Professor Elam

Most would say that one person is pressed to make a difference in a large organization.  Well, as Societe General is learning, that is not always the case. One rogue trader has proven that theory incorrect.  While this article disputes Kerviel’s claim that the Bank would look the other way when I was profitable, my experience at such things is that this is quite correct. Great gains only come with assuming greater risk. Again and again this is fine when it works. But oh how the same gate keepers are aghast when that Risk thing runs the other way.  I have never received any invitations to join a Board of Directors of any kind. I am sure that my tendency to ask uncomfortable questions has much to do with that. But when this kind of situation occurs, it is most always because someone was not asking those kinds of questions. This is a perfect example of why Internal Auditing and Managerial Accounting are rising in importance. Like the old Holiday Inn advertisement said, the best surprise is no surprise!  And Boards do not like to be surprised. Yet most of them resist the rogue Director who asks hard questions that demand answers. Ross Perot’s short time on the GM Board is the perfect exaample.  Ross remaked that there were lots of great people at GM, too bad you can’t say that about the cars. Then CEO Roger Smith’s reaction was to buy him off with 25% of GM’s total cash-$750 M.  Yet history has proven him right as their company is a shadow of its former self.

The SG Board is meeting, in the tradition of the French Revolution there are calls for, figuratively, the head of the CEO, and talk of the very future of the ownership of the Bank. This is how fears of Recession become a Recession.  FDR was not kidding when he spoke the famous words that ‘what we have to fear is fear itself.’  The FED may or may not cut interest rates another 50 points this week, will cutting something most Americans cannot define rally their optimism?