“Financial service CEOs are not exactly known for their humbleness,” says Daniel Diermeier, professor of regulation and competitive practice and Northwestern University’s Kellogg Management School. According to various reports, studies show that doctors who apologized for their mistakes reduced their risk of being sued; could CEOs see the same results?
One case the professor cited was U.S. domestic airline Southwestern Airlines, which faced intense scrutiny after one of its passenger planes skidded off a runway and killed a six-year old boy. CEO Gary C. Kelly held a news conference and stated that “there are absolutely no words to accurately state our grief and our sorrow over the tragedy.”
As a result, the press and analysts commended his response as a new standard for how airlines would deal with crisis situations.
Diermeier says the financial services realm is quite different. “Because the products are complicated, there’s a sense that you are smarter than everyone else and aggressiveness is valued,” he says.
While Richard Fuld, CEO of collapsed Lehman Brothers, notably told U.S. lawmakers that he took full responsibility, he stopped short of apologizing, instead saying that he shared the blame with regulators and Congress.
Another approach is forgoing bonuses. Deutsche Bank followed the actions of Morgan Stanley CEO John Mack last year, by relinquishing their bonuses. While apologies remain scant, Benjamin Ho, an assistant professor of economics at the Cornell Johnson School of Management, said apologies need to come off as sincere.
“A carefully crafted legalistic apology is of no use,” he said to FinancialWeek. “To be effective, an apology must make the apologizer vulnerable, open either to the possibility of civil suits or other sanctions, or open to the appearance of incompetence.”