Buzz about Société Générale

There is a lot of buzz in the French media about the Société Générale, and what can be done to avoid a rogue trader or employee taking a huge risk on the company's behalf. Several journalists are coining the phrase "ethical risk" - which is different from the usual "reputational risk", because it goes deeper into the organization.

To avoid this ethical risk many people are now calling for a compliance function in organizations. Banks usually have them, as they have a heavy regulator who requires regular reports. The problem with compliance is that it will not make the employees have more integrity. Only education and training can raise the level of sensitivity and awareness of these types of issues. Perhaps we should be looking into rewards for behavior that fosters the common good, as opposed to pure performance measures.