Sallie Krawcheck wants corporations to know something important: Diversity is healthy for the bottom line.
Krawcheck, known as one of the most high-ranking women on Wall Street, may be remembered not only for her rapid rise up the ranks but for a widely public firing at Citigroup (C). The news of her dismissal was leaked to CNBC before her firing was finalized, she wrote in her new book, “Own It: The Power of Women at Work,” which provides frank anecdotes from her corporate life as well as advice to women seeking to crack the glass ceiling.
In Krawcheck’s assessment, her dismissal wasn’t due to her gender, but to the problem of “groupthink,” which she ascribes to a lack of diversity on Wall Street. Her firing came after she pushed Citi’s then-CEO, Vikram Pandit, to reimburse Citi’s clients who lost large sums on investments that Citi marketed as low-risk.
Her assessment: She was punished for speaking out against the majority opinion. Wall Street’s lack of diversity, she argues, creates a “false comfort of agreement” from pervasive groupthink.
“There is no doubt in my mind that was a cause,” Krawcheck told CBS MoneyWatch. “I didn’t see evil geniuses who perfectly foresaw the crisis, and I was at the table. They really believed what they were saying -- that the risk was dispersed, that they didn’t have much on their balance sheets.”
She added: “There was no doubt that had we had more diversity of thought, perspective, education, gender, color, the crisis would have been less severe.”
The economic outcomes from diverse workplaces are increasingly a focus of economic research, and some early studies back Krawcheck’s view that diversity helps the corporate bottom line. She now runs Ellevest, a digital investment platform for women. Aside from working at Citi, she served as the CEO of Smith Barney and the CEO of Merrill Lynch Wealth Management.
A recent study from the Peterson Institute for International Economics found that firms where at least 30 percent of “C-suite” executives were women added 1 percentage point to their net margin compared with companies where the executive suites were filled only by men. Another study, from Credit Suisse (CS), found that companies with women on their boards outperformed those with only men by 3.5 percent on an annual compound basis since 2005.
At the same time, women’s progress on pay equality has stalled out since the 1990s. Krawcheck said such economic disparities will remain a significant stumbling block toward women getting on an equal foothold with men because lower pay has lifelong consequences, such as retirement accounts that aren’t as well funded as men’s and higher rates of female poverty.
While some economists and women’s advocates stress the importance of reducing the gender pay gap, Krawcheck said many women neglect what she calls “the gender investing gap,” or the fact that women generally have smaller investment accounts than men, yet their typical lifespan is five years longer.
Men’s retirement account balances are typically 50 percent larger than women’s, according to research from Vanguard.
Women are more likely to take time off from work to care for children or elderly relatives, which contributes to the investment gap. Krawcheck estimated that a woman with a $85,000 annual salary who takes a two-year career break will end up losing out on $1 million over the course of her career, due to foregone raises and the likelihood of returning to a lower-paying job.
The gender investing gap, she added, “can cost women hundreds of thousands of dollars throughout their lives.”
Her core piece of financial advice for women? “Invest, invest, invest,” she said.
“It’s so interesting, as a group, we women have so much economic power, but individually we don’t have as much as men,” she said. “We won’t be equal with men until we are financially equal with men.”
While that may strike some professionals as a dire outlook, Krawcheck has some sunny advice that may provide hope for the future of women in the workplace. First, technology is giving women more information they need to negotiate equal salaries. For instance, career sites like Glassdoor.com publish pay data gleaned from employee reviews.
Second, she believes increasing reliance on automation will create more demand for the types of skills that women generally bring to the table. A study published last year from the Pew Research Center and the Markle Foundation, based on government jobs data and a survey of U.S. adults, found that the shifting labor market is likely to reward women in the coming years because they tend to hold jobs where social and analytic skills are essential.
“It’s hard to outsource relationships,” said Krawcheck, “and so far it’s hard to outsource what a lot of women bring in terms of holistic decision-making and this drive for purpose.”