The Low Bow

The Conference Board Review^® Article

The Low Bow

When a CEO needs to say he's sorry.

By Leslie Gaines-Ross

Perhaps the best way to accept responsibility and demonstrate empathy for those affected in a crisis is the apology. For the most part, apologies have been extremely effective. In fact, research has found that higher share prices generally follow corporate apologies within one year.

The apology is one way to help shift the focus from what has happened to what should happen next. Apologies can sometimes serve as the second bookend to a crisis, and shorten its longevity and lessen its sting. For this reason, the straightforward CEO apology has become an increasingly common strategy for dealing with a breaking crisis or its immediate aftermath.

The number of CEO and other public figure mea culpas has soared — from Oprah Winfrey's apology for defending James Frey's book A Million Little Pieces to then-Harvard president Larry Summers' misgivings over his negative comments about women in science and engineering. Another example came from News Corp. chairman Rupert Murdoch, who apologized for causing pain to the families of Ron Goldman and Nicole Brown Simpson for planning to publish O.J. Simpson's If I Did It, about his wife's brutal murder.

Corporate regrets are fast becoming a global phenomenon. Korean CEOs sometimes apologize in hopes of reducing fines, as do Japanese CEOs when their companies do not make earnings.

Henry Paulson Jr., former chairman and CEO of Goldman Sachs Group, demonstrated how a properly issued and frank apology from the top can help repair a personal and company reputation. During a question-and-answer session at a Salomon Smith Barney conference in January 2003, Paulson seemed to imply that between 80 and 85 percent of Goldman Sachs employees were irrelevant to the company's success. "I don't want to sound heartless," the CEO said, "but in almost every one of our businesses, there are 15 to 20 percent of the people who really add 80 percent of the value. I think we can cut a fair amount and not get into muscle and still be very well-positioned for the upturn."

Paulson's comments drew an immediate and overwhelmingly negative reaction. Rather than wallow in explanations as to what he actually intended to say, or suggest that the comment had been taken out of context, Paulson took the heat. He did not waver. In a voice-mail message afterward to all twenty thousand Goldman Sachs employees, Paulson acknowledged that his remarks were "insensitive" and "glib." He apologized. He articulated exactly what made his comments offensive and contradictory to the financial-services firm's team-oriented mindset: "[T]he eighty-twenty rule is totally at odds with the way I think about the people here." In his voice-mail remarks, he commented that he intended to apologize in person at a series of upcoming town-hall meetings but realized that he should not wait. He reaffirmed the importance of teamwork over individual glory and acknowledged that he was embarrassed by his choice of words.

Paulson's apology was a sign not of weakness but of strength. Within his apology are several lessons:

First, take responsibility. Paulson acknowledged the distastefulness of his remarks, took full responsibility for having made them, and expressed regret.

Second, act quickly. Paulson issued his voice-mail apology to employees a few days after making his ill-conceived remarks.

Third, communicate sincerity. Paulson accomplished this by selecting the correct channels to express his apology. Voice mail and town-hall meetings allowed his genuineness to resonate with employees. An e-mail could have easily been misinterpreted and, without the sound of his voice, undoubtedly have carried far less emotional weight.

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