Embattled Soc Gen CEO steps down

PARIS (Fortune) -- Daniel Bouton will step down as chief executive of Société Générale in May, although he'll stay on as chairman, the French bank announced Thursday. Bouton, 58, is taking the fall for the bank's failings in the rogue trading affair involving Jérôme Kerviel, a junior stock arbitrager who ultimately cost the bank $7.5 billion in net losses.

The bank's announcement came just days after FORTUNE revealed that Bouton had decided not to mention anything about Kerviel or the gargantuan $75 billion open position he had taken in stock index derivatives at a board meeting on Jan. 20, the day he found out about the size of the position. It was only three days later, after the bank had liquidated that position and put in place an $8.5 billion capital increase, that Bouton called an emergency board meeting and disclosed what had happened.

Bouton's silence was apparently motivated by concern about word leaking. But it's surprising not just because the bank itself was severely threatened by the crisis - Kerviel's position was almost double the bank's equity - but also because the CEO himself is an authority in France on corporate governance. In 2002, he wrote an official report following the Enron scandal that urged French boards to be more transparent and play a larger role in decision-making, especially in tough times.

In a brief statement issued after the close of the French market, the bank described Bouton's move as driven by corporate governance reasons. "In view to adapt the Group's governance," the statement said, "the Board of Directors, on Daniel Bouton's proposal, has decided to proceed with the dissociation of the functions of Chairman and Chief Executive Officer." The move will be made formally at a board meeting on May 12. Frédérick Oudéa, currently the chief financial officer, will take over as CEO.

Splitting the CEO and Chairman roles was also a recommendation Bouton made in his 2002 report, but not something he acted on himself at the bank.

Viewed by his peers as brilliant but caustic, Bouton has become a lightning rod for criticism in France following the Kerviel affair. President Nicolas Sarkozy, among others, has demanded his ouster. But the board twice refused his resignation.

According to bankers involved in the rescue operation, Bouton was a key to the successful completion of the $8.5 billion rights issue, which was easily oversubscribed last month. Thanks to that capital increase, Société Générale (SCGL.Y) now has a stronger balance sheet than it did before the Kerviel crisis. But an internal inquiry by the bank into Kerviel's trading activities revealed that the bank had ignored or dismissed 75 alerts over a two-year period.