The Société Générale case invites comparisons with the Kidder, Peabody imbroglio & the Virginia Tech incident
Que: What do you make of Jerome Kerviel, the trader
who just lost $7 billion for Société Générale with his secret dealings? (Jorge Gonzalez Henrichsen, Mexico City) Ans: We think his dealings probably weren’t so secret. In fact, we are ready to wager that ever since the details of Jerome Kerviel’s trickery started being exposed, more than a few of his coworkers have been cringing. “I knew something was wrong with that guy,” they’re confessing at home or whispering to each other. “He always gave me a strange feeling.” Some are recalling the times they almost spoke to a manager about their concerns, but stopped themselves. “I didn’t have any real proof,” they might tell you by means of rationale.
Or: “It’s always better to keep your head down.” Or: “No one would have listened.” It’s hard to argue with these explanations. Kerviel was astonishingly adept at covering his tracks, slipping though several of the bank’s security firewalls as he moved on.
And it’s true that organizations – especially hierarchical, bureaucratic ones – can develop cultures in which the rank and file don’t feel exactly enthusiastic about reporting bad news upward, especially if it’s just a hunch. They sense their managers don’t want to hear it, and their managers, busy with competitive pressures, don’t do much to persuade them otherwise either. We don’t want to jump on the standard blame-the-company bandwagon. Sure, some companies could make it easier for employees to come forward with concerns.
But from our experience, even when companies provide convenient, confidential ways for that to happen, few employees use them. Suggestion boxes remain empty. Ombudsmen wait for the phone to ring.
Even in organizations where managers make it abundantly clear that risk management is everyone’s job and where those who speak up are celebrated as role models, there just seems to be a human disinclination to squeal. People would rather wait, in hopes that the miscreant in their midst fades away before doing some real damage or gets caught. And so, time and again, you get cases like Kerviel’s – rogues who raise hackles but not alarm bells. In 1994, after Kidder, Peabody lost hundreds of millions at the hands of a trader named Joe Jett, several of his colleagues had admitted that they had long suspected he was up to something illegal.
“Someone trading such mundane products could never have been making those kind of profits,” they generally said. “We figured someone upstairs would eventually get that.”
This all-too-human dynamic brings to mind the tragedy at Virginia Tech (though of course there is no comparison between the magnitude of the incidents), where 32 people were murdered in 2007 by a student. After the tragedy, dozens of people who had previously been in contact with the killer said they had been worried for months that exactly such an incident would come to pass.
Some had spoken up, but many more, silently hoping he would go away or get noticed, had kept quiet. Soon after the shootings, Virginia Tech instituted numerous safety measures designed to make another such incident impossible. That’s what exactly happened at Kidder, Peabody as well.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
Que: What do you make of Jerome Kerviel, the trader
who just lost $7 billion for Société Générale with his secret dealings? (Jorge Gonzalez Henrichsen, Mexico City) Ans: We think his dealings probably weren’t so secret. In fact, we are ready to wager that ever since the details of Jerome Kerviel’s trickery started being exposed, more than a few of his coworkers have been cringing. “I knew something was wrong with that guy,” they’re confessing at home or whispering to each other. “He always gave me a strange feeling.” Some are recalling the times they almost spoke to a manager about their concerns, but stopped themselves. “I didn’t have any real proof,” they might tell you by means of rationale.Or: “It’s always better to keep your head down.” Or: “No one would have listened.” It’s hard to argue with these explanations. Kerviel was astonishingly adept at covering his tracks, slipping though several of the bank’s security firewalls as he moved on.
And it’s true that organizations – especially hierarchical, bureaucratic ones – can develop cultures in which the rank and file don’t feel exactly enthusiastic about reporting bad news upward, especially if it’s just a hunch. They sense their managers don’t want to hear it, and their managers, busy with competitive pressures, don’t do much to persuade them otherwise either. We don’t want to jump on the standard blame-the-company bandwagon. Sure, some companies could make it easier for employees to come forward with concerns.
But from our experience, even when companies provide convenient, confidential ways for that to happen, few employees use them. Suggestion boxes remain empty. Ombudsmen wait for the phone to ring.
Even in organizations where managers make it abundantly clear that risk management is everyone’s job and where those who speak up are celebrated as role models, there just seems to be a human disinclination to squeal. People would rather wait, in hopes that the miscreant in their midst fades away before doing some real damage or gets caught. And so, time and again, you get cases like Kerviel’s – rogues who raise hackles but not alarm bells. In 1994, after Kidder, Peabody lost hundreds of millions at the hands of a trader named Joe Jett, several of his colleagues had admitted that they had long suspected he was up to something illegal.
“Someone trading such mundane products could never have been making those kind of profits,” they generally said. “We figured someone upstairs would eventually get that.”
This all-too-human dynamic brings to mind the tragedy at Virginia Tech (though of course there is no comparison between the magnitude of the incidents), where 32 people were murdered in 2007 by a student. After the tragedy, dozens of people who had previously been in contact with the killer said they had been worried for months that exactly such an incident would come to pass.
Some had spoken up, but many more, silently hoping he would go away or get noticed, had kept quiet. Soon after the shootings, Virginia Tech instituted numerous safety measures designed to make another such incident impossible. That’s what exactly happened at Kidder, Peabody as well.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
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