Oh dear Oudea, it’s deja vu at SocGen
– Margaret Doyle is a Reuters columnist. The opinions expressed are her own –
French boards have a funny way of exacting retribution from their bosses. When the board of Societe Generale realised that it had lost 4.9 billion euros in rogue trading last year, it didn’t sack the boss.
Instead, it said Daniel Bouton could only be chairman, stripping him of his role as chief executive. That job went to Frederic Oudea.
Oudea had been chief financial officer and should have spotted that the cash flowing into the bank’s famed trading division was rather less than the cash flowing out.
On May 6, he received another stripe: he added the title of president (chairman) to that of directeur-general (chief executive).
Being PDG is quite the norm in France, as in the United States. In Britain, listed companies are expected not to combine the roles. In the rare cases where they do, they are expected to explain why.
The idea is that one individual should run the company, and another the board. If the board is to provide proper oversight, it should not be subject to the very individual who it is meant to scrutinise.
The new rules were introduced during the 1990s in Britain partly to prevent too great a concentration of power. Robert Maxwell, chairman and chief executive of Mirror Group Newspapers, demonstrated this risk by robbing the group’s pension funds.
The need to separate powers is more important in banks because of their position in the financial system.
It is perfectly possible that SocGen would still have lost almost 5 billion euros had the powers been separated, but it is less likely. The bank appears to have learned nothing from the experience. The promotion of Oudea sets up the conditions for this to happen all over again.