Jérome Kerviel : Rogue Trader or Misguided Employee ? What Really Happened at the Société Générale?

ETHICS - REPORT

Case study : Jérome Kerviel : Rogue Trader or Misguided Employee ? What really happened at the Société Générale?

Group Members:

Xue Chen, Yixuan JIANG, Neeharika GOWLIKAR, Sunandita BISWAS, Raghudath DEVADATHAN NAIR

Q1.What are the facts?  

Kerviel was suspected of arbitrage at the SocGen bank, operating a portfolio of financial instruments by trading European future funds in one market, then at the same time selling a similar portfolio with a different value to minimize the trading trace. Kerviel's portfolio was "fictitious," and it showed that Kerviel had made a bet of a shocking $73.3 billion of SocGen 's money on European futures according to the bank’s report,. The ultimate downfall of SocGen are also caused by it. Most of the awareness caused by Kerviel trades were written off as computer system errors; his explained to his supervisors but it was so confusing they dropped their questioning. The bank, France’s second largest made a conclusion that, “Systematically, employees were not considerable enough in their checks.” And The bank could not find evidence that Kerviel had partners.  

Q2.Who are the stakeholders?  

There are Jerome Kerviel, supervisors, senior managers and the board of directors, employees of the company, the company shareholders, government and competitors.

Q3.What are the consequences of Kerviels’ actions for each stakeholder? (Run a Cost and Benefit analysis of Kerviel’s action for each stakeholder)  

Jerome Kerviel: Jerome Kerviel is the main stakeholder in this case. His actions were the most important cause behind the huge losses incurred by SG. He had been also notorious with his whole life.

Supervisors: Kerviel’s direct supervisors were responsible for managing his actions. They were also blamed by public, however, thank to this event, their sense of vigilance has growing.

Senior managers and the board of directors: senior managers and the board of directors were not innocent and they were responsible for carrying out and enforcing guidelines. By the way, their resignation was not successful, but their professional skills had been queried by all people.

Employees of the Company: employees of the company are stakeholders since other traders, actions may have influenced Kerviel’s decisions, and their own careers may have been disturbed by Kerviel case within the company.

The company shareholders: the final primary stakeholders were the company shareholders, and the huge trading losses at SocGen brought about by Kerviel have bad influence on them. The crisis of confidence of the company was also destroyed through this incident.

Government: Secondary stakeholders include the government, who pushed the board of directors for Bouton’s resignation, and the court systems prosecuting Kerviel and other individuals indicted on counts of insider trading. Cooperation between country and country will be hard to complete.

Competitors: there are competitors, including BNP Paribas, who may try to use this opportunity to purchase a portion of SocGen operations at a lower price. Finally, there is the public whose confidence was yet again shaken by another scandal within a financial institution.

Q4 . Is Kerviel the only guilty one in this case with regard to his actions? Should other individuals and the bank be held legally responsible for Kerviel’s actions? Why or why not? Explain your answer.

In my opinion Kerviel is not the only one who is responsible for the action rather as he mentioned about himself : “Labeled as scapegoat” . He is the the front face , a direct name to the world who must know about this incident but if anyone dig into deeper level he is not the only one.

Why so ? is because if we read the details of the incident from beginning we can find that all what he tried to or intended to do was with a motive of being a best trader and making as much profit as he can do for the bank , so that in return he will gain his percentage of amount, which is normal for him in that case. Not only that there were instances when he was trading with amount far access than normal trading limit , by passing the internal controls for over two years , the emails sent to his supervisors were ignored. Because what he was doing was profitable for the company. As we can see Two years is a big amount of time to detect or stop if anything is needs to be done. But there was no. Superior ignores the email alerts of his activity , Which simply means according to me that it was also the superior were also not doing their tasks properly, which causes .

Another point that Kerviel was charged with unauthorised computer activity and due to which later on IT , security of the bank was increased in greater level across all the branches, For me Why AFTER and not BEFORE? A global bank which works in all the 3 banking sector must enable such proper security system for them so that any issues or events like that can never happen. We call in English that prevention is better than cure , so why not the bank prevented themselves before it occurred, so according to this fact in my opinion bank’s security , IT infrastructure is equally responsible , as the superior of Kerviel.

Q5 . In your opinion, does the punishment fit the crime? Explain your answer .

According to me there is no ideal punishment for any crime , rather it’s important that to prevent the situation in certain way so that crime can be prevented before there are commited. In this situation as explained before it is very much observed that Kerviel is not the only guilty for what ever happened, also there were other superiors of him who has been proven to neglect their job which lead to this situation . Along with that bank’s security and IT system as well . so globally , If there is a crime and that deserve the people who commited to have punishment , it should be all of them , and not just one who is focused in the forefront , here in this case for me Kerviel did something unethical and deserve a punishment , this punishment should be also be given to other people who were not in the forefront but was responsible for this situation .  

And if it is asked whether this punishment fit the crime than for me it won’t, unless we remove the reason of the crime , and as we have seen there have been lot of negligence from various other stakeholders of bank, so even if we see Kerviel have been punished , but I am sure this won’t stop the crime to happen again , so NO this punishment doesn’t fit the crime.

Q6. Describe what you professional ethics?Use maturity, individual applied)

Believe to have been Kerviel’s personal and the concepts studiedin class (level of style of decision making, ethics theories