SocGen Splits Chairman, CEO Jobs After Scandal
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.
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.
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 criticized its controls.
Oudea, 44, was credited with helping to stabilize 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.
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.
But SocGen's board and major shareholders closed ranks behind Bouton as the bank's larger French rival BNP Paribas openly pondered a bid before declaring a truce. Throughout, Bouton vowed to keep Societe Generale independent.
On Thursday, SocGen shares rose 5.9 percent to 75.15 euros, buoyed partly by renewed speculation that France's Credit Agricole might make a move on SocGen.
Societe Generale said in a statement that Bouton had initiated the new management decisions.
It said the board would discuss the changes on May 12.
The same meeting is due to approve first-quarter earnings, which the bank said would reflect the "sustained confidence of our clients, the group's resilience and once again the benefits derived from a balanced portfolio of activities in a difficult environment."
SocGen was seen as one of the last major European banks to have a combined chairman and chief executive role.
Bouton was the author of a 2002 blueprint on French corporate governance that proposed tighter supervision and accounting rules in the wake of the Enron affair but did not come down either for or against splitting the top roles.
Before the Kerviel crisis, banking sources said Bouton had been preparing his succession by promoting two high-flyers in their forties, Oudea and corporate and investment banking chief Jean-Pierre Mustier, who was wounded by the trading scandal.
Oudea comes from the Polytechnique engineering school, a source of brainpower and exotic mathematical skills that made SocGen a world leader in derivatives.
Known simply as "X" after a mathematical variable, the elite Polytechnique school provides many of SocGen's raw recruits.
But critics say the Kerviel affair has shown that Societe Generale is too elitist and more reliant on computer wizardry than common sense.
Its derivatives brand came tumbling down when Kerviel's managers failed to spot his activities from a relatively humble corner of the trading floor specialising in index arbitrage.
Kerviel, who did not go to a top graduate school, is under investigation over the affair but says the bank must have known what he was doing. SocGen denies this and says he acted alone.
Besides engineering school, Oudea was drilled in public finances as an Inspector of Finance, one of the classic paths trodden by French business leaders and civil servants. He joined SocGen in 1995.
Oudea has told the board he will propose keeping two other deputy CEOs, Philippe Citerne and Didier Alix, SocGen said.
However, it added that Citerne had decided not to ask for a renewal of his board mandate at a shareholder meeting on May 27.
"The board has decided to accept this proposal and to increase the proportion of independent board members by asking shareholders to appoint a new independent board member," the bank's statement said.