For Bankers, Saying ‘Sorry’ Has Its Perils

As America recovers from the worst financial crisis since the Depression, some of the nation’s chief executives are offering that rarest of statements — an apology.

But often, their words are so carefully parsed, scrubbed by lawyers or picked over by public relations professionals that it is unclear just how much mea is in their culpa.

The Financial Crisis Inquiry Commission Hearing held on January 13, 2010. Pictured are the Financial Institution Representatives: Lloyd C. Blankfein of Goldman Sachs, James Dimon, of JPMorgan Chase & Company, John J. Mack of Morgan Stanley, and Brian T. Moynihan of Bank of America.
The Financial Crisis Inquiry Commission Hearing held on January 13, 2010. Pictured are the Financial Institution Representatives: Lloyd C. Blankfein of Goldman Sachs, James Dimon, of JPMorgan Chase & Company, John J. Mack of Morgan Stanley, and Brian T. Moynihan of Bank of America.

The former Time Warner chief, Gerald M. Levin, dropped jaws last week by taking the blame for “the worst deal of the century,” the decade-old merger of America Online and Time Warner. Yet few other chief executives, including the handful of Wall Street chieftains who acknowledge missteps, have embraced his plea to accept personal responsibility for decisions that have caused pain, loss and suffering for many ordinary Americans.

“American culture does not put a premium on apology,” said Michael Useem, professor of management at the Wharton School at the University of Pennsylvania. “The level of anger in this public in general is extremely high against those who led Wall Street into the abyss, in part because they never stepped forward to apologize for the mess they made.”

The art of the nuanced regret — admitting mistakes without accepting blame — will be on display Wednesday at a hearing of the new Financial Crisis Inquiry Commission in Washington, where Lloyd C. Blankfein of Goldman Sachs , Jamie Dimon of JPMorgan Chase , John J. Mack of Morgan Stanley and Brian T. Moynihan of Bank of America are to testify about their roles in the financial crisis.

Mr. Moynihan, who recently took over Bank of America after Kenneth D. Lewis steered it into a troubled merger with Merrill Lynch, plans to say that the banking industry caused a lot of damage and acknowledge that mistakes made by financial companies can affect Main Street, said a person briefed on his testimony. But he will stop short of the statement that Mr. Blankfein offered several months ago.

Mr. Blankfein, whose firm is on track to report blowout 2009 profits, uttered the word “apologize” in November although he is not expected to repeat it in his testimony Wednesday. His remarks came a week after he drew fire for saying the firm was doing “God’s work,” but it was never clear what the subject of his atonement was. “We participated in things that were clearly wrong and have reason to regret and apologize for,” he said, without elaborating on what “things” the firm did wrong.

Since then, Mr. Blankfein has continued to defend the millions in bonuses he is paying to keep Goldman’s bankers happy, although the firm has since changed its compensation practices to emphasize stock over cash payments to discourage short-term risk taking.

Others see no reason for censure. Mr. Dimon has maintained that JPMorgan also did not need a bailout despite billions of dollars of bad loans, and in fact helped support the government’s rescue effort with its emergency takeover of Bear Stearns. In a recent letter to investors, he said mistakes were made in the bank’s mortgage business, but cited “regulatory lapses” and errors by the ratings agencies as triggers of the mortgage debacle. Still, he has acknowledged that the industry has benefited from extraordinary federal aid programs. A spokesman declined to discuss his Wednesday testimony.

Mr. Mack apologized to Congress last February for his firm’s role in the financial crisis, and is not expected to do so again Wednesday, according to a person briefed on his testimony. Last month, he said he would forgo his bonus for the third consecutive year, after receiving more than $60 million in stock bonuses in 2005 and 2006. Mr. Mack will tell lawmakers that many firms took on too much risk and will call for more authority for regulators, including the ability to dismantle firms that mismanage their risk, the person said.

Of course, corporate chieftains worry that apologies may be red meat for shareholder lawsuits. Shareholders have sued Bank of America, for example, for failing to disclose billions in losses and bonuses paid out at Merrill Lynch before the merger. Last week, an Illinois pension fund sued Goldman Sachs to recover billions in bonuses and other compensation for 2009, saying the payouts harm shareholders.

Sydney Finkelstein, a management professor at the Tuck School of Business at Dartmouth, said his research for a recent book showed that heads of Fortune 500 companies almost never apologize for poor performance.

“Out of the 100 or so companies we looked at, only one acknowledged managerial culpability — Andy Grove at Intel for the company’s handling of the Pentium,” he said.

“We specifically looked at many other companies,” he added, “and found none who admitted managerial error, let alone apologized for it.”

Another reason it is so hard for chief executives to apologize is that they simply tend to have big egos that are not used to admitting mistakes, said Robert F. Bruner, dean of the Darden School of Business at the University of Virginia.

“You don’t get to the top of a large and highly competitive organization by debasement and humility,” he said. The politics of humble is seen in stark contrast in Japan, where executives often make wrenching public apologies for their missteps. Akio Toyoda, the head of Toyota, recently agonized about the car company’s woes, and acknowledged it was a step away from “capitulation to irrelevance or death.” The company, he warned, “is grasping for salvation.”

Would an American chief executive ever be so blunt?

Rick Wagoner, who ran General Motors as it fell into bankruptcy, has remained quiet since he was fired by the government shortly before his company filed for bankruptcy. Mr. Wagoner also was involved in a frequently mentioned bad deal: G.M.’s 2000 decision to invest in Fiat. The venture cost G.M. nearly $5 billion, including money it had to spend to get out of it in 2005. Even so, Mr. Wagoner defended it.

Since then, G.M. executives have expressed no regrets. “It was kind of water over the dam,” said Tom Wilkinson, a G.M. spokesman. Today, Mr. Wagoner gives guest lectures at Duke University Business School, but otherwise has avoided public forums.

Other lightning rods of the crisis have stayed out of the limelight, aside from appearances at Congressional hearings. Richard S. Fuld Jr., who bolstered the Lehman Brothers empire before presiding over its collapse; Angelo R. Mozilo, whose Countrywide Financial thrived by peddling dubious mortgages; and E. Stanley O’Neal, who pushed Merrill Lynch into ultimately disastrous bets, have rarely discussed their roles in the crisis. None of the men could be reached for comment.

Some other major financial figures have offered tepid apologies. Sanford I. Weill, who built a financial empire at Citigroup, told The Times recently that he was “sad” about the state of Citi and had made some mistakes. But he defended the colossus that he built and said one of his major blunders was picking Charles O. Prince III as his successor. He blames Mr. Prince for taking on a mountain of risky debt that later proved toxic.

As for Mr. Levin, while his abject apology was years after the fact, experts said it was nonetheless stunning in an environment that generally frowns upon apologies as a sign of weakness.

“Certainly the accepting of public responsibility is a virtue that companies and business schools should cultivate,” said Mr. Bruner. “In that sense, I think Jerry Levin’s apology will be studied for years to come.”

Eric Dash and Andrew Ross Sorkin contributed reporting.