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Apr-18-2008SocGen CEO to Quit After Scandal(topic overview)
CONTENTS:
- A bank statement said the functions of chief executive officer and chairman would be dissociated as of May 12, with Frederic Oudea becoming the new CEO. It said that "the board of directors, on Daniel Bouton's proposal, has decided to proceed with the dissociation of the functions of chairman and chief executive officer. during its meeting May 12." (More...)
- Bouton was at the center of a firestorm that erupted at the bank in late January after it announced losses of more than $7 billion in a scandal it has blamed on unauthorized trades by a single trader, Jerome Kerviel. (More...)
- A report released on Feb. 20 said the bank failed to follow up on 75 warnings on Kerviel's positions. (More...)
- Ouda, 44, joined Socit Gnrale in 1995 and became chief financial officer in 2003. (More...)
- "Delaying it has, rather than restore confidence, has increased the distrust" in the banks management. (More...)
- Almost a decade later bad blood still lingers between the banks. (More...)
- Kerviel turned himself in to police on January 26, two days after the bank revealed the losses, and on January 28 was charged with breach of trust, fabricating documents and illegally accessing computers. (More...)
- President Nicolas Sarkozy called for the chairman's departure amid widespread claims that lax procedures had enabled Mr Kerviel to go undetected. (More...)
- Oudea joined Societe Generale in 1995 after holding positions in the French senior civil service, including at the finance ministry. (More...)
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A bank statement said the functions of chief executive officer and chairman would be dissociated as of May 12, with Frederic Oudea becoming the new CEO. It said that "the board of directors, on Daniel Bouton's proposal, has decided to proceed with the dissociation of the functions of chairman and chief executive officer. during its meeting May 12." Bouton, who currently holds both positions, on two occasions offered to resign from the board following revelations in January that the bank had suffered a loss of 4.9 billion euros (7.7 billion euros) in unauthorised deals it blamed on a 31-year-old trader, Jerome Kerviel. Kerviel has maintained he acted alone but suggested his bosses knew he was dealing with huge sums of money and turned a blind eye as long as he was making a profit. An internal bank inquiry found that Kerviel's unauthorised trading had not been detected because of his sophisticated techniques, but it also pointed the finger at internal audit and risk control failures. [1] PARIS -- Société Générale SA announced the first high-profile casualty of its recent trading scandal, saying Daniel Bouton will step down as the bank's chief executive officer next month. Though Mr. Bouton will stay on as chairman, the diminishing of his role seems to be an attempt by the bank to draw a line under the embarrassing, €4.9 billion ($7.8 billion) loss it suffered at the hands of a low-level trader.[2] Société Générale moved to draw a line under the rogue trader scandal which cost the bank almost €5 billion (£3.2 billion) last night when it announced that Daniel Bouton, its figurehead, would be stripped of his operational role. Although Mr Bouton will stay on as chairman, he will lose the chief executive function, which is to be filled by Frédéric Oudéa under a reshuffle in May. Mr Oudéa, 44, who was thrust to the forefront last month when he was promoted from chief financial officer to deputy chief executive, now has the task of leading the French bank out of the crisis, which was sparked by the biggest rogue trader scandal in history.[3]
PARIS (AFP) — French bank Societe Generale, hit by a massive rogue trading scandal four months ago, said Thursday that Daniel Bouton would be replaced as chief executive but would retain his position as chairman.[1] Societe Generale Chief Executive and Chairman Daniel Bouton has insisted the French bank would bounce back from a trading scandal that shattered its reputation.[4]
PARIS (AP) - Societe Generale Chairman Daniel Bouton will be replaced as chief executive, according to the French bank, which is trying to rebuild its reputation after a huge trading fiasco, but will remain chairman in a move that splits up the CEO and chairman posts among two people to improve governance. SocGen said Thursday that the company board had agreed to the moves, which will take effect at its next meeting May 12.[5]
April 17 (Bloomberg) -- Societe Generale SA said Frederic Oudea will replace Daniel Bouton as chief executive officer after France's second-largest bank was stung by a record 4.9 billion- euro ($7.8 billion) trading loss.[6] Societe Generale has said that chief executive Daniel Bouton will step down as the bank tries to rebuild its damaged reputation. Rogue trades discovered earlier this year cost the firm 4.9bn euros ($7.7bn; '3.9bn) and cut into its profits for 2007, down 82% from 2006. On his request, Mr Bouton will step down as chief executive, but will remain chairman. Deputy chief executive Frederic Oudea will take his place.[7]
Bouton himself may not. The bank announced Thursday that he will be replaced as chief executive officer. Societe Generale stunned investors in January when it revealed that unauthorized trades at its French markets division in 2007 and 2008 will cost France's second-largest bank 4.9 billion euros ($7.2 billion). SocGen was forced to complete an $8.5 billion rights issue in March to strengthen its capital position.[4] Bouton had combined the chairman and CEO functions since 1997 and claimed a "clear mandate" to run Societe Generale after twice offering to resign over the 4.9 billion euros in speculative losses triggered by junior trader Jerome Kerviel. The discovery of huge uncovered positions over a weekend in late January caused panic at France's second-biggest listed bank and sent it scrambling for emergency funds under the watchful eye of France's central bank, which criticised its controls.[8] Oudea's elevation to CEO comes three months after the bank revealed that 31-year-old employee Jerome Kerviel amassed 50 billion euros in positions backed by fake hedges and false documents, resulting in the biggest trading loss in banking history. Bouton, who has held both the chairman and CEO roles since 1997, offered his resignation to the board twice following the scandal, and was refused.[6]
Months after SoGen revealed it had lost '''4.9 billion ($7.8 billion) because of unauthorized trades by rogue trader Jerome Kerviel, the French bank announced that Bouton would step aside as Frederic Oudea, the chief financial officer, will take over as CEO. Bouton is expected to remain chairman.[9] Securities trader Jerome Kerviel is being investigated for costing the bank some 4.9 billion euros (7.8 billion dollars) in unauthorized transactions. Other bank employees could yet be implicated in the scandal and Bouton had long been under pressure to resign, including from French President Nicolas Sarkozy.[10] French President Nicolas Sarkozy said in January that senior executives at Societe Generale should face "consequences'' from the record trading loss. Societe Generale blames the trader for taking unauthorized positions that the bank was forced to unwind after they were discovered in January. Kerviel says the bank was aware of what he was doing and that most of the loss resulted from the bank's hasty liquidation of his positions. Societe Generale commissioned an investigation into how its controls failed to catch the trader earlier.[6]
The capital increase was successfully completed in February, attracting demand from investors for nearly twice the number of shares offered. Bouton subsequently withdrew his offer to step down. With lingering doubts about the quality of risk-management and oversight at the bank and speculation of a possible takeover bid for the 144-year-old lender, opposition to his stewardship remained. The French president, Nicolas Sarkozy, has been one of Boutons most vocal critics, saying that he was baffled by the boards loyalty to its chief. "When the president of a company experiences a disaster of this magnitude and he doesnt face any consequences, its not normal," Sarkozy said in February. Just last week, Bouton told a panel of French legislators that Socit Gnrale was "doing just fine" and that despite the dent to its balance sheet, the trading scandal there had "not been the slightest loss of confidence from hundreds of financial dealers who work with us."[11] Oudas rapid rise to the chief executives suite also signifies a sharp turn in the fortunes of Jean-Pierre Mustier, the head of Socit Gnrales investment banking division, who until the trading scandal had been widely considered to be Boutons heir apparent. Mustier, 47, helped to create Socit Gnrales equity derivatives trading business in the mid-1980s, building the banks reputation as a global leader in this area. It was his division that employed Kerviel and his star been waning since the trading scandal was disclosed, according to board members and other bank insiders.[11]
Soci't' G'n'rale, which Bouton had spent the past 15 years building into one of the most respected and profitable banks in Europe, was suddenly at risk of imploding. With his 15-member board set to convene in just hours, Bouton, 58, made a stunning decision: He opted, Fortune has learned, to tell his full board absolutely nothing about the unfolding scandal. It was a startling move for an executive who is a French authority on corporate governance and who wrote an official report in 2002 on board transparency and accountability. It was the first step in a swiftly executed plan that ended up saving Soci't' G'n'rale. By keeping his board in the dark (he did confidentially brief the head of the audit committee that Sunday night) and then handing the task of unwinding Kerviel's positions to a single trader who wasn't even told how much he had to sell, Bouton ensured that word of the crisis wouldn't leak. If it were to, he worried, Soci't' G'n'rale risked provoking a stampede in the markets and among its customers. "We all had Northern Rock in our heads," says an insider, referring to the British financial institution that was brought to its knees last year by panicky customers queuing up to withdraw their savings.[12] Bouton also appears to have become a lightning rod for a much greater disenchantment - even anger - with the French political and business establishment. "It's a pleasure to discover that the elite are not as good as all that," says Fr'd'rik-Karel Canoy, a gadfly French lawyer who represents small Soci't' G'n'rale shareholders. "In France people are sick of these types who came top of the class and know everything." Bouton didn't help his cause when he publicly lambasted Kerviel as a "terrorist" and declared Soci't' G'n'rale an innocent victim of the trader's machinations. The bank's own internal investigation into the matter shows that Kerviel's supervisors missed, ignored, or didn't take seriously 75 alerts about his trading activities over a period of two years, a damning record that gives credence to the young trader's defense for his actions: His bosses were aware of his trades but largely ignored his activities as long as he was making money. Kerviel is charged with breach of trust and forgery (he admits he faked e-mails to cover up losses) but isn't accused of pocketing any money. This absence of greed - coupled with his Tom Cruise-like good looks and his small-town roots - are cementing Kerviel's image as a modern-day Robin Hood.[12] Reille is explaining why Kerviel couldn't possibly have been trading without Soci't' G'n'rale's complicity. "That's three million 500-euro notes. That's as tall as the Eiffel Tower. Bouton's grandfather was a railway signalman and his father an engineer, so there was nothing preordained about his rise to the top of the French establishment. He stood out early on by dint of his intellectual prowess. After winning a prestigious national history competition at the age of 17, he went on to the most elite college in the country, the Ecole Nationale d'Administration, which for decades has turned out France's top politicians and civil servants. He likes to excel at everything he does - his golf handicap got as low as four - and he isn't modest about it.[12]
Soci't' G'n'rale, by contrast, is in relatively good shape. Its net losses from the affair amount to about $7.5 billion. (Controversially, the bank offset a $10 billion trading loss with some earlier gains Kerviel had made.) Despite the extraordinary Kerviel-related loss, plus an additional $2.5 billion write-down of its exposure to the U.S. subprime crisis, the bank nonetheless reported a profit in 2007; its capital ratios now are even stronger than they were before the crisis, and just three weeks after the scandal it completed the acquisition of a big Russian bank, as scheduled.[12] Bouton, 58, is taking the fall for the bank's failings in the rogue trading affair involving J'r'me Kerviel, a junior stock arbitrager who ultimately cost the bank $7.5 billion in net losses. The bank's announcement came just days after FORTUNE revealed that Bouton had decided not to mention anything about Kerviel or the gargantuan $75 billion open position he had taken in stock index derivatives at a board meeting on Jan. 20, the day he found out about the size of the position. It was only three days later, after the bank had liquidated that position and put in place an $8.5 billion capital increase, that Bouton called an emergency board meeting and disclosed what had happened.[13] The trading loss at Societe Generale, more than five times the $1.4 billion of losses by Nick Leeson that brought down Barings Plc in 1995, forced Bouton to turn to shareholders to raise 5.54 billion euros in a stock offering in March.[6] The company, which will release results on May 13, posted a 3.35 billion-euro loss in the final three months of 2007. Stock Offering Societe Generale rose 2.93 euros, or 4.3%, to 70.99 euros in Paris trading today after Goldman Sachs added the stock to its "conviction buy'' list. The shares have dropped 23% this year.[14]
PARIS (Thomson Financial) - Societe Generale denied a report that the head of its investment banking division, Jean-Pierre Mustier, will leave the bank in the coming weeks as part of the fallout from the unauthorized trading scandal which cost the bank 4.9 billion euros.[15] PARIS, April 17 (Reuters) - The head of Societe Generale, the French bank that recently survived the world's biggest rogue trading scandal, is relinquishing his job as chief executive but will stay on as chairman, SocGen said on Thursday.[8] The head of Societe Generale's corporate and investment banking is to step down along with about a dozen other managers following the rogue trading scandal at the French bank, the Mediapart online newspaper reported on Thursday. Jean-Pierre Mustier, a close ally of Societe Generale Chairperson Daniel Bouton, is expected to leave his post "in the coming weeks", said Mediapart.[16] Paris - Societe Generale head Daniel Bouton will step down from day-to-day operations, France's second-largest bank said Thursday night, three months after a massive banking fraud scandal broke.[10]
PARIS (Fortune) -- Daniel Bouton will step down as chief executive of Soci't' G'n'rale in May, although he'll stay on as chairman, the French bank announced Thursday.[13] The inside story of how 31-year-old trader J'r'me Kerviel nearly destroyed French giant Soci't' G'n'rale, bank CEO Daniel Bouton's dramatic rescue, and the surprising aftermath of the affair. Kerviel, photographed upon his release from prison, is now a folk hero.[12]
Over a frenzied three-day period Bouton and his tiny team shed Kerviel's entire position and at the same time persuaded two U.S. investment banks to guarantee $8.5 billion in new capital. Jan. 23, only after he had shored up Soci't' G'n'rale, Bouton called an emergency meeting of the board, where he finally disclosed the immensity of Kerviel's position and the very costly steps he had taken to pull the bank back from the brink. Bouton, who declined to comment for this article, would later tell Le Monde that when he first heard about the size of the bank's exposure, he had a vision of an aircraft carrier about to sink. In some places this salvage effort would have turned Bouton into a local hero. It was imperious and high-handed, much like Bouton himself, but it kept Soci't' G'n'rale afloat at an especially fragile time for financial institutions.[12] The losses led to calls for the resignation of Bouton, and to speculation that rival banks might attempt a takeover. Under these circumstances, Soci't' G'n'rale has sought to rebuild its position, assuring its customers about its financial position.[17]
G'rard Longuet, a former Industry Minister who was a classmate at ENA, describes Bouton as "extremely rigorous." He adds, "You can debate as to whether he's sympathetic by nature. He gives the impression of being pleased with himself." Bouton has been known to upbraid unpunctual journalists and take potshots at other French companies; he famously trashed media company Vivendi ( VIVEF ), for example, when it was struggling during the dot-com meltdown. Despite his contentious personality, Bouton moved swiftly up the ranks of the civil service to become director of the national budget. Senator Michel Charasse, who was France's Budget Minister in the late 1980s, says Bouton has a sense of humor beneath his austere fa'ade, but as a boss "he's very authoritarian." They had one big fight, when Charasse thought one of Bouton's deputies had been insolent and told him to fire her. Bouton refused point-blank, and Charasse says he almost fired them both - before he calmed down and retreated. Bouton was too good to lose, he says. He was hired away to Soci't' G'n'rale in 1991 by then-CEO Marc Vi'not, who groomed him to be his successor. Bouton took over as CEO in 1993 and has bulked up Soci't' G'n'rale and dramatically boosted its profitability since. He has also fought fiercely to preserve its independence; in 1999, Soci't' G'n'rale ( SCGL.Y ) ended up in a three-way takeover battle with two French rivals, BNP and Paribas, but managed to avoid being acquired.[12]
Bouton's silence was apparently motivated by concern about word leaking. It's surprising not just because the bank itself was severely threatened by the crisis - Kerviel's position was almost double the bank's equity - but also because the CEO himself is an authority in France on corporate governance. In 2002, he wrote an official report following the Enron scandal that urged French boards to be more transparent and play a larger role in decision-making, especially in tough times.[13] Fr'd'rick Oud'a, currently the chief financial officer, will take over as CEO. Splitting the CEO and Chairman roles was also a recommendation Bouton made in his 2002 report, but not something he acted on himself at the bank. Viewed by his peers as brilliant but caustic, Bouton has become a lightning rod for criticism in France following the Kerviel affair. President Nicolas Sarkozy, among others, has demanded his ouster. The board twice refused his resignation.[13] Instead of earning praise, Bouton has become France's favorite villain. President Nicolas Sarkozy has called for Bouton's head, and several peers in the French banking world believe his days are numbered; at the very least they expect him to give up either his chairman or his CEO role. Most painful of all is public opinion, which holds him and the bank largely responsible for the crisis in the first place, and for which Bouton has become a symbol of the arrogance and snobbery of the French elite.[12]
An internal report into what went wrong noted that 74 red flags raised on Kerviel's trades failed to sound the alarm--he was spotted on the 75th. French President Nicolas Sarkozy called on Bouton to resign, and the company's board had twice rejected Bouton's offers to do so before announcing on Thursday that his 15-year tenure as the bank's top executive would be ending.[4] The board twice rejected Bouton's offers to resign, despite calls from President Nicolas Sarkozy for top executives to face the "consequences" of the huge losses.[5]
French President Nicolas Sarkozy had called on Bouton to resign over the trading scandal, which angered French voters and sent shockwaves through the global banking system, already strained by subprime write-downs and collapsing credit markets.[8] French bank chief Bouton relinquishes CEO job, but remains chairman, in wake of rogue trading scandal.[13] The French online news service Mediapart reported that Socit Gnrale was preparing to announce the departure of Mustier and around 10 other bank executives in the coming weeks in connection with the trading scandal. Mustier, reached on his cell phone, denied the report.[11] Last month, it successfully raised 5.5 billion in new capital in a share offering. Bouton told legislators this month that while the trading scandal had been financially damaging to Socit Gnrale, "it did not call into question our system of risk assessment because it involved positions that were completely hidden."[18]
Socit Gnrales board rejected the offers, partly out of fear that a change at the helm then might derail a 5.5 billion emergency share sale aimed at shoring up capital reserves that had been largely depleted as a result of the scandal.[11]
Bouton was at the center of a firestorm that erupted at the bank in late January after it announced losses of more than $7 billion in a scandal it has blamed on unauthorized trades by a single trader, Jerome Kerviel. [5] The moves follow nearly three months of steady pressure from French politicians for Socit Gnrales senior management to take responsibility for the nearly 5 billion in losses suffered after the bank closed out 50 billion in unauthorized bets made by a junior derivatives trader, Jrme Kerviel. "This should have happened much sooner," said Frdrik-Karel Canoy, a lawyer representing hundreds of small shareholders in Socit Gnrale.[11] In January, the French lender disclosed that it had lost '4.9 billion after the bank closed out '50 billion in unauthorized bets made by a junior derivatives trader, J'r'me Kerviel.[17]
The 143-year-old French lender disclosed in January that it had lost 4.9 billion, or $7.7 billion at current exchange rates, while closing out 50 billion of unauthorized bets by a 31-year-old junior trader, Jrme Kerviel. Kerviel, who has admitted to fabricating trades and forging documents to hide his activity from his employer, is under criminal investigation and was recently released from five weeks in custody.[18]
A report released on Feb. 20 said the bank failed to follow up on 75 warnings on Kerviel's positions. Kerviel was released from jail March 18 after a Paris court ruled there was no longer any risk of him tampering with evidence. He'd spent five weeks in what's called provisional detention while magistrates investigated him for fraud, abuse of confidence, and computer hacking. Their investigation continues. Bouton told the French parliament's finance committee on April 9 that the bank would spend between 50 million euros and 100 million euros this year to augment trading-room controls. [6] Oudea, 44, was credited with helping to stabilise the bank, as it negotiated an emergency capital increase and unwound up to 50 billion euros of wrong-way bets in a falling market. He was recently promoted to one of Societe Generale's deputy CEO positions on top of his finance director role.[8] "There will be other cases.'' Deputy CEOs Philippe Citerne and Didier Alix will stay in their current roles, Societe Generale said today. Citerne has told the board he doesn't want investors to renew his mandate as director at the next shareholder meeting.[6]
The CEO shuffle that was all the rage in the U.S. last year has finally crossed the Atlantic as news spreads that Societe Generale SA's chairman and CEO Daniel Bouton has stepped aside.[9] Attempts by AFP to contact Societe Generale for comment on Thursday were unsuccessful. Mustier had presented his resignation to Bouton after Kerviel's deals were uncovered in January, but the chairperson had rejected it. Societe Generale blames 31-year-old Kerviel for the mammoth losses incurred after the bank was forced to unwind more than '50-billion of unauthorised deals he is said to have made. Kerviel has maintained he acted alone but suggested his bosses knew he was dealing with huge sums of money and turned a blind eye as long as he was making a profit. An internal bank inquiry found that Kerviel's unauthorised trading had not been detected because of his sophisticated techniques, but it also pointed the finger at internal audit and risk control failures.[16] PARIS, April 17 (Reuters) - French bank Societe Generale (SOGN.PA: Quote, Profile, Research ) said on Thursday it would split the functions of chairman and chief executive officer and named the men it would appoint to the posts.[19] "The board will appoint Daniel Bouton as chairman and Frdric Ouda as chief executive officer," the bank said in a brief statement.[18] "In view to adapt the Group's governance," the statement said, "the Board of Directors, on Daniel Bouton's proposal, has decided to proceed with the dissociation of the functions of Chairman and Chief Executive Officer."[13]
Bouton will be replaced by Frdric Ouda, the chief financial officer, who last month joined the banks senior management team as a deputy chief executive. Philippe Citerne, Boutons second in command, will also step down from the banks board when his mandate finishes at the end of May.[11] Deputy CEO Frederic Oudea, promoted only last month from chief financial officer, will take over as CEO, the bank said. Kerviel, recently released from jail pending further investigation, claims his superiors must have known what he was doing but that they chose to look the other way when he was making money. He is facing preliminary charges of breach of trust, forgery and unauthorized computer activity.[4] Oudea, 44, has been chief financial officer for five years and last month was promoted to deputy CEO. The board will approve the changes on May 12.[6]
Ouda, 44, joined Socit Gnrale in 1995 and became chief financial officer in 2003. He is a former Finance Ministry official and a graduate of two of the most elite universities in France, the cole Polytechnique and the cole Nationale dAdministration - giving him the same pedigree as most of the top business leaders in France. At least half of the 40 largest French companies are run by graduates of those schools. [11] As part of a reorganization of the bank's senior management structure, the chief financial officer, Fr'd'ric Oud'a, would replace Bouton.[17]
The announcement last night looked like a compromise that would enable Mr Bouton to save face while being pushed gently towards the exit door. After 15 years at the helm, the man nicknamed "two brains" for his formidable intelligence will now be taking a back seat. He can claim credit for turning SocGen into a leading player on the international financial stage and also for leading it through the turbulent weeks that followed the revelation of Mr Kerviel's activities. Mr Bouton's supporters argue that he saw out the worst of the storm when SocGen raised €5.5 billion through a rights issue and then managed to beat off BNP Paribas, its Gallic rival, which was considering a takeover battle. The failure to stop Mr Kerviel earlier has tarnished Mr Bouton's reputation and ultimately cost him the post of chief executive.[3] Jean-Pierre Mustier, the head of SocGen's corporate and investment banking division, is another high powered victim of the scandal. Once tipped as a future chief executive, he has been blamed for the failings which enabled the rogue trader to prosper, and was overtaken by Mr Oudéa in the race for Mr Bouton's succession.[3]
Mr Bouton twice offered to resign in the aftermath of the rogue deals, blamed on former junior trader Jerome Kerviel, but was refused. Societe recently raised 5.5bn euros by selling reduced-price shares to existing investors to try and rebuild its balance sheet.[7] The dismissals would be the first fallout at the bank from the '4.9-billion in losses incurred from unauthorised deals by trader Jerome Kerviel, who has been charged in the case, according to the report.[16]
Mustier, Soci't' G'n'rale's head of investment banking, had already alerted him about a 31-year-old junior trader in the stock arbitrage department named J'r'me Kerviel who had been caught making big unhedged bets on European stock futures. It was only now, after auditors had spent two days and nights furiously digging through computer records and Mustier himself had questioned Kerviel, that the bank knew just how big those bets were.[12]
By contrast, J'r'me Kerviel, the rogue operator who openly admitted to breaking bank rules, has assumed the unlikely role of folk hero - the common man who humbled a haughty institution. (Kerviel even called the subprime crisis correctly, making some smart, albeit unauthorized, trades before erroneously betting on a market rebound.) What's behind this Freaky Friday - like switch in roles? The French have long been skeptical about the workings of capitalism and the ability of markets to bring prosperity to more than a tiny few; former President Jacques Chirac once described free-market liberalism as a scourge as big as communism.[12] French news website Mediapart reported that Mustier and nearly ten other managers responsible for overseeing the work of Jerome Kerviel, the ex-trader whose unauthorized trades led to the loss, would soon leave the bank.[15]
"Delaying it has, rather than restore confidence, has increased the distrust" in the banks management. Bouton and Citerne, both 58, offered their resignations to the board in late January, shortly after the trading scandal - the biggest alleged bank trading fraud in history - was disclosed. [11] The scandal sparked a power struggle between Mr Bouton, 58, who appeared determined to hang on to his job after two initial resignation offers were rejected by the board, and French political leaders.[3]
SocGen's board and major shareholders closed ranks behind Bouton as the bank's larger French rival BNP Paribas (BNPP.PA: Quote, Profile, Research ) openly pondered a bid before declaring a truce.[20]
Daniel Bouton will hand the top executive post to finance director Frederic Oudea, according to a statement from the bank, which remains beset by bid rumors in the wake of the affair.[20] Bouton will stay on as chairman but current finance chief Frederic Oudea will become the new CEO.[10]
Going forward, the CEO and chairman posts will be split among two people, improving governance, the bank said. SocGen said the board had agreed to the moves, which were proposed by Bouton and will take effect at its next meeting May 12.[4] The bank said the idea of separating the jobs of CEO and chairman came from Bouton himself.[10]
The jobs of chairman and chief executive officer will be split as of May 12, the bank said.[10] Oud'a joined the bank's senior management team last month as a deputy chief executive alongside Philippe Citerne, who also sits on the board, and another deputy chief, Didier Alix.[17] SocGen said that Mr Oudéa wanted to retain Philippe Citerne and Didier Alix as deputy chief executives. It added that Mr Citerne had decided not to ask for a renewal of his board mandate at a shareholder meeting on May 27.[3]
Commenting on the financial results, the company's president and chief executive officer, Paul Geraghty said, ' Harleysville's portfolio has virtually no exposure to subprime borrowers - a benefit of our historically careful approach to residential mortgage lending."[21] The posts of chief executive and chairman were combined by Mr Bouton in 1997, but will now be split to try to improve corporate governance.[7] Bouton has served as chief executive since 1993 and added the chairmanship in 1997.[6]
Almost a decade later bad blood still lingers between the banks. People who know Bouton well say the experience was a critical one that helped him deal with the Kerviel crisis. "He was incredibly involved right from the beginning, unlike in 1999," says one friend. [12] Bouton himself has consistently denied any responsibility for the scandal and blamed Kerviel's actions alone.[10] Reille, who looks a bit like Mr. Bean, is partly responsible for the unprecedented rehabilitation of Kerviel's image. Most other rogue types in financial scandals are cast as bad boys, or they simply try to maintain a low profile. They don't end up, like Kerviel, with photographs in the glossy magazine Paris Match.[12]
Kerviel turned himself in to police on January 26, two days after the bank revealed the losses, and on January 28 was charged with breach of trust, fabricating documents and illegally accessing computers. [1] In a brief statement issued after the close of the French market, the bank described Bouton's move as driven by corporate governance reasons.[13] Bouton, 58, will remain as chairman, the Paris-based bank said in an e-mailed statement today.[6]
President Nicolas Sarkozy called for the chairman's departure amid widespread claims that lax procedures had enabled Mr Kerviel to go undetected. [3] The moves come less than four months after SocGen announced that it had discovered the unauthorised deals of Jérôme Kerviel, a junior trader, which were unwound at a loss of €4.9 billion.[3] For the recently concluded fourth quarter, the France, Paris-based company reported a net loss of '3.35 billion, compared to a net income of '1.18 billion in the prior year quarter.[17] The Harleysville, Pennsylvania-based company reported net income for the first quarter of $7.3 million or $0.23 per share compared to $6.1 million or $0.21 per share in the year-ago quarter.[21] HNBC closed Thursday's regular trading session at $13.86, down $0.17 or 1.21% on a volume of 78.18K shares on the Nasdaq.[21] Shares in the top global information giant, Thomson Reuters, start trading for the first time.[18]
Oudea joined Societe Generale in 1995 after holding positions in the French senior civil service, including at the finance ministry. He became CFO in January 2003. [6] According to bankers involved in the rescue operation, Bouton was a key to the successful completion of the $8.5 billion rights issue, which was easily oversubscribed last month.[13] "When organizations get into trouble that can provide an impetus'' to consider separating the leadership roles, said Eleanor Bloxham, president of the Corporate Governance Alliance, an education and advisory company in Columbus, Ohio. "It's smart to do.'' The bank said today that its first-quarter earnings will show "resilience'' and "the benefits derived from a balanced portfolio of activities in a difficult environment.''[6]
SOURCES
1. AFP: Bouton to stay Societe Generale chairman, loses CEO post: bank
2. Free Preview - WSJ.com
3. Daniel Bouton relieved of chief executive role as SocGen seeks to end rogue trader crisis - Times Online
4. Bouton Bows Out As SocGen CEO - Forbes.com
5. Societe Generale splits chairman, CEO roles - USATODAY.com
6. Bloomberg.com: Worldwide
7. BBC NEWS | Business | Societe boss Bouton to step down
8. UPDATE 2-SocGen splits chairman, CEO jobs after scandal | Markets | Markets News | Reuters
9. Bouton ousted from SocGen (Dealscape)
10. Societe Generale replaces chief three months after fraud scandal : Europe World
11. Socit Gnrale chief to step down - International Herald Tribune
12. Saving Soci't' G'n'rale - Apr. 15, 2008
13. Embattled Soc Gen CEO steps down - Apr. 17, 2008
14. SocGen to replace CEO after $US7.8bn trading loss | theage.com.au
15. Societe Generale denies report investment banking head Mustier to leave bank | Latest News | News | Hemscott
16. business.iafrica.com | world news SocGen purge begins
17. RTTNews - Global Business News, Business Newswires, Business Articles, News Analysis.
18. Bouton replaced as CEO of Socit Gnrale - International Herald Tribune
19. Societe Generale to split CEO, chairman functions | Industries | Financial Services & Real Estate | Reuters
20. SocGen splits chairman, CEO jobs after scandal | Reuters
21. RTTNews - Breaking News, financial breaking News, Positive EPS Surprises, Stock research .
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