Saturday, 26 January 2008

The Chief Corporate Counsellor

A rogue’s gallery

As the plot continues to thicken regarding the rogue trader at Société Générale, I am beginning to wonder which of the two are really the rogue – The bank management or the person.

When the bank learnt of the activities of Jérôme Kerviel, they were not sure of how exposed he had made the bank; it would now appear the exposure exceeded the market capitalization of the bank by about $21 bn.

At they time they began to unwind the deals, the losses stood at about $2.4 bn and rising to about $7.4 bn after the bank had covered the exposure.

In the time between learning of this “fraud” and telling the authorities about it, the bank had indulged in some serious self-preservation activities that we might have to deem criminal in the long run.

Market meltdown

So, last Monday, they flooded the market with these suspect deals and sold off all these positions – buyers not being aware of why the market was engaged in such frenzy, it is possible that the bank might have tried to mask where the trades were coming from to avoid the suspicious of more savvy marketers.

Beyond that, many might say it is coincidental but is not contrived to suggest this selloff prompted the US Federal Reserve to knock off 75 basis points from the baseline interest rates to avert a market disaster.

The acts of the bank could be analogous to walking away from scene of an accident or moving the body and furniture around at a murder scene before calling the police – the former being criminal and the latter being highly suspicious as to suggest criminality.

But it meant the bank was saved because the collapse of the fifth largest bank in Europe would have sent the banking world and the markets to the middle of Armageddon. The ends have in some way justified the means, but the legality of it all must be investigated.

Mere mortals make businesses

Now, back to the person, flesh and blood, like you and me, and subject to the same kinds of passions experienced in our basic humanity.

This young man at 31 suffered both the death of his father and the breakdown of his marriage more or less at the same time, sometime last year.

So, he would have been suffering grief, sadness and a sense of failure, all these weighing down on his emotions as he tried to take his mind off the matters at home and bury himself in his work as we all seem to do.

I would also suspect that working in a banking atmosphere; everyone is sapped of every ounce of humanity to become achievement automatons, nobody cares if you have problems at home or need a break to recover – you are a lesser person for allowing yourself to be human.

This is the kind of work environment I hear is pervading the banking industry in Nigeria, everyone puts in the longest hours possible that they have no time for anything else but in the service of the bank because they are paid to give up their humanity for the accumulation of accolades and great profits for the bank. This is both cultish and a kind of slavery for the want of another description.

Was Société Générale not named the equity-derivatives house of the year 2007 by the Banker magazine, whilst all this was going on? [Economist]

Martingale instincts

The positions that the young man took in trying to recover his losses probably involved the popular 18th Century France Martingale betting system – it involves a gambler doubling his stake after every loss such that any consequent win would recover the loss and a profit equivalent to the original stake.

The probability and mathematical analysis of this system suggests the more one is able to afford to bet, the more likely the person is expected to lose – however, human instinct might dictate otherwise and luck might just smile on that person.

Now, I would suppose every man has a Martingale instinct if you gamble on something, it takes a special kind of gambler to set a limit on what he would gamble before he walks away – with his dignity intact and his shirt still on his back.

The need for a Chief Corporate Counsellor

The loss of elements of humanity in work environments allows for things to go wrong, it is unlike the man had a mentor or confidant in whom he could confide when things were going wrong.

The emphasis on success and driving ambition is good for growing a business but every business requires human beings who are somewhere between having everything perfect in their lives and most things in disarray.

Some people whose status depends on their achievements at work might well require additional support when things go wrong in their lives and this goes beyond just having a concerned manager or company shrink.

The need for a kind of corporate confessor or counsellor, dare I say “Agony Aunt” in workplaces that tax all the elements of our humanity cannot be overestimated.

This role should not be used to assess the mental state or fitness of an employee, nor should it be part of a performance review, but it should have ways by which people with difficulties either at work or outside work can unburden themselves and become more effective and productive at work.

If there was such a person whom employees could approach in confidence appreciating their issues and concerns would be dealt with sensitively and compassionately, it could be argued companies would not end up in so much trouble.

This kind of role is very much like the role the Counselor plays in StarTrek: The Next Generation – available, approachable, wise, non-judgemental and considerably useful to the total welfare of the Enterprise crew.

Message to Jérôme Kerviel

There are still many unanswered questions, but for the young man, I hope he can begin to see beyond the maelstrom that has engulfed him. Regardless of his reckless behaviour, I believe he was let down by his management, castigated by the bank and is probably the scapegoat for what should really be punished at the board level.

Be strong, you can live through this, and don’t do anything stupid.

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