When Corporate Apologies Are Not Enough

November 10, 2015

We Are SorryWhen Volkswagen was caught last month in the emissions-rigging scandal which engulfed the world’s largest automaker and nearly 500,000 of its four-cylinder “clean diesel” cars starting with the 2009 model year, its Chief Executive Officer, Michael Horn, apologized saying: “On behalf of our company, my colleagues in Germany and myself, I would like to offer a sincere apology for Volkswagen’s use of a software program that served to defeat the regular emissions testing regime”. Calling the company’s admission “deeply troubling,” Horn said, “We have broken the trust of our customers, dealerships, and employees, as well as the public and regulators.”

Recently, when General Motors was caught installing a faulty ignition switch in cars despite knowing it did not meet its own company specifications and then attempted to cover up the fact, its CEO, Mary Burns, went before members of Congress and apologized for the 13 deaths that GM admits were caused by the substandard parts it knowingly used.

The art of the corporate apology is nothing new. Who can forget the impassioned apologies of BP’s CEO, Tony Hayward, after his company devastated the Gulf coast after an off-shore drilling mishap? In 2012 Apple’s CEO Tim Cook had to apologize for glitches in Apple’s new Maps app. Then there was the time his famous predecessor Steve Jobs issued an apology to users of the iPhone4 who experienced antenna problems. In 2011, Netflix’s CEO, Reed Hastings, had to issue apologies for price hikes and for trying to rename the DVD delivery service “Quikster” after customers made it clear they were not happy and Netflix’s stock plummeted. And there’s more: calling it “the most humble day of my life” News Corp., CEO, Rupert Murdoch, apologized to the British public after a notorious phone hacking scandal by placing full-page advertisements in several national newspapers; Toyota was forced to apologize after the automaker issued a massive world-wide safety recall over acceleration and brake problems involving millions of care; and, in 2006, Mark Zuckerberg, founder and CEO of Facebook, apologized for security problems with an update of its social network platform. The list goes on and on. CEO’s from the makers of automobiles and all kinds of consumer products have found it necessary to master the art of the corporate apology when companies are caught cheating and lying.

One reason for this is that a simple apology can save a business millions of dollars and the loss of valuable good will.  Studies show businesses can improve customer relations without dropping a rebate check in the mail.  Researchers at Britain’s Nottingham School of Economics tracked 632 customer complaints posted on a German eBay site.  In an attempt to correct problems, half of the disgruntled customers received an apology while half received cash rebates ranging from $3 to $8.  Forty-five percent of the customers who received an apology removed their critical ratings, compared to 21% of those who received a rebate check.

Volkswagen of America is assembling what it call s a “goodwill package”  for owners of 2-liter diesel vehicles affected by the company’s massive emissions scandal,  consisting of a $500 prepaid Visa card and another $500 good at Volkswagen dealerships. Cars from model years 2009 to 2015 are eligible. Audi, which has also offered the affected engine, has announced that it will launch a similar program. Three years of roadside assistance will also be handed out. To apply, owners must visit a special website that Volkswagen has set up, fill out the required information, then wait four weeks.

While most owners probably won’t say no to the offer, the scandal is far from over: lawsuits are pending, regulatory action is coming, and Volkswagen hasn’t yet offered fixes for affected vehicles that would actually correct their emissions failures. Furthermore, the $500 credit good at Volkswagen dealerships is a bit of a misdirection — presumably, many owners won’t be interested in buying another vehicle from the company any time soon, which makes it a far less valuable component of the offer. VW’s CEO calls the package “a first step toward regaining our customers’ trust.”

Hospitals have also found that owning up to medical errors can reduce litigation and prevent future mishaps.  When 18-month-old Kaelyn Sosa suffered a bump on her head, her mother took her to the emergency room at Baptist Children’s Hospital in Miami to make sure her injury was not serious.  While Kaelyn was under sedation in an MRI machine, her breathing tube was dislodged, cutting off her oxygen and causing a crippling brain injury.  After the accident the hospital settled.  However, the hospital took further measures to prevent a recurrence.  Ozzie Sosa, Kaelyn’s father, said the hospital’s dedication to solving the problems that contributed to his daughter’s injury helped the family get to know the staff and forgive them for the unintentional mistake.

According to a study published in the Journal of Patient Safety between 210,000 and 440,000 patients each year who go to the hospital for care suffer some type of preventable harm that contributes to their death. According to the Institute of Medicine, medical mistakes kill as many as 98,000 Americans each year.  That would make medical errors the third leading cause of death in the United States behind heart disease and cancer. Yet, medical centers are finding that apologies help minimize litigation.  The University of Illinois Medical Center has 40% fewer law suits since it implemented a policy to communicate with patients and families immediately after an accident occurs, apologizing, disclosing medical errors, and offering a financial settlement.

But when is a corporate apology not enough? If you’re driving a diesel-powered four-cylinder Volkswagen you’re stuck with repair costs and a lemon that is no longer worth what it should be. If you’re one of the 210,000 – 420,000 people who are the victims of medical neglect, who will pay for the pain and expense of dealing with a lifetime of disability caused by a careless doctor or cost-cutting health care provider? The fact is, as soothing as a corporate apology may be to stockholders, a corporate image or the bottom-line, the victims of corporate greed and excess and medical neglect are the ones who really end up paying the price and for whom the art of the corporate apology doesn’t begin to make things right.  Those are the people it has been our privilege to represent for more than 30 years.

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