citi executives have been replaced since Pandit’s
arrival with fellow Morgan Stanley alumni as the new CEO continues to face
pressure to cut costs and restructure the bank more efficiently. Indeed, one of
Smith Barney’s top producers says he “wasn’t surprised by the news,” adding
that it was less a comment on Krawcheck’s abilities and more one of the current
context for the firm—the need to be lean. “There are whole layers of management
from regional to divisional guys making millions of dollars that could be cut
out,” he says.
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