Why CEOs Still Can't Say 'I'm Sorry'

Though some top executives have learned the art of apologizing, others compound their company's PR problems by failing to take responsibility. Welcome to the "aquarium!"

BP CEO Tony Hayward in May 2010
BP CEO Tony Hayward in May 2010
Maayan Manela

TEL AVIV — Facebook "forgot" to tell its users about their unwitting participation in its experiments, BP caused the history's worst oil spill, and an Israeli dairy company added silicon to milk. Companies make mistakes all the time. Some are truly grave ones. When it happens, some CEOs choose to apologize and fix the scandal, while others apparently can't bring themselves to say they erred.

Why is it so difficult for managers to apologize?

After it was revealed that Facebook engaged users in a behavioral experiment without their consent or even awareness, the company's COO Sheryl Sandberg used the semi-apology tactic. "We never meant to upset you," she said at the time, pretty much avoiding any apology at all.

Uber CEO Travis Kalanick never actually apologized after his senior vice president Emil Michael threatened to dig up dirt on journalists who criticized the company. Kalanick instead simply tweeted that Michael's comments didn't represent the company, but he didn't apologize for them. Nothing says "we're sorry" like a 140-character non-apology.

When the massive explosion on BP's Deepwater Horizon oil rig caused a devastating spill in the Gulf of Mexico — the largest in U.S. history — then-CEO Tony Hayward apologized for the disturbances the oil spill caused to the daily routine of residents. But in what The New York Times characterized as the "sound bite from hell," he immediately added, "I'd like my life back."

When a recent accident in the Trans-Israel Pipeline led to a massive oil spill in a desert nature reserve, the company not only didn't apologize but it initially reported that the spill was smaller than it actually was.

But there are executives who do apologize for mistakes. In 2007, an Israeli TV investigation revealed that products from the food company Osem were kept in the sun for hours instead of being stored in refrigerators. The CEO at the time apologized for the mistake and promised to tackle the problems.

Own it

But why is it so difficult for managers to face their clients and say, "I was wrong"?

"Managers don't apologize because an apology is seen as a weakness, and if we perceive the manager as weak, then the organization is weak, and no organization wants to be seen that way," says Tali Eichenwald-Dvir, deputy dean of the Arison School of Business at the Interdisciplinary Center Herzliya in Israel.

Managers also don't want to sound inconsistent, she adds. In our culture, there is an overemphasis on consistency, and if a manager retracts or admits a mistake they are often considered inconsistent.

In addition, admitting an error quite literally has a price since taking responsibility can have financial and legal ramifications. Apart from these implications, the public response to apologies can be confusing.

"On one hand, clients might say, "what's the issue?"" says Eichenwald-Dvir. "Let the manager apologize, acknowledge the mistake and we will accept it. On the other hand, sometimes when a person apologizes, it's not really seen favorably. The public is truly divided."

And yet, she is unequivocal in her recommendation that executives apologize. A manager doesn't have to report each and every misguided decision, but when things go badly wrong, they should take responsibility.

"Every executive should consider themselves as if they were living in an aquarium," Eichenwald-Dvir says. "In the past, you could seal deals and hide mistakes not to pay the price of admitting an error. Today it's almost impossible."

And once a manager has decided to apologize, it should be a real one, not an evasive one. "The level of transparency has increased dramatically, and so has the level of customer sophistication," she says. "Today it's much more difficult to fool people. A half-apology is the most annoying thing for customers. For them the message is that the organization acknowledges the mistake but at the same time doesn't fully admit it."

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Air Next: How A Crypto Scam Collapsed On A Single Spelling Mistake

It is today a proven fraud, nailed by the French stock market watchdog: Air Next resorted to a full range of dubious practices to raise money but the simplest of errors exposed the scam and limited the damage to investors.

Sky is the crypto limit

Laurence Boisseau

PARIS — Air Next promised to use blockchain technology to revolutionize passenger transport. Should we have read something into its name? In fact, the company was talking a lot of hot air from the start. Air Next turned out to be a scam, with a fake website, false identities, fake criminal records, counterfeited bank certificates, aggressive marketing … real crooks. Thirty-five employees recruited over the summer ranked among its victims, not to mention the few investors who put money in the business.

Maud (not her real name) had always dreamed of working in a start-up. In July, she spotted an ad on Linkedin and was interviewed by videoconference — hardly unusual in the era of COVID and teleworking. She was hired very quickly and signed a permanent work contract. She resigned from her old job, happy to get started on a new adventure.

Others like Maud fell for the bait. At least ten senior managers, coming from major airlines, airports, large French and American corporations, a former police officer … all firmly believed in this project. Some quit their jobs to join; some French expats even made their way back to France.

Share capital of one billion 

The story began last February, when Air Next registered with the Paris Commercial Court. The new company stated it was developing an application that would allow the purchase of airline tickets by using cryptocurrency, at unbeatable prices and with an automatic guarantee in case of cancellation or delay, via a "smart contract" system (a computer protocol that facilitates, verifies and oversees the handling of a contract).

The firm declared a share capital of one billion euros, with offices under construction at 50, Avenue des Champs Elysées, and a president, Philippe Vincent ... which was probably a usurped identity.

Last summer, Air Next started recruiting. The company also wanted to raise money to have the assets on hand to allow passenger compensation. It organized a fundraiser using an ICO, or "Initial Coin Offering", via the issuance of digital tokens, transacted in cryptocurrencies through the blockchain.

While nothing obliged him to do so, the company owner went as far as setting up a file with the AMF, France's stock market regulator which oversees this type of transaction. Seeking the market regulator stamp is optional, but when issued, it gives guarantees to those buying tokens.

screenshot of the typo that revealed the Air Next scam

The infamous typo that brought the Air Next scam down

compta online

Raising Initial Coin Offering 

Then, on Sept. 30, the AMF issued an alert, by way of a press release, on the risks of fraud associated with the ICO, as it suspected some documents to be forgeries. A few hours before that, Air Next had just brought forward by several days the date of its tokens pre-sale.

For employees of the new company, it was a brutal wake-up call. They quickly understood that they had been duped, that they'd bet on the proverbial house of cards. On the investor side, the CEO didn't get beyond an initial fundraising of 150,000 euros. He was hoping to raise millions, but despite his failure, he didn't lose confidence. Challenged by one of his employees on Telegram, he admitted that "many documents provided were false", that "an error cost the life of this project."

What was the "error" he was referring to? A typo in the name of the would-be bank backing the startup. A very small one, at the bottom of the page of the false bank certificate, where the name "Edmond de Rothschild" is misspelled "Edemond".

Finding culprits 

Before the AMF's public alert, websites specializing in crypto-assets had already noted certain inconsistencies. The company had declared a share capital of 1 billion euros, which is an enormous amount. Air Next's CEO also boasted about having discovered bitcoin at a time when only a few geeks knew about cryptocurrency.

Employees and investors filed a complaint. Failing to find the general manager, Julien Leclerc — which might also be a fake name — they started looking for other culprits. They believe that if the Paris Commercial Court hadn't registered the company, no one would have been defrauded.

Beyond the handful of victims, this case is a plea for the implementation of more secure procedures, in an increasingly digital world, particularly following the pandemic. The much touted ICO market is itself a victim, and may find it hard to recover.

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