Jerome Kerviel, the rogue trader at France’s Societe Generale who manipulated the company’s computer system to enter large unauthorized bets under someone else’s name that led to $7.7 billion in losses — the biggest financial fraud in history — is claiming he’s being made into a scapegoat for the company’s control lapses. What’s crazy about this statement is that I’m not sure he’s off base.
Kerviel’s actions are unforgivable ethically. Flat wrong. End of case. But he’s making the point that the company should have caught him. It’s a weak case, on the surface, until you take into account that the company’s risk-management system — which they’re going to spend 100 million euros to improve — did catch him! He set off 75 alerts, and still his superiors didn’t figure out what he was up to.
I don’t need a big internal report, such as the one Societe Generale released today, to tell me that there are also serious management failures at work here. Kerviel has never disputed that he was the sole architect of the plan, but he’s the only one under investigation. His two direct supervisors are facing possible dismissal, according to the New York Times. Big whoop. Why are they getting off with a pink slip (or, I should say, a possible pink slip)?
The ethical culture of a corporation needs to be dictated from the top down. When you have a failure like this, it can never be the work of just one person. Kerviel flunked his ethics because his supervisors were flunking theirs. They didn’t do their job, and it’s a shame they’re not going to take the fall along with the fall-guy.
See where I’m coming from? Or think I’m completely off base? Share your thoughts in the comments section.
