Société Générale Essay

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Carlos Albizu University ECON521 – Economics of Organizational Architecture and Strategy Analyzing Managerial Decisions- Société Générale In January 2008, the French Bank Société Générale suffered a major financial loss due to derivative trading handled by Jerome Keirvel creating fictitious transactions manipulating data, computer systems and the trust that management had over him. A) Identify Keirvel’s opportunity costs and incentives that led to his actions and behavior. Jérôme Kiervel was apparently acting alone when he purchased future contracts, the underlying assets for which were stock indices. It appears that Mr. Keirvel’s activities were linked to an attempt to raise his bonus by securing high profits for Société Générale. He engaged in unauthorized trades totaling as much as €49.9 billion by creating losing trades intentionally so as to offset his early gains. Around 1.4 billion in hidden profits were generated by the end of 2007. Kerviel stated that his actions were known by superiors and that the losses were caused by panic selling by the bank. However, criminal charges were made against Keirvel for abuse of power, forgery of documents and illegal entry into company computer systems. The banks losses due to Keirvel’s activities among other actions were of €4.9 billion. B) Discuss whether or not the bank’s organizational architecture contributed to Keirvel’s actions. Apparently, the organizational architecture of Société Générale had some fault for the tragic situation that occurred. For starters, it was a mistake to allow lower level employees handle decision-making without additional approval from top management. Keirvel’s extensive years working in the bank amplified his knowledge on internal controls which made it easier for him to be undetected of any illegal transactions. No matter how many years he had been with the bank,

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