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Société Générale’s CEO is resigning … but should he?
By Lauren | May 4, 2008
Back in February I commented on the governance implications of the multi-billion Euro trading disaster at Société Générale, one of the largest banks in France. The bank’s CEO, Daniel Bouton, is taking one for the team, and has agreed to step down from his position later this month. Bloggers are using phrases like “finally” and “at last,” making pretty clear that they think Bouton should have publicly committed professional suicide when the story first broke. But the bank’s representatives insisted that Bouton stay on because they believed he was the best person to keep Société Générale together in the wake of the scandal.
What if they were right?
Bouton can probably be faulted for failing to instill a stronger sense of ethics among his subordinates, and early reports make it pretty clear that financial controls at the bank were looser than they should have been. If managing other people’s money creates corporate responsibility, and I definitely think it does, it’s hard to imagine any business entity with a greater duty of care than a bank. If Bouton didn’t recognize and respect that duty, he ought to step down.
However, even the best-run, most ethical bank can have rogue employees. I doubt very much whether CEO Bouton had even heard of Jérôme Kerviel, the young trader whose wheeling and dealing caused the scandal, before the story broke in the international press. Is it really realistic to blame Bouton for Kerviel’s misconduct?
If Bouton was, in fact, the best person to keep the bank together after Kerviel’s antics became front-page news (and he may well have been, because Société Générale hasn’t closed its doors yet), sacrificing him on the altar of public opinion might prove to be a short-term cosmetic fix with lasting negative consequences. It’s always tempting to look for a scapegoat when things go wrong, and hard to argue that the head of a company shouldn’t be held accountable for subordinates’ misconduct. Société Générale’s owners have every right to be outraged, and I’d be a little reluctant to invest my own money in a bank where a mistake this big could go undetected. Still, I have to wonder whether it wouldn’t suffice to fire (and maybe prosecute) Kerviel and his immediate supervisors while letting the top management of the bank apologize and mop up the damage. Société Générale may find that losing Bouton is ultimately almost as costly as the original trading disaster itself.
Topics: Business Ethics, Corporate Governance, Risk Management |