Sallie Krawcheck had not been on the job at Bank of America Corp. a full day and outsiders were already debating how good a fit she will be — and whether anyone knows what a good fit there is anymore.
B of A made several executive moves this week, but the hiring of Krawcheck — a former Citigroup Inc. executive who joined B of A Tuesday to run its wealth management and brokerage operation — drew the most attention. Observers familiar with Krawcheck, as well as her current and former employers, said her selection underscores the cultural change underway at B of A.
Bringing a former competitor into the corporate suite before they prove themselves internally runs afoul of long-standing philosophies held by Kenneth D. Lewis, B of A'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 armor 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 B of A 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 B of A'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 B of A 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.
"I was given a chance to live up to my full potential. That's one of the reasons we have as one of our goals and values is to be an inclusive meritocracy. I have been a part of that … and I owe that to every associate in this company going forward."
Robert Stickler, a spokesman for B of A, said Tuesday that Krawcheck's hiring is consistent with the company's ideals. "I think the outsiders' interpretation of inclusive meritocracy is wrong," he said. "It means that people within the company are treated fairly in line with the value they bring. It also means they have a fair chance to go where their talent and hard work takes them. The concept does not preclude the company from hiring talented outsiders."
The company said Krawcheck was in meetings and unavailable for an interview.
Stickler reiterated that the management moves were made by Lewis in consultation with the board, which has been largely reconstituted in the past seven months. He said the government was not involved, though the government's stress-test process required the company to review management.
Still, some observers questioned why B of A would choose Krawcheck, given her association with Citi and former CEO Charles Prince, who was ousted in late 2007. Lewis has spent months this year trying to cast his company in a different light from Citi, though both have received $45 billion in government capital since last fall. Her hiring runs the risk of drawing more comparisons, some said.
Observers have mixed views about Krawcheck's career at Citi, where she ascended from running the brokerage unit to becoming chief financial officer under Prince in less than three years. Her career ended on a down note, first being moved from the top financial post to running wealth management, then relinquishing that post last fall after reportedly clashing with Vikram Pandit, who had replaced Prince, over compensating clients for bad investments in areas such as auction-rate securities.
"Adding Sallie is stunning," said Nancy Bush at NAB Research LLC. "She comes with a taint from Citigroup."
Many believe her to be skillful at running brokerage operations but shaky when given responsibility in other areas.
"She is a smart executive but, as CFO, she failed in her job," said Guarav Patankar, a managing partner at 360 Global Partners Inc. who worked as a Citi analyst while Krawcheck was at the company. He placed the blame mostly on Citi's management structure at the time, where it was often unclear, with personalities such as Robert Rubin, Sanford Weill and Prince around, who was handling strategic direction.