How CEOs Benefit From Apologizing

Last Updated Oct 29, 2008 9:18 AM EDT

Remember that famous line from the sappy 1970 movie "Love Story?" After losing his wife, Ryan O'Neal says, "Love means never having to say you're sorry."

Well, sometimes apologizing is a good idea for CEOs under the gun. The problem is that the CEOs who need to say they are sorry these days are from the financial sector and types like them aren't exactly known for their humility.

Daniel Diermeier, professor of regulation and competitive practice at Northwestern University's Kellogg Management School believes that public apologies are a good idea. They can restore public trust and even improve stock prices.

A few examples:

  • Southwestern Airlines faced adverse scrutiny in 2005 when a plane skidded on a runway, killing a young boy. Within hours, the airline's CEO publicly apologized and within a few days, Southwestern's stock was back up after an initial dip.
  • Richard Fuld, former head of bankrupt Lehman Brothers, took heat for a half-hearted apology in congressional testimony.
  • The entire management of Deutsche Bank and Morgan Stanley CEO John Mack have pledged not to accept any bonuses this year. Actions like these speak louder than words.
It is true that American and European CEOs do not have the tradition of apologizing the way Japanese CEOs do. But saying nothing is probably the worst thing beleagured CEOs can do, Diermeier believes.