Sallie Krawcheck
Chairman & CEO
Sanford C. Bernstein
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From FORTUNE magazine:
With $266 million in revenues last year, generated from trading commissions sent its way by satisfied clients, Sanford C. Bernstein has made honest research a thriving, profitable business. At a time when the big firms are saying that research cannot pay its own way, the Bernstein story suggests rather strongly the opposite.
At the center of the firm is Sallie Krawcheck. The first thing Krawcheck, 37, will tell you in an interview is that she doesn't want to be identified as either young or funny--though of course she is both. Raised in Charleston, S.C., she has a gracious, refined manner that masks her toughness--a quality many companies discovered the hard way when she was a research analyst. "I remember sitting in the office of a senior executive and reading upside down on a sheet of paper on his desk, 'Don't be fooled by her smile,' " Krawcheck recalls.
A former investment banker who once interned at FORTUNE, Krawcheck joined Bernstein in 1994 as an associate to the firm's insurance analyst. Two years after joining the firm, Krawcheck was put in charge of brokerage stocks, where she quickly proved her mettle. By the late 1990s, she was recognized as the top-rated analyst in the brokerage sector by Institutional Investor magazine.
In late 1998, Krawcheck was named Bernstein's director of research. At the time, as she now concedes, "Bernstein was under siege." This was, after all, the height of the tech bubble, and many institutional investors weren't much interested in independent research. Mutual fund and hedge fund managers wanted hot IPOs--and Bernstein didn't do underwriting. They cared about next week's earnings numbers--not in-depth analysis of a company's long-term outlook. Bernstein analysts, meanwhile, were being lured away by the big firms, which dangled the prospect of making many times the $2 million or so a top analyst can earn at the boutique. As market share eroded and defections increased, the firm was acquired in 2000 by Alliance Capital, a money-management firm known for its growth bent. Word quickly spread that old Sandy Bernstein was a goner. "We were losing basically everywhere," says Krawcheck.
So what did she do? She doubled down. Shortly after the Alliance Capital acquisition, Krawcheck convinced senior executives to let her triple the size of the research staff. It was a gutsy move--"the bet of my career," she says now--but it also turned out to be a smart move. "Our view was that the pendulum would swing back to valuing thorough, objective research," she says. Which, as we now know, is exactly what happened--and which helps explain why Krawcheck was named CEO in June 2001.
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