SocGenIT IS not the end for Daniel Bouton. Oh no. Although Monday will see his role of chief executive of Société Générale, France's second-largest listed bank, handed over to someone else, he will still be le President.
It does not seem a very st
iff sentence for someone who oversaw the loss of more than 5 billion (£4bn). Bouton was the man in charge when the extent of rogue trader Jerome Kerviel's actions, described as the biggest fraud in history perpetrated against a bank, came to light in January.
Some think he could take the credit for righting the ship by overseeing a successful 5.5bn rights issue. But bank bosses all over the world, many of them facing sleepless nights worrying about the extent of their losses due to exposure to the subprime market, looked on in wonder that he held on.
His pillar has remained rather solid. While Chuck Prince at Citi and Stan O'Neal at Merrill Lynch went quietly into obscurity having suffered the ignominy of falling on their swords, Bouton is still the president of not only SocGen, but also two leading French banking organisations the Fédération bancaire française (FBF) and l'Association française des banques.
But then Bouton is more establishment than the establishment. And, as one French banker puts it: "they protect their own".
In the not so distant past when all banks were government-owned, it would have been unthinkable for a French banker to resist the will of the president but such it was for Bouton.
Nicolas Sarkozy publicly called for Bouton to "take responsibility" for the problem. It must be said Bouton did offer his resignation, twice. Both times he was refused by SocGen's close-knit board.
Instead Bouton said: "I stay, I am the pilot, I drive on."
Yet removing him from his executive role is still a rebuke in the bankers' exclusive milieu. "This is a way for Daniel Bouton to save face, to make a graceful exit," said Pierre-Yves Gomez, president of the French Institute of Business Governance.
In his place will be Frederic Oudea, 44, who has been chief financial officer for five years.
Clearly it took one of the world's great banking crises to move SocGen towards what in the US and the UK has become de rigeur for corporate governance – splitting the role of chairman and chief executive. Yet SocGen also has what they call "co-CEOs". Right underneath Bouton is Didier Alix, head of the SocGen's backbone retail bank, and crumpled mathematician Philippe Citerne. It was Citerne who once said: "There is one basic rule; when he is not here, I make the decisions." As Bouton resigns as chief executive, Citerne loses his place on the board – "to increase the proportion of independent board members".
Another quiet dagger was for Jean-Pierre Mustier, the head of corporate and investment banking where Kerviel worked. Mustier, a former paratrooper and fan of military philosophers Clausewitz and Sun Tzu, was supposed to succeed Bouton. Although he too maintains he plans to keep his job, it is clear he is no longer welcome at the top.
Considering his predecessor, Marc Vienot retired at the age of 69, Bouton's loosening of his grip happens young for the 58-year-old.
Both are known as being cigar-smoking bon viveurs. It has been said Bouton would "travel miles to taste a bottle of wine or listen to opera". One journalist who met him was initially disappointed he planned to lunch with her in the staff canteen of their ultra-modern twin-towered headquarters at Le Defence where the bank relocated from central Paris in 1995. There was no reason for her to worry. Over the langoustine rotie et nage de moule aux legumes, he asked to pause the interview for a moment in order to better appreciate the dish.
Although he has smilingly been described by colleagues as "the perfect example of the French republican meritocracy", he might have been born on another planet from that of his employee Kerviel. It was only when banking started to become more complex and needed to keep people on that employees were paid enough not to have to evade fares on the Metro in order to make ends meet.
Dubbed "two brains", the Paris-born Bouton earned degrees from National Institute of Political Studies and the elite National School of Administration. His wife Nicole Berckole, with whom he has two daughters, is a director of investment bank Lazard. An 18-year career in the civil service, ending as inspector general of finance, was a sure route to a top job in banking.
Yet an audit of the fiasco suggested that it was Bouton's management that allowed – even encouraged – traders like Kerviel to push the limits.
The difference between SocGen before Bouton arrived and now is it has been transformed from a mild French provincial bank to a global player, especially in eastern Europe and Russia. It also became a world leader in equity derivatives trading, which is where it all went wrong.
"A main pillar of this corporate and investment bank is equity derivatives, both in terms of revenues and management capabilities," said Bouton in a happier era.
"I think that is well understood by the market."
Before the crisis, equity derivatives was expected to account for about 20 per cent of group profits. As a percentage of revenues, this beat out rivals BNP Paribas and the supposed giants of European derivatives markets and investment banking, Deutsche Bank and UBS.
When the trading scandal was revealed, former employees went to the press saying traders were "pushed to make a lot of money", there was a "short-termist culture ... where they don't want to be bothered by inspectors and controllers".
But before the scandal, Bouton was proud of this culture. He told one magazine: "Our CIB has a very entrepreneurial spirit... The one point I try to teach to young managers is that you are allowed to make mistakes, but you are not allowed to stay idle and sit on the fence."
Bouton's legacy would also have been that of taking the bank from being very French to becoming a much more significant international player.
He bought stakes in Rosbank, Russia's second-largest retail bank as well as majority stakes in Komercni Bank in the Czech Republic and BRD in Romania.
Now his legacy will see him thought of, if not as the architect of one of the world's frauds, certainly its patron.
LE PRESIDENTBorn – 10 April, 1950, in Paris.
Education – Degrees from National Institute of Political Studies and National School of Administration.
Family– Married, with two children.
Career – French ministry of finance 1973 to 1991. Started as inspector of finance and ended as inspector-general of finance. Joined Société Générale 1991 as executive vice-president, a post created for him. In 1993 he became chief executive officer, replacing Mark Vienot as chairman of SocGen in 1997.
Awards – Knight of the Ordre Nationale de la Légion d'Honneur; Knight of the Ordre Nationale de la Légion du Mérite.
The full article contains 1198 words and appears in The Scotsman newspaper.
