Running head: Jerome Kerviel 1

Jerome Kerviel Rogue Trader or Misguided Employee

Cecilia Maynard

Post University
Rogue Trader or Misguided Employee 2

Introduction

One hundred fifty-five years in the making, Société Générale is one of the oldest yet third

largest bank in France. Founded in 1864, Société Générale often nicknamed “SocGen” was

originated by a group of producers and investors during the second empire (Napoleon III reign).

The French banking has grown to serve 19.2 million individual clients in 76 countries. SocGen

operates in three major businesses: 1. Retail banking and financial services; 2. Global

investment management and services; and 3. Corporate and Investment banking. In 2006

SocGen was classified as 67 on the Fortune’s 2006 Global 500 which had built a $72 billion

position in Euro stock index futures. In the prior year, it had rated 152 on Fortune’s list which its

enhanced overall advantage was $5.5 billion up 42% at the time.

Jerome Kerviel an unmarried 31-year-old at the time worked for SocGen in the summer

of 2000. He began working in the middle class as a monitoring support role which he oversaw

the futures traders for five years. In 2005, he then got promoted as the junior trader (broker) to

the futures trading front desk. Kerviel job was arbitrage which he would trade European futures

by betting on the future execution of these funds. His trading surplus increased throughout the

year of 2007, as he continued to bet that the markets would fall during that time. When the year

ended Kerviel needed to disguise his gains, so he formed counterfeit losing positions to weaken

his gains. He was hindering more than $73.3 billion an excessive amount which exceeded

SocGen’s overall market cap of $52.6 billion. Although Kerviel was a rogue trader/misguided

employee, my question is Who is to blame? And was he a villain or a victim?

Rogue Trader or Misguided Employee 3

Should other Individuals and the Bank be held Accountable for Kerviel Actions?

Yes, I strongly believe that other individuals and the bank should be held accountable for

Kerviel actions. He is not the only one responsible for these actions as he so mentioned himself

as being the “scapegoat”. Kerviel should be the first individual held responsible for these loses

for two reasons. First, he knew exactly what he was doing this malicious, evil, devious act that

was not right and against company policy. Second, his fraud activities were done deliberately of

being more acceptance and more higher earnings for himself.

Société Générale systems and system developers is next in line for being held responsible

for these loses. Meaning these systems demonstrated to be not safe, especially when the

expertise used in the fraud easily avoided the fraud detecting system. Also, alerts concerning

irregular accounts in the system were not set in motion at an effective rate, which made it

possible for Kerviel to further avoid being captured. In addition, the system did not detect the

more-than-ordinary gains being caused by the department where Kerviel worked.

Société Générale management team is the third to be blamed for these loses. First, the

fact that the management did not foresee probable fraud when they moved Kerviel between two

attached positions. Second, the internal control had scheduled checks on each trader’s books that

were known to Kerviel, which gave him the chance to fix any problems before these checks.

Third, the management team was not on top of things, meaning they should have put a stop to

this madness from the first beginning. Instead SocGen management neglected the action after it

discovered that the trading fraud had a meaningful impact on the world marketplace.
Rogue Trader or Misguided Employee 4

Describe What I Believe to have been Kerviel Personal & Professional Ethics

What is personal ethics? It is defined as a category of philosophy that determines what an

individual believes about morality and right and wrong.

https://pages.stolaf.edu/ein/disciplines/personal-ethics/ What is professional ethics?

Professionally accepted standards of personal and business behavior, values and guiding

principles. Codes of professional ethics are often established by professional organizations to

help guide members in performing their job functions according to sound and consistent ethical

principles. https://businessdictionary.com/definition/professional-ethics.html I believe that

Jerome Kerviel personal ethics moves towards the individualism side, someone who cashed on

free internal controls of society general. His independency may be controlled from the following

factors; such as a negative life experience or an overly aggressive financial career objective.

The ethical reasoning for his moral responsibility for the harmful effects of his actions

would be “1. He knowingly and freely acted or caused the act to happen and knew that his act

was morally wrong or hurtful to others and 2. He knowingly and freely failed to act or prevent a

harmful act, and he knew it would be morally wrong for him to do this.” (Weiss, 2014) On the

other hand, his professional ethics got washed away when he assured himself that nobody will

ever find out what he has done which led to breach of trust. He luxuriates into scandal at the

stake of the company which exceed to his credit limits. His actions were familiar to his superiors

and the loses were caused by fear selling by the bank. In addition, his actions were practiced by

other traders within the company.

Rogue Trader or Misguided Employee 5

Explain How A Stakeholder and Issues Analysis can help Me Understand this Case

The only way a stakeholder and an issues analysis can help me understand this case better

is by being honest. Meaning bringing forth all the evidence. Not keeping any information out.

Not assuming anything.

Conclusion

In conclusion, no one knows what was going on in the mind of Jerome Kerviel at the

time, but what was certain that his actions had brought bankruptcy where he worked. He has

found a way to manipulate and suppress the system where he worked very well by analyzing his

weaknesses. However, regardless of the negative side caused by the institution where he

worked, Kerviel managed to make a lot of profits (gains). You know what they say, actions

speak louder than words. Some might call him genius but really, he should be called greedy with

a sinful nature.
Rogue Trader or Misguided Employee 6

References

Weiss, J. W. (2014). Chapter 2: Ethical Principles, Quick Tests, & Decision-Making Guidelines.

In Business Ethics: A Stakeholder and Issues Management Approach (p. 55).

Personal Ethics | A Guide to Ethics. (n.d.). Retrieved from

https://pages.stolaf.edu/ein/disciplines/personal-ethics/

What are professional ethics? definition and meaning. (n.d.). Retrieved from

https://businessdictionary.com/definition/professional-ethics.html