Tuesday, February 5, 2008

Crisis management - European style?

Our more longstanding friends, i.e. those who have worked with the first edition of our Business Ethics book, will remember that its success was very much predicated on the proposition that it was the first text book to talk about business ethics from a European perspective. OK, we toned it down for the second edition, but still the main focus of the book is to provide an account of business ethics beyond the Anglo-American version of capitalism – which still is the backdrop of most textbooks in the field.

There has been some debate about whether – and if so, how – a specific European perspective on business ethics is warranted. A good way to learn about these things is to look at how different economies deal with ethical scandals (e.g. Ethics in Action 6.1 in our Business Ethics book). A newspaper article in the Canadian Globe and Mail discusses the recent scandal in France at the bank Société Générale in the context of the Enron case and comes up with some really striking comparisons.

We talked about Jérôme Kerviel in one of our latest blogs and it is indeed fascinating to watch how the French public, rather then seeing him as a villain and a crook, views the bank and its managers as the ones who are responsible for what happened (you can give your own assessment here, see the box on the right). The general mistrust of capitalism and big corporations still seems pretty entrenched in Europe. On facebook, there are now numerous support networks for Kerviel. For instance the group “Jérôme Kerviel should be awarded the Nobel Prize in Economics" has no less then 2,517 members! Could you imagine this happening to Ken Lay or Jeff Skilling in the wake of the Enron disaster…

It is also conspicuous to see the reactions. While the US government took a fairly hands-off approach to the actual downfall of Enron, incl. the plight of many employees who lost jobs, savings and pensions, Nicolas Sarkozy’s government is anything but ‘laissez faire’. Worried about a foreign takeover of Société Générale it appears that the French government has now elected to micromanage the case and has even considered a fairly unrealistic bail out. While the magnitude of this case probably will not allow for this, European governments have a longstanding history of becoming directly involved in managing these issues. And this even at a time where we would expect newly wed Sarkozy to have other things on his mind…

This hands-on approach contrasts significantly with the US, where the main reaction of the government was to issue new legislation with the Sarbanes-Oxley Act, setting tighter rules for the game, rather than trying to become a player in the game itself. It is also interesting to see differences within Europe here. The Globe and Mail article refers to how Gordon Brown has dealt with the recent collapse of a major British bank (Northern Rock): While Brown was actively (as it were, European-style) involved in protecting the savings and mortgages of millions of British working men and women, the solution was in the end left over to the market: brokering the takeover of Northern Rock by Richard Branson’s Virgin empire appeared the best solution, showing strong reliance on markets and free enterprise in the running of the economy – something we can associate more strongly with the Anglo-American system of capitalism.

It will be fascinating to watch how the personal fate of Kerviel will develop over the next couple of weeks. He will hopefully not end up as Enron’s vice chairman John (Clifford) Baxter who committed suicide, unable to deal with the personal shame about his role in the scandal. But it will also be fascinating to watch the further fate of Société Générale. Our money is on a take over by another French bank, brokered in some backroom of the Elysée Palace!

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