Board Backs Chief of French Bank, Assigns Crisis to Committee

The board of Société Générale so far has declined to act on an offer to resign by chairman and CEO Daniel Bouton, according to news reports. The New York Times, quoting one director from the 15-member board, said: “The captain remains on the boat” but it is unclear whether “the captain or the boat will sink first.” France’s second largest bank has reported losses of $7.1 billion, the result of actions the bank alleges by 31-year-old trader, Jérôme Kerviel.

The decision by the board to keep Bouton at the helm “baffled some people in the United States and Britain,” according to the Times  [link to story], “where sound corporate governance would most likely have dictated his departure. But the decision seemed to be driven by board and worker interests, rather than the coziness that is common among France’s political and business elite.” The Financial Times, quoting another unnamed director, who said, “If he [Bouton] leads us through the crisis, there is no reason why he should go.” 

The bank’s board appointed one of its independent directors, Jean-Martin Folz, the former chief executive of PSA Peugeot Citroën, to head a crisis surveillance committee made up of independent directors. The committee is to supervise an internal inquiry into how Kerviel was able to allegedly gamble with as much as 50 billion euros of the bank’s money without the knowledge of his bosses. The FT reports the committee is to issue a report as soon as within a month.

The bank said it had also hired the auditing firm PricewaterhouseCoopers to assist the committee. The committee, Folz told reporters, would ensure that “the mechanisms behind the fraud are brought to light.”