Chairman and chief executive officer, Société Générale
Born: April 10, 1950, in Paris, France.
Education: Earned degrees from National Institute of Political Studies and National School of Administration.
Family: Married; children: two.
Career: French Ministry of Finance, 1973–1976, inspector of finance; 1977–1986, budget department; 1986–1988, chief of staff of deputy minister in charge of budget; 1988–1991, head of budget department; 1990–1991, inspector general of finance; Société Générale, 1991–1993, executive vice president; 1993–1997, chief executive officer; 1997–, chairman.
Awards: Knight of the Ordre Nationale de la Légion d'Honneur; Knight of the Ordre Nationale de la Légion du Mérite.
Address: Société Générale, 17, cours Valmy, Paris la Defense, F-92972 Cedex, France; http://www.socgen.com.
■ Daniel Bouton spent nearly two decades as a civil servant in the French government before joining the French bank Société Générale in 1991. As chief executive officer and later chairman, Bouton fostered an aggressive but careful acquisition program involving banks and firms within France and overseas. By 2002 Bouton had made Société Générale into the most profitable European corporate and investment bank. Industry analysts have noted that Bouton established a good balance in Société Générale's activities among retail banking, investment banking, and asset management.
After receiving a degree in political science from the National Institute of Political Studies, Bouton continued his
studies and graduated from the elite National School of Administration. He then began his career as part of the French financial controllers' civil service corps and went on to hold a number of positions in France's Ministry of Finance. From 1986 to 1988 he served as chief of staff to Alain Juppé, who was France's deputy minister in charge of the budget. In 1988 Bouton was appointed head of the budget department.
Bouton left government service in 1991 and joined Société Générale, which had been a state-run institute that was privatized in 1987. As an executive vice president, Bouton's duties included the crucial responsibility of helping to establish a management team to institute protective measures designed to enable the bank to deal with the risks inherently associated with being a private market enterprise.
In 1993 Bouton was named the bank's chief executive officer. As CEO, Bouton played a seminal role in acquiring a 63 percent stake in the French bank Crédit du Nord and in establishing Société Générale's strong domestic retail presence, which accounted for 50 percent of the bank's profits. He also built up a potentially powerful franchise in international capital markets and asset management.
Bouton was named chairman of Société Générale in 1997, taking over the position at what analysts considered to be the most crucial period in the institution's 130-year history. Many of Europe's banks were undergoing upheavals as they found themselves competing against global rivals. The new competition was a result of Europe's ongoing and profound economic and political transformation as barriers to cross-border trade and competition were falling. By the late 1990s, 12 Eurozone markets had been integrated and 10 new countries were expected to join. Old taboos were being broken, and European banks were stretching out more into wider domestic and global markets, with many looking toward a goal of eventually establishing a single financial market for member states of the Eurozone.
As chairman, Bouton responded to these changes by focusing on three core business lines: retail banking, corporate and investment banking, and asset management and private banking. He bolstered the bank's investment banking activities by acquiring Great Britain's Hambros banking services, which gave Société Générale an entry into private banking and corporate finance. Bouton also oversaw the purchase of the U.S. firm Cowen and Company, a Wall Street securities firm.
Bouton soon set his sights on a merger with the French investment bank Paribas, which was part of the Compagnie Financier de Paribas Group. Paribas was the fourth-ranked French bank in assets, right behind Société Générale at number three. Bouton saw Paribas's strong standing in the bond market and leadership in European currency unit issues as a complement to Société Générale's own investment banking activities in such areas as derivatives and structured finance. Although the deal was nearly finalized, the agreement was thwarted when Banque Nationale de Paris (BNP) outbid Société Générale and purchased Paribas.
At the same time that BNP secured a 65 percent share in Paribas, it was seeking to secure a controlling share of Société Générale as part of its efforts to compete in the newly unified financial markets of Europe. Bouton, however, vehemently opposed the BNP takeover and eventually succeeded in keeping BNP's share of Société Générale down to 31.8 percent.
After the failed takeover of Paribas, Bouton announced that Société Générale would seek to grow on its own, primarily through acquisitions and partnerships outside its home market in France. Although many of Europe's top banks were focusing on cross-border mergers as a way to consolidate their earnings, Bouton said he believed that alliances or partnerships had a lower execution risk than mergers, which were overly complicated. Nevertheless, Bouton knew that the fundamental style of banking in Europe was changing. He told Thomas Kamm for an article in the Wall Street Journal , as quoted in the Indian Express , "We are at the start of an accelerated evolution of the European banking landscape. In the second half of the next decade, banks will break out of their boundaries" (October 6, 1999).
By the end of 1999 Bouton noted that the bank would attempt to reduce its exposure in investment banking and emerging markets over the following two years. Instead, he wanted to focus on areas that provided for recurring profits as he tried to increase the bank's return on equity to 18.4 percent. As a part of that effort, he carried out an audacious coup by taking a 3.8 percent stake in Crédit Lyonnais SA. At the time, the troubled former French state bank was being eyed for a takeover by France's largest bank, Crédit Agricole. Bouton's acquisition effectively gave Crédit Lyonnais SA enough power to fight off the takeover. Bouton also continued to oversee acquisitions of other banks in various countries, usually rebuilding the bank in Société Générale's own image. A prime example was the Czech Republic's Komercni Bank. Acquiring a 60 percent stake in the bank in 2000, Bouton established a broader range of consumer loans and life insurance at Komercni, as well as Internet banking.
In addition to acquisitions, industry analysts also noted that Bouton had been consistently gathering together a protective group of core shareholders to help prevent Société Générale from being taken over. One of the additions to this core was Spain's largest banking group, Banco Santander Central Hispano, which raised its stake in Société Générale to 7 percent in early 2000.
In January 2002 Bouton and two other Société Générale executives were taken into custody for questioning by the French police as part of a money-laundering inquiry. The initial investigation centered on the issue of check controls as opposed to deliberate criminal activity. Société Générale and several other banks were part of a wide-ranging investigation involving stolen French checks that were being sent to Israel, where they were signed over to new beneficiaries. These beneficiaries then cashed the checks at various moneychangers and presented them to Israeli banks for payments. The Israeli banks then sent the checks to be cleared by the correspondent banks in France, including Société Générale.
Upon Bouton's arrest, Société Générale issued a statement denying that any of its employees knowingly participated in money-laundering transactions. Bouton, who was the most senior banking executive to be questioned, received a vote of confidence from the French Finance Minister Laurent Fabious, who was quoted in the Business Recorder as saying, "I know Daniel Bouton. We studied together. And I know he is honest" (January 16, 2002).
The bank officially protested that its only involvement was a failure to carefully scrutinize its check-cashing procedures and that it could not possibly monitor the huge number of checks cleared through the bank each day. More than a year and a half later, in October 2003, a French judge ordered Société Générale and seven other banks to stand trial on moneylaundering charges. In all, 32 bank executives and directors were ordered to stand trial, including Bouton.
The investigation and trial sparked a controversy over revising the French judicial system. Industry analysts noted that Bouton had been known and publicly endorsed as a respectable banker. They also pointed out that he was being held responsible not for trying to make himself rich, but for failing to enforce the money-laundering regulations. His arrest further stirred up France's already exasperated business community, and the banking federation renewed calls for clarifications of France's 1996 money-laundering laws.
Although Société Générale had a good performance in 2002 with a 16.3 percent return on equity excluding restructuring costs, Bouton remained concerned about the uncertainty of the economic situations in the countries where the bank had expanded its holdings. He was especially looking for a recovery in the U.S. economy, which had developed into Société Générale's second-biggest market.
Nevertheless, Bouton continued his strategy of acquisitions in the United States in 2003 when the bank acquired Constellation Financial Management and formed a new unit called SG Constellation. According to industry analysts, this purchase added structured products, such as hedge funds, that the bank could sell to institutional investors.
Bouton has been described by industry analysts as a firm but cautious decision maker. He has remained reluctant to form a merger with another bank and stuck to his philosophy that Société Générale would best move forward through strategic tie-ups rather than headline-grabbing cross-border mergers. Although he said that the bank might look favorably on either a domestic or cross-border consolidation, Bouton pointed out that even without them, Société Générale was one of the best performers among European banks. Fiscal year 2003, for example, saw Société Générale's net banking income rise 7 percent and its operating income rise 4 percent. As a result, Bouton maintained that Société Générale did not need to merge because of the company's continued growth, profitability, and its division's leadership positions in the Eurozone. Nevertheless, Bouton did not completely rule out a merger. As he told the Euromoney contributor Jennifer Morris, "We will marry when we find the right girl and it's proven that marriage is better for our shareholders, customers and employees than being a bachelor" (April 2003). In addition to his duties at Société Générale, Bouton held directorships at Schneider Electric, TotalfinaElf, and Veolia.
See also entry on Société Générale in International Directory of Company Histories .
Cameron, Doug, "Will SocGen Become Too Big for Its Boots?," European , February 23, 1998, p. 53.
"French Police Question Société Générale Officials," Wall Street Journal Europe , January 15, 2002.
Kamm, Thomas, "Societe Generale to Seek Growth on Its Own through Acquisition," Wall Street Journal in the Indian Express , October 6, 1999, http://www.indianexpress.com/fe/daily/19991007/fec07001.html
Morris, Jennifer, "France's Banking Model," Euromoney , April 2003, p. 42.
"Societe Generale Denies Wrongdoing in Money Launder Probe," Business Recorder , January 16, 2002, http://www.paksearch.com/br2002/Jan/16/Societe%20Generale.htm .