In yesterday's Wall Street Journal Elizabeth Bernstein expressed surprise that so many people had started to apologize for past offenses. Apparently, social networking sites are allowing people to get back in touch with long lost friends, recall wrongs they had inflicted on said friends, and apologize decades after the fact.
These personal apologies, often delivered in private, may or may not count for their recipients, but that does not, I asserted in my post on the topic, make them a bad idea. (If you scroll down to my previous post, you will be able to read my thoughts on the topic.)
Today the New York Times has thoughtfully contributed to the discussion by publishing an article on public apology, or on the general lack of same in the business world. Link here.
The article was occasioned by today's public hearing by the Financial Crisis Inquiry Commission. Wall Street's leading bankers are being put on the spot for their role in the financial crisis. The Times and many others are wondering whether they will accept responsibility and apologize.
Public apology involves institutional, not personal, failure. Responsibility is allocated based on title and authority, not necessarily as a function of who made the mistakes. Public apology is normal business and political practice in Japan, but is less than common in the United States.
Several years ago I wrote a book about the issue: "Saving Face." In it I argued that the political fabric of America was not just damaged by the Vietnam War, but that the policy failure was aggravated by the fact that no one ever apologized for it.
When the person in charge refuses to take responsibility, he is effectively saying that he did nothing wrong. But if something went wrong and he is not responsible for it, then the fault must lie with others, with the underlings who failed to execute his policy effectively.
A failure to apologize shifts blame, immediately and inexorably.
This demoralizes the staff. Everyone will be less concerned with the corporate interest and more worried about their personal interest. They will be working overtime to get as much as possible for themselves, regardless of the consequences. When the question of responsibility arises they will set out in search of a scapegoat.
An institutional failure cannot be resolved with a private apology. It requires a public statement of humility and abjection. It requires that the person making the apology show real and sincere shame.
But it also requires that the responsible party pay a price for his assumed dereliction. You cannot just apologize for an institutional failure and go back to your job. Apology must be accompanied by a loss of status and of community standing.
According to the Times, such practices are rare in American business. It uses the example of Gerald Levin's recent apology for the AOL-TimeWarner merger to show that perhaps the corporate world is finding ethics.
Does the general litigiousness of American culture make it nearly impossible for corporate leaders to admit of mistakes? So we might imagine.
Yet, studies of the medical profession have shown that when physicians apologize for mistakes they are far less likely to be sued than when they do not accept responsibility.
As for the financial crisis, certainly the leaders of Wall Street's major financial institutions bear some responsibility. At the least they bear responsibility for their own companies. Surely they made mistakes in managing those companies.
Yet, Lloyd Blankfein is CEO of Goldman Sachs. He is not in charge of the financial system. Jamie Dimon runs JPMorgan Chase, not the financial system.
Great responsibility must also be borne by executives whose companies failed. James Cayne of Bear Stearns, Stanley O'Neal of Merrill Lynch, and Richard Fuld of Lehman Bros. have all disappeared from public view. Yet, none of them has apologized publicly for the spectacular failures of their institutions.
Still, none of these individuals were in charge of the financial system. But, then again, who was?
Perhaps the financial system is so large and so complex that no one individual is really in charge. But that does not mean that there are no one owes us an apology for his role in the crisis.
Given today's committee testimony, it makes sense that the times singles out bankers for special blame. Yet, what about the government officials who are directly responsible for the good order and discipline of the financial system.
Shouldn't the Chairmen of the Federal Reserve step forth to apologize for their role in flooding the banking system with money? What about the heads of regulatory and ratings agencies?
And shouldn't the heads of Fannie Mae and Freddie Mac bear some responsibility for the collapse of the mortgage market, along with their institutions? And what about members of Congress and the executive branch who were either not paying very close attention or were vigorously defending Fannie and Freddie?
In principle, these agencies are independent; they are supposed to be above politics. But, with independence comes both authority and responsibility. We know that politicians protected their friends at Fannie and Freddie, but we are still waiting for the heads of these agencies to come forth and apologize for the central role they played in the crisis.
So, the question remains: who should apologize for the financial crisis? That honor must go to the Maestro himself, Alan Greenspan.
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