When To Risk Your Career For Ethical Reasons

Sallie Krawcheck on paying the price for following your gut, and why that’s so much harder than it sounds.

When To Risk Your Career For Ethical Reasons
[Photo: Flickr user James Cridland]

This story reflects the views of this author, but not necessarily the editorial position of Fast Company.


Earlier this month, Republicans tried and failed to gut the Office of Congressional Ethics. And by the end of this week, we’ll officially enter a world in which the President of the United States believes he’s “smart” for not paying taxes, has used bankruptcy as just another business tool, and has overseen nonprofits that appear to have been used for private purposes.

Yet the reality that none of these things are now disqualifications from holding the highest office in the land didn’t fall out of the sky. On Wall Street, the industry in which I grew up, a culture in which “my word is my bond” shifted over the past few decades toward one where the big print can say “FREE” while the small print gives the real costs. And in corporate America at large, a single-minded commitment to shareholders has led to closing profitable businesses and outsourcing them to other countries in order to make even more profit. In the companies at which I’ve worked, this has been done without much (okay, any) discussion of ethical ramifications.

Everyone faces tough ethical decisions at different points of their careers, virtually without exception. I know I’ve been pushed to make some of those hard choices throughout mine. Sometimes it’s possible to come up with “good enough” solutions that work for everyone. Other times, it’s simply too black and white, and you can be forced into a choice that’s career-altering.

These are extremely difficult, messy calculations no matter which direction they go. Here’s a look, by my own reckoning, at that moral math.

When To Push For An Imperfect Solution . . .

One of the lesser-known subplots of the last financial crisis was the freezing of the auction-rate securities market. These were financial instruments whose value was set on a periodic basis through an auction process. They were sold as higher-yielding alternatives to cash.

At certain points in the crisis, the risk aversion became so great that there were simply no bidders for the securities, making money that individual investors had expected to be available essentially worthless. I was CEO at Smith Barney (at the time part of Citigroup), when all this was going down, around 2008. At one point, one of those investors called me on the phone literally crying because this was the money for his daughter’s wedding, and he’d lost access to it.


What would you do? By and large, the industry’s answer was, “There’s nothing we can do” and, “This is really awful, but the fine print says the price is set by auctions” and, “It isn’t really our fault anyway.”

I’ll tell you what my team and I did. After a lot of hard thinking, we made available 0% interest, non-recourse loans to those clients. By any calculation, this would cost us since our budget had us earning a higher rate on these loans, and there was a real risk that clients would take the money and run, given the loans’ non-recourse nature.

It wasn’t a perfect solution by any means, but it felt like the most ethical one to make under the circumstances. And we were fortunate to have the leeway inside the organization to make it without suffering much blowback. Actually, our team felt proud of our efforts. But in the end, the financial costs to the bank weren’t as high as we’d expected, since not many of our clients would up taking advantage of these loans anyway.

When we asked them why, they told us that simply the knowledge that the loans were available was enough, and they were willing to bet that we’d continue to do the right thing for them. Many wanted to expand their relationship with us rather than pull money out. We’d proved ourselves an ethical business, which in turn proved to be good business: win-win.

. . . And When Not To Compromise

Then there are ethical conundrums that don’t leave as much room for creative solutions.

When I joined Bank of America in August 2009 to run Merrill Lynch, I was confronted with a crisis: a stable-value fund that had lost a lot of value. These are investment options in 401(k)s that are akin to money-market funds, in that they offer a yield while trying to maintain a stable principle amount. The issue was that the fund’s sub-advisor had chased higher yields, a bet that failed amid the market collapse, permanently impairing the fund as a result. One more thing to note: The biggest group of investors in this fund consisted of Walmart employees, not wealthy individuals who could easily weather the loss.


But let me back up.

I’d joined Bank of America after getting fired from Citigroup for partially reimbursing clients for alternative investments that had been sold as low-risk but wound up losing most of their value in the market downturn. I broke with my CEO; it was public and it was ugly. So the pain of that decision was pretty fresh, and as you can imagine, I wasn’t particularly excited to gamble my job yet again on what I considered to have been a principled decision.

I began by talking to people inside the company and within my own network to see what options I had. One guy I spoke to—somebody so senior he was considered an industry titan—dismissed the very idea of there being options. “There’s nothing to be done,” he told me. “Everyone knows stable value funds aren’t stable.”

“Huh?” I thought, “I’m pretty sure that’s in the name.” But again and again, I got the advice to keep my head down and do nothing. Instead, I took the case to Bank of America’s CEO, and after a good bit of back-and-forth, he agreed to allocate enough money to top up those depleted stable-value funds.

While I breathed an initial sigh of relief—“Hey, we did the right thing, and I still have my job”—that feeling didn’t last long. The problem-solving process itself, not to mention to solution I eventually struck inside the company, cost me some powerful allies among those who’d stuck to the other side of the argument. I didn’t lose my job then, but the political damage was done: when that CEO retired, the clock began ticking down on my time at Bank of America, and before long I was “reorganized out” of that role.

Where The Line Falls

How did I decide which way (and even whether) to act in these two scenarios? Even at many years’ distance, that’s hard to say.


One reason why is because I couldn’t have foreseen the exact costs. And when the outcome—including the level of personal risk—isn’t very clear, the best you can do is follow your gut. Back at Citi, I lost a job I’d loved, working with people I’d considered friends. One of my peers who left at about the same time was offered a severance package of $42 million; I was told not to let the door hit me in the ass.

There were other penalties for breaking ranks with the bigwigs in the industry that were harder to quantify. Sometimes, it’s simply not possible to make ethical decisions that you know (or strongly suspect) will cost you your job because you literally can’t afford to lose it. And I recognize that it can be easier to make “ethical” decisions when you know you can recover from getting fired. But even then, the career risks I was facing were considerable, even if couldn’t predict precisely what they’d be.

Here’s what I did know, though. The financial crisis, at bottom, was about investors’ faith in banks: Would they be able to get their money back when they needed it? Once there’s a crack in that belief, mistrust spreads, and banks eventually have to shut their doors—as some sure enough did. So my choice to go out on a limb in both situations wasn’t strictly a matter of principle, though it was that, too. It was a way to communicate to investors that while the system had failed them, our particular institutions still deserved their faith. Once again, I thought, ethical business was good business. My colleagues didn’t all agree.

So while checking your gut may sound simple, it was anything but. It came down to my sense of purpose as well as my sense of my industry’s purpose; it wasn’t about some abstract ethical theorem. I thought long and hard about why I had gotten into wealth management in the first place, and what my responsibilities there were.

And the answer wasn’t that I got into the business simply to make a lot of money. It was because it was a business that I knew could have a positive impact on clients’ lives, but at that time wasn’t. It was because I found the content of the work to be fascinating. And then, yes, it was because I could do well financially in the process.

But for me, it was in that order.


About the author

Sallie Krawcheck’s professional mission is to help women reach their financial and professional goals. She is the CEO and cofounder of Ellevest, a digital investment platform for women