Share option too far topples top French banker

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Daniel Bouton turned 59 only a couple of weeks ago. Normally, he could have claimed several more years to continue running Société Générale. But circumstances have hardly been normal in the past 12 months for the chairman and architect of the French bank’s expansion to become one of Europe’s financial powerhouses, and he will be moving out next week.

If the subprime crisis were not bad enough for a bank that had built a reputation as a leader in equity derivatives, the rogue trading scandal that hit SocGen last year seemed to put the writing on the wall for an otherwise impressive career as a banker.

Mr Bouton has finally decided to resign. He offered to do so at the time of last year’s trading scandal, but his board rejected it. A number of directors would probably have liked him to go. But when Nicolas Sarkozy, the French president, launched a stinging public attack on the SocGen boss, the board closed ranks and rallied round the embattled Mr Bouton. After all, SocGen has also been proud of its independence and was not going to be told what to do by the Elysée Palace.

There was a second good reason for Mr Bouton to hang on, even as he became unfairly depicted as the symbol of the greedy banker by the political establishment. Although he had been carefully preparing his succession, the time was not ripe for his departure. The two leading candidates were Jean-Pierre Mustier and Frédéric Oudéa, both regarded as brilliant young bankers.

Mr Mustier headed the investment banking business where the rogue trading scandal took place. He has moved on to run the bank’s private banking business and was instrumental in negotiating the recent merger of SocGen’s asset management activities with those of Crédit Agricole.

That left the way clear for Mr Oudéa. He was appointed chief executive but Mr Bouton, who had combined CEO and chairman posts, stayed on as non-executive chairman. Mr Oudéa is probably considered a little young and needing the support and watchful eye of the chairman.

Mr Bouton now says there is no need for him to continue as chairman because Mr Oudéa has made his mark. Mr Bouton also spent his career fighting off repeated attempts by French rival BNP Paribas to acquire SocGen. Now that BNP has secured its deal to take over the Fortis Belgian banking operations, he is no longer required to man the barricades.

But the real reason may be that he has now made one mistake too many. Mr Bouton has never been known for political savvy or social skills. Perhaps that is why he saw no problem recently with accepting a share option package at precisely the moment the country was up in arms over the pay of bankers whose institutions have benefited from state support.

The public outrage prompted Mr Bouton and three other top executives to give up their entitlements. But the public relations damage was done. For SocGen, the immediate challenge is to restore its badly dented public image. The irony is that for all its highly publicised problems, the bank has continued to perform more than adequately. That, in large part, has been thanks to Mr Bouton’s stewardship before he unexpectedly tripped up so badly. Even then – and probably the biggest irony of all – the trading scandal forced SocGen to rush through a rights issue to strengthen its capital base well before the full force of the subprime crisis swept the financial world.

Opel complications

Now that he seems to have the Chrysler deal practically in the bag, Sergio Marchionne Fiat’s chief executive, will be able to devote more time to his parallel negotiations to acquire Opel and General Motors’ other European operations.

Chrysler was complicated, but Opel promises to be even more so. The German unions, probably with the tacit support of Berlin, last week leaked Fiat’s interest in Opel. This sparked a public outcry, with unions and politicians warning that a deal with Fiat would ultimately lead to big job cuts in Germany.

Opel thus seems to be turning into a prime electoral issue in Germany just as the future of Alitalia became a big issue in the last Italian parliamentary election that saw Silvio Berlusconi return to power. This could well be the case, but the German reaction smacks much more of negotiating tactics to secure rock-solid pledges from Fiat on German jobs and restructuring.

There are not many better alternatives than Fiat for Opel. None of Opel’s German peers is interested and surely Fiat would offer a better fit than Magna, the Canadian car parts group also interested in Opel, or a Chinese manufacturer. As for Fiat, absorbing Chrysler and eventually GM’s European operations on the cheap is clearly compelling.

But there are also big risks, especially if both ultimately turn out to be – as others have discovered – bottomless financial and industrial pits.

european.view@ft.com

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