Everyone is in full apology mode. GM and Chrysler executives seem to be stuck in constant apology gear starting with their appearance before Congress with a tin cup in one hand and the keys to the executive jet in the other. Now that Rick Wagoner has been given the boot, it falls to him to apologize to countless shareholders for not moving quickly enough to restructure not to mention never seriously attacking the burden of providing costly healthcare benefits to retirees or otherwise reducing labor costs that made GM cars thousands of dollars more expensive to build than its non- U.S. competitors.
Treasury Secretary Tim Geithner expressed regret that he didn’t declare his awareness of the bonuses to senior executives when he went forward with the bailout deal for
We’re still waiting for Barney Frank to apologize to the American people for his continued denial of the overextended financial predicament of Fannie and Freddie right up to the debacle, when it became evident to nearly everyone else. Then there’s Senator Chris Dodd’s sweetheart mortgage deal with Countrywide Financial. No one should be holding one’s breath.
The mother of all apologies came from an unlikely corner. Jack Welch allowed that the obsession with short-term profits and share price gains that has dominated the corporate world for over 20 years was “a dumb idea”. Welch offered this remark before news that GE, which he left in 2001, had been downgraded by Standard & Poor’s, losing the pristine triple A rating it had held since 1956.
For good measure Welch told the FT interviewer in its series on the future of capitalism, that he never meant “to suggest that setting, and meeting, profit expectations quarter after quarter in an effort to boost a company’s share price should be the main goal of corporate executives.
“It is a dumb idea,” he said to the FT. “The idea that shareholder value is a strategy is insane. It is the product of your combined efforts – from the management to the employees.”
Thanks, Jack, now you tell us. For good measure Welch remarked elsewhere that “anybody could run a business in the 1990s. A dog could have run a business.” We wonder what Jeff Immelt, Welch’s successor makes of another Welchism: “It was an easier time to be a CEO in the 1990s. The wind was on our backs. Up until 2007, this was easy. Now, it is really difficult.” Is this Immelt’s consolation prize?
When events go pear-shaped as they seem to do with regularity these days, should business leaders apologize? John Kador, a contributing editor to Chief Executive, (see INfact, p. 20) studied how CEOs respond to missteps and crisis and specifically explored outcomes when bosses publicly apologized vs. hunkering down, trusting that the unpleasantness would soon blow over. He summarizes his findings in the recently published book Effective Apology: Mending Fences,
It’s a topical dilemma facing business leaders and the subject of this issue’s cover story (“Want Better Performance; Say You’re Sorry,” p. 54). In this age of hyperconnectivity and super-heated transparency, there is no place for CEOs to duck for cover anymore. More often than not, admission about liability is the least of it. If customers or the general public render a verdict in the court of public opinion, your company’s reputation is toast anyway. The key, argues Kador, is to give an effective apology if one is to give one at all. Our cover story offers guidelines on how best to do this.