Investors prefer ‘I’ over ‘we’ when CEOs apologize
In the corporate world, crises can arise unexpectedly, prompting CEOs to step into the spotlight and deliver public apologies. The effectiveness of these apologies, however, is not merely a matter of sentiment; it can significantly influence a company’s stock price. Research conducted by marketing professors, including one who specializes in the nuances of corporate communication, suggests that the language used in these apologies can have profound financial implications. Specifically, the study analyzed 224 corporate apologies from 1996 to 2023, revealing that CEOs who say “I apologize” tend to see a notable increase in stock prices, while those who use “We apologize” often do not experience the same positive effect.
Two high-profile cases illustrate this phenomenon vividly. In 2016, Samsung Electronics faced a crisis when it had to recall 2.5 million smartphones due to battery fires. Despite running full-page ads proclaiming, “We are truly sorry,” the company’s stock continued to plummet, resulting in substantial market losses. In contrast, during the infamous 1982 Tylenol crisis, Johnson & Johnson’s CEO took immediate responsibility by saying “I apologize” and initiated a nationwide recall, which, although costly, helped maintain public trust and stabilize the company’s stock price. This stark difference highlights how personal accountability communicated through language can significantly shape investor reactions and market perceptions.
The research further indicates that the context of the apology matters. In cases involving workplace discrimination or diversity-related issues, the effectiveness of a personal “I apologize” diminishes. Investors often view these situations as indicative of systemic failures within the organization, necessitating a broader acknowledgment of responsibility. Thus, in such contexts, a collective “We apologize” may resonate more effectively, signaling a commitment to institutional accountability. The findings stress that corporate apologies are not merely a formality; they are critical communications that can influence investor confidence, employee morale, and customer perceptions. In an era where trust in institutions is waning and social media amplifies scrutiny, crafting the right apology is more important than ever, making it essential for corporate leaders to prepare thoughtfully for crisis communications as part of their risk management strategies.
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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.
A tale of 2 apologies
Consider two examples from the not-too-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
that said, “We are truly sorry.” Despite the apology,
Samsung’s stock continued falling
, wiping out billions of dollars in market value.
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. The company’s stock price
didn’t take much of a hit
, either.
While the two cases are different in many ways, together they illustrate a pattern my colleagues and I observed in our study: Markets respond differently to “I apologize” versus “We apologize.”
Investors reward personal accountability
I collaborated with marketing professors
Jennifer H. Tatara
and
Courtney B. Peters
to analyze 224 corporate apologies between 1996 and 2023. Using
event-study methods
common in finance, we tracked unusual stock returns around apology announcements and linked them to how CEOs framed their statements.
Our results, which we are preparing for publication, were striking. CEOs who said “I apologize” often saw short-term stock returns rise by a statistically significant amount. CEOs who said “We apologize” saw no such effect. Saying “I apologize” lessens the market penalty by roughly 86%, we found.
We think this is because
markets reward leaders
who take individual responsibility. “I” signals personal accountability and decisiveness. “We,” by comparison, dilutes ownership of the problem.
But context matters, we found. When we zeroed in on diversity-related cases – those involving mistreatment based on race, gender, disability or LGBTQ+ status, for example – the positive effect of “I apologize” weakened or disappeared.
That’s because investors often interpret diversity crises as signs of
systemic failure
, rather than isolated mistakes. In those cases, investors, employees and the public may expect accountability that goes beyond the CEO. A lone “I apologize” can seem hollow, while “We apologize” may resonate more by acknowledging shared institutional responsibility.
Beyond CEOs: Why stakeholders should care
Apologies are among the most scrutinized executive communications. Their effects ripple across different audiences.
For investors, apology language provides
a real-time signal
of leadership quality and future governance. Our research shows 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 leaders prepare for crisis communications as a standard part of risk management.
For employees and customers, apology language sends a message about corporate culture. “I” can demonstrate accountability; “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 aren’t one-size-fits-all. The right words depend on the nature of the wrongdoing.
Prachi Gala does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
