CEOs should think twice before putting on a brave face

As Toshiba president resigns LBS research extols virtues of a sincere apology 

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In the wake of a scandal, CEOs should think twice before putting on a brave face. New research finds that showing sadness in your facial expression during an apology could save your organisation from poor financial performance persisting for up to three months.

Yesterday, Toshiba’s president and chief executive Hisao Tanaka resigned in the wake of an accounting scandal.

While its shares fell by 1.7 per cent yesterday, research by Gabrielle Adams, Assistant Professor of Organisational Behaviour, London Business School and Dr Leanne ten Brinke, UC Berkeley Haas School of Business, suggests there may yet be hope for the company’s bottom line.

Speaking today to the Financial Times, Dr Adams explained: “If people perceive company representatives to be insincere, they may be less willing to support these organisations and more motivated to sell off their shares after a transgression. In contrast, sincerity might buffer organisations from the financial fall-out of a transgression, discouraging shareholders from selling their stock despite the wrongdoing.”

Apologising well, it turns out, really does matter. And if you’re the CEO, it is critical. 

“In the wake of a scandal we often expect a public apology. But not all apologies successfully repair public confidence or, crucially, investor confidence”, Dr Adams explains.

“Our research finds that CEOs who demonstrate sadness in their facial expressions when apologising are largely able to restore confidence and keep their companies on an even financial trajectory. On the other hand, CEOs who say they are sorry but fail to show sadness in their faces find their financial bottom line adversely affected for as long as three months after the apology. Financial backers are less willing to support them and shareholders start selling off shares.”

The study,‘Saving face? When emotion displays during public apologies mitigate damage to organizational performance’, is due to be published in the Journal for Organisational Behavior and Human Decision Processes in September.