When corporate crises hit, the public looks to the CEO. From product recalls to workplace discrimination to customer mistreatment scandals, CEOs often find themselves in the spotlight and forced to apologize.
But do the exact words they choose really matter?
I’m a marketing professor and my preliminary research suggests the answer is yes. In fact, they can even move stock prices.
A tale of two apologies
Consider two examples from the not-so-distant past. When Samsung Electronics had to recall 2.5 million smartphones in 2016 due to battery fires, the company ran full-page ads in major American newspapers saying, “We are very sorry.” Despite the apology, Samsung shares continued to fall, wiping out billions of dollars in market value.
Compare that to a famous case: the Tylenol crisis of 1982, in which seven people died after taking capsules that an as-yet-unidentified criminal had laced with cyanide, circumventing the company’s safety protocols. The then-CEO of Tylenol’s parent company, Johnson & Johnson, said “I apologize” to consumers and immediately ordered a nationwide recall, costing the company more than $100 million. Their direct recognition of responsibility and quick action helped restore public trust and became a case study in effective crisis leadership. The company’s share price was also not affected much.
While the two cases are different in many ways, together they illustrate a pattern that my colleagues and I observed in our study: markets respond differently to “I apologize” versus “We apologize.”
Investors reward personal responsibility
I collaborated with marketing professors Jennifer H. Tatara and Courtney B. Peters to analyze 224 corporate apologies between 1996 and 2023. Using common event study methods in finance, we tracked unusual stock returns around apology announcements and linked them to the way CEOs framed their statements.
Our results, which we are preparing for publication, were surprising. CEOs who said “I apologize” often saw short-term stock returns increase by a statistically significant amount. CEOs who said “We apologize” saw no such effect. Saying “I apologize” reduces the market penalty by about 86%, we found.
We believe this is because markets reward leaders who take individual responsibility. “I” indicates personal responsibility and decision. “We,” by comparison, dilutes the ownership of the problem.
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But context matters, we discovered. When we focused on diversity-related cases, for example, those involving mistreatment based on race, gender, disability, or LGBTQ+ status, the positive effect of “I apologize” weakened or disappeared.
This is because investors often interpret diversity crises as signs of systemic failure, rather than isolated mistakes. In those cases, investors, employees, and the public can expect accountability that goes beyond the CEO. A solitary “I apologize” may seem hollow, while “We apologize” may resonate more in recognition of shared institutional responsibility.
Beyond CEOs: Why stakeholders should care
Apologies are among the most scrutinized executive communications. Its effects spread across different audiences.
For investors, apology language provides a real-time signal of the quality of future leadership and governance. Our research shows that these signals are strong enough to move stock prices.
For corporate boards, an apology can be as important as a balance sheet in shaping market perceptions. Our research suggests that boards should insist that leaders prepare for crisis communications as a standard part of risk management.
To employees and customers, apologetic language sends a message about corporate culture. “I” can demonstrate responsibility; “We” can affirm inclusion and shared responsibility. Both matter, depending on the situation.
Leading in a skeptical era
Corporate apologies are nothing new. But in today’s environment, where social media amplifies every word and trust in institutions is fragile, the stakes are higher. A single poorly framed statement can trigger outrage, stock sell-offs, or viral boycotts.
The good news is that “sorry” doesn’t have to be the hardest word. In fact, this research suggests that a good apology can pay off, literally. The key is to remember that apologies are not the same for everyone. The correct words depend on the nature of the evil action.
*Prachi Gala is an associate professor of Marketing at Kennesaw State University.
This article was originally published on The Conversation/Reuters
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