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Ms. Clean
Jan Alexander
01/01/2008
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It has been nearly a year since Sallie Krawcheck stepped in to
clean up problems in Citigroup’s private bank, and what a year it has been.
Beyond her control were the subprime mortgage woes and the calls for Citigroup
to overhaul its business model, whether by dismantling the pieces and getting
smaller, merging with another behemoth bank and getting even bigger, or just
finding a new philosophy to follow. There was also that $7.5 billion infusion
from the Abu Dhabi Investment Authority, which has been a boost to the capital
base but not to market confidence.
 In 2006, when Krawcheck was Citigroup’s CFO, all of that would
have been her problem. But now, as the CEO of Citi Global Wealth Management—she
oversees Citi Private Bank, Citi Investment Research and Citi Smith Barney—all
she has to accomplish is a list of tasks roughly a mile long. Among them:
Expand Citi Global Wealth Management throughout the world; restructure the
brokerage division; carry out a plan to host quarterly online meetings to help
clients understand the workings of the economy; reestablish Citigroup’s private
banking credibility in Japan after the regulatory-abuse scandals of two years
ago; and slash costs. Oh yes, and stabilize a division that has changed
leadership every two years since 2000, amid monumental changes in Citigroup’s
top executive ranks. The good news is that her division saw record revenues in
the third quarter of 2007, with net income up 29 percent at Smith Barney and 5
percent at the private bank.
When former CEO (and now persona non grata) Charles Prince reinstated
Krawcheck in the wealth management group—a job she had held from October 2002 to
November 2004 before she switched places with Todd Thomson and became CFO—the
first item of business was to redecorate her office. "You are sitting in the
Todd Mahal," she volunteers to a visitor, mincing few words about the inside
buzz over Thomson’s much-publicized excesses, which were made known just when
the bank’s share price was languishing. Besides the incident in which Thomson
left Citigroup employees to find their own way home from Beijing at company
expense while he rode in a corporate jet with CNBC anchor Maria Bartiromo, there
was his opulent office. Now it is all mahogany, Oriental rugs and
books, with drawings by Krawcheck’s two children scattered about. She
mutters something under her breath about the fish aquarium that is no longer
there and "sushi dinner." She is joking, of course. Krawcheck, 42, became one of
the most powerful women on Wall Street while in her 30s, and, her reputation as
Ms. Clean notwithstanding, probably would have fizzled out 10 years ago without
a sense of humor that is occasionally self-deprecating. Her early lessons in
life came as an outsider in Charleston, S.C., where Krawcheck grew up without
the lineage required for social acceptance, a kid who wore braces and glasses
before she blossomed into a track star and homecoming queen at Porter-Gaud prep
school.
She is one of those rare executives who will admit that things
are sometimes less than perfect. "It is surreal to be on the other side of it,"
she says of the drama that has become daily fare at Citigroup and what she calls
a climate of "a rumor du jour."
"You need to re-center yourself and get the job done," she
says. "The media has you as too good at some points in your life, and other
times you’re a bum. If you allow your view of yourself to be the reflection of
what the media prints, you just drive yourself crazy."
The media were particularly good to her right after the dot-com
era, when she proved to be a straight-shooting analyst while many others were in
the pockets of the investment banking side. It helped that she was working for
the boutique research firm Sanford C. Bernstein, which was not attached to a
bank. But she was clearly a braver analyst of the financial services industry
than many, risking ostracism with negative comments on venerable institutions,
including one known at the time as Citicorp. When it became clear she was
right, then-CEO and chairman Sanford Weill was apparently impressed. In 2002,
he offered her the position of CEO of Smith Barney, the stock research and
retail brokerage operation. Weill’s call came several years after a legendary
incident in which Krawcheck managed to grill him throughout the duration of a
flight from New York to London in the late 1990s.
Her senior management experience at the time consisted of one year and four
months as the CEO at Bernstein, but the idea was that she could be the new
sheriff in a white hat, reforming the research unit in the wake of accusations
of fraudulent research. She has earned her stripes at Citigroup cleaning up
after men who flew too high. That first time, the main offender was Jack Grubman, the superstar analyst who was found to be a
booster of telecommunications companies that were headed toward bankruptcy. Citi
had to pay a penalty of $400 million to investors who proved they had been
burned, and Krawcheck had to personally say "we’re sorry" to many of them.
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