"When corporate crises hit, the public looks to the CEO. From product recalls to workplace discrimination to customer mistreatment scandals, CEOs are often thrust into the spotlight and forced to apologize. But do the exact words they choose really matter? I'm a professor of marketing, and my preliminary research suggests the answer is yes. In fact, they can even move stock prices."
"Contrast that with a famous case: the 1982 Tylenol crisis, in which seven people died after taking capsules that a still-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 over US$100 million. His direct acknowledgment of responsibility and swift action helped restore public trust and became a case study in effective crisis leadership."
A study analyzed 224 corporate apologies between 1996 and 2023 using event-study methods to link stock returns to CEOs' apology wording. Case comparisons include Samsung's 2016 "We are truly sorry" ads, which coincided with continued stock declines, and Johnson & Johnson's 1982 Tylenol CEO saying "I apologize" followed by a nationwide recall, which preserved trust and limited stock damage. The analysis finds investors reward personal accountability signaled by "I apologize," producing stronger or smaller negative abnormal returns than impersonal "we apologize." Event-study methods measured abnormal returns around apology announcements to isolate language effects. The findings imply CEO phrasing matters for investor perceptions, crisis outcomes, and reputation management.
Read at Fast Company
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