Mary Barra, the new CEO of GM, recently apologized to those affected by their recall of over 2 ½ million small cars for faulty ignition switches. But do such apologies have any meaning? Aren’t they just part of a corporate chess game with regulators, customers, and workers?
Some researchers sought to understand what it means to express regrets in a business context. They looked at what happens when physicians apologize for medical mistakes. It’s an interesting case study, because doctors are often hesitant to apologize because of lawsuits, but patients often sue out of anger because the doctors won’t apologize.
To break this cycle, over 30 states have passed laws that make a doctor’s apology inadmissible in court. The research examined malpractice claims before and after these laws were passed. After the apology-shield was enacted, there was over a 15% reduction in malpractice filings, and the cases settled 20% faster.
Apologies are hard—and that’s the point. Saying you’re sorry exposes you to guilt and shame. But it may be the only way to restore trust after something goes wrong. And the more costly the regrets, the more effective the signal.
Douglas R. Tengdin, CFA
Chief Investment Officer