What Makes an Ethical CEO Apology? — Daryl Koehn Speaks at SCCE

On April 28th, Wicklander Chair, Daryl Koehn, spoke at the Society of Corporate Compliance and EthicsRegional Compliance and Ethics Conference. These conferences attract professionals from a wide range of industries looking for updates on current developments in compliance.

Koehn explained what makes an ethically good CEO apology and how the stock market reacts to more ethical CEO apologies. “An apology,” Koehn said, “…is a verbal exchange in which someone who is perceived as having caused harm or offense to a second party speaks and behaves in a way that allows for a future reconciliation between the offender and those he or she has harmed.” An ethically good apology details the problem, conveys the CEO’s character, and forges an emotional connection with the audience. A good apology must be structured to restore trust between the firm and the injured parties.

Take the following two apologies:

  • Citibank CEO Chuck Prince before Congress on the financial crisis of 2007-2008: “Let me start by saying I’m sorry. I’m sorry the financial crisis has had such a devastating impact for our country. I’m sorry about the millions of people, average Americans, who lost their homes. And I’m sorry that our management team, starting with me, like so many others could not see the unprecedented market collapse that lay before us.”
  • Chrysler CEO Lee Iacocca’s apology for Chrysler dealers’ practice of disconnecting odometers, driving the cars, reconnecting the odometers, and then selling as new cars: “Disconnecting odometers is a lousy idea. That’s a mistake we won’t make again at Chrysler. Period.”

In the first apology, Chuck Prince apologized for not being God, and Lee Iacocca apologized for a clear wrongdoing and firmly stated this intention to fix the issue. Koehn dissected apologies for the audience using transcripts and videos that employed graphs showing real-time polling data on the CEO’s perceived levels of sincerity and believability.

Factors such as the speed of response, the construction of the reconciliation plan and a firm follow through all impact the outcome of the apology. There are still more complications, such as culture (USA/Japan/Europe), the character of the audience and the nature of the offence. A lot of things can go wrong. While creating an ethically sound apology does not guarantee success, it can put a company in the best possible position for reconciliation and can help avoid compounding a scandal with outrage directed at the company’s poor response.

Visit go.depaul.edu/ethics for Daryl Koehn’s work at the Institute for Business and Professional Ethics at DePaul University.