Roguish Behavior

Today’s ruling against Jérôme Kerviel is interesting due to the fact that it sends the message that he and he alone should bear all responsibility for Société Générale’s crash. But what about the people at the top? Most control frauds usually begin with the CEO of the company.

Mr. Kerviel acknowledged at his trial that he had falsified documents and entered fake trades to hide his activities, but he maintained that his bosses had deliberately turned a blind eye to what he was doing and had tacitly encouraged him as long as it was profitable.

More than likely, the bosses at Société Générale had set up a Gresham’s by cultivating a culture where only those who were willing to engage in the control fraud would have employment there. Had Mr. Kerviel not been willing to make these risky investments, someone else would have come along to do it.

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