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Case Study 1 - Douglas Silber MBA540 Case Study 1 1 Do you...

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Douglas Silber MBA540 Case Study 1 March 13, 2011 1. Do you agree with Société Générale’s CEO that Kerviel’s actions were “irrational”? No, I do not agree with the company’s CEO that Kerviel’s actions were irrational. Brickley (2009) states, “Kerviel told investigators that all he wanted was to be respected and to earn a large bonus”. (Managerial Economics, p. 13). By the bank allowing a culture of risk to flourish and by giving large bonuses to those with successful trading operations, the bank was asking for this issue to arise. 2. Discuss how the bank’s organizational architecture contributed to the problem. The bank allowed for a system where employees were given bonuses for taking risks. Employees were given large rewards in the form of gigantic bonuses for making risky investments pay off for the company. Kerviel’s actions were not to make himself money directly from his trading but to make the company money and in turn receive a big bonus as a reward from the company based on the incentive program offered.
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