In the wake of the banking Royal Commission, saying sorry and meaning it is everything. Here's the issues your board needs to consider to handle an apology.

    In late 2018, Prime Minister Scott Morrison stood before a hushed Federal Parliament delivering a national apology to the survivors and victims of child sexual abuse after the five-year Royal Commission into Institutional Responses to Child Sexual Abuse exposed thousands of cases of misconduct. In a moment raw with emotion he begged “a sorry that dare not ask for forgiveness” and joined hands with Opposition Leader Bill Shorten and survivors.

    Such apologies are rare. Former PM Paul Keating’s Redfern speech in 1992, Kevin Rudd’s 2008 apology to the Stolen Generation and Julia Gillard’s 2013 apology to victims of forced adoption echoed deeply in their times.

    Saying sorry takes courage, skill, timing and most of all persistence. Many get it wrong; a few get it right.

    Harsh realities of putting things right

    With business practices under intense scrutiny in both the Royal Commission into Misconduct in the Banking, Financial Services Superannuation Industry and now the Royal Commission into Aged Care Quality and Safety, boards are having to confront the harsh realities and put things right for customers, employees, the community and investors. They’ve been forced to consider a major non-legal consideration and one which has many definitions — community standards and expectations, or social licence.

    Multiple apologies from banking and financial services company chairs and CEOs during the banking Royal Commission highlighted a significant shift in the tension of advice to boards.

    Boards often listen to advice from experts and management and then crunch through scenarios, steering a course to satisfy an organisation’s needs without exposing it to undue risk.

    “At the moment it’s kind of like everybody’s behaving badly, or everybody thinks everybody’s behaving badly,” says Sue Cato, a longtime adviser to boards and CEOs from communications firm Cato and Clegg.

    One thing that is clear, Cato says, is that companies can no longer send out an anonymous media spokesperson to say nothing on the excuse that, on legal advice, to make an apology could expose the organisation to future litigation.

    Social media can flare up and this type of response can be picked up by the media. The resulting pressure from shareholders can end with resignations of the CEO, chair and directors.

    Saying sorry is always a hard one, a task many avoid. The usual advice to directors comes from two areas, the head of corporate affairs or media advisers and the general counsel. The lawyers might say: You can’t apologise because that may be an admission which would leave the organisation open to action. The communications expert is likely to say the opposite: Apologise now to limit brand damage. Cato says a common approach is, “I’m sorry if I’ve offended anyone” which she describes as an apology which isn’t an apology. “It annoys people,” she adds. “You’re just digging a deeper hole.”

    Communications advisors Company Director spoke to say the art is to find a path between both, to limit damage with customers, and not open the door to a flood of legal issues.

    The first step is to acknowledge the issue, then show what’s being done to fix the problem — and give people a reason to calm down — then describe why this will never happen again.

    “You’ve got to give your stakeholders or your audience or your shareholders a reason to let you move on,” Cato says. “An apology quite frankly is not only the right thing, but the best thing you can possibly do in most circumstances as long as you’re being mindful of the environment that you’re operating in.

    “It’s actually understanding what it is that you are responsible for, what your duty of care is and making sure that people actually understand that you do know that there’s a problem.”

    Ruveni Kelleher, a partner at law firm Johnston Winter & Slattery, has worked on a number of cases in which big corporates have needed to make an apology.

    “The general concern is obviously that the apology will be used to suggest liability or fault and that could prejudice a case in the future if any litigation is commenced,” Kelleher says.

    “What is not commonly known is that it all depends on what you’re apologising for, what the potential legal claim is, and where it’s occurred.”

    Legalities of an apology

    In NSW, the NSW Civil Liability Act, section 69 rules that an apology is not admissible in civil proceedings as evidence of fault or liability. The same applies in Queensland with the Civil Liability Act 2003 and in the ACT under the Civil Law (Wrongs) Act 2002. In Victoria, the exemption only applies to proceedings relating to the death or injury of a person (Wrongs Act 1958) Section 20 in the uniform defamation legislation in each state and territory provides that an apology made in connection with any defamatory matter alleged to have been published by the person does not constitute an express or implied admission of fault or liability and is not relevant to the determination of fault or liability in connection with that matter.

    Kelleher says boards also have to be aware of what their insurance policies require or provide for because, in some cases, the insurance policy will be voided by an apology. Cato says it doesn’t help if communications people don’t listen to legal guidance, or if lawyers are locked in a position. “It’s an ability for everybody to understand what needs to be achieved and then to work out how to get there,” she says.

    Ann Sherry AO FAICD, chair of Carnival Australia and Unicef Australia and a director of National Australia Bank and Sydney Airport, says by nature legal advice is more conservative and it is the job of boards to find the right balance.

    “Lawyers are advisors and some advice is very apt and worth taking on while some probably doesn’t take full account of the environment boards have to consider,” Sherry says. “It is the job of boards to navigate this, use their judgment and stick to it.”

    As CEO of cruise company Carnival Australia, Sherry had direct experience in responding in the media and faced operational and reputational challenges brought about by a 2010 Coroner’s inquiry into the death of Dianne Brimble, a passenger who died on the P&O Pacific Sky in 2002. That experience taught Sherry valuable lessons and has provided a management perspective now she is a director of a board responding to the banking Royal Commission.

    “Step 1 in rebuilding reputation is you have to accept someone’s else view of you, even if it doesn’t align with what you think,” Sherry says. “You have to let go of the defensiveness. Then you have to be diligent and disciplined in following through to ensure that over time things actually change. In big organisations things can get lost easily. In two years time people will look back and, unless you can show what you have done, it doesn’t count. “Step 2 is put a plan in place to do it and [identify] the cultural markers that your organisation and your board will look for.”

    Sherry says board and management also need to be aware they ensure there is adequate support for staff working directly with customers and having to defend the organisation day to day.

    Sherry says board and management need to work out what the organisation’s cultural markers are and look for how they can shift. This includes ways of approaching issues that may not be within director control. For example, Carnival set up protocols with police forces in all its ports so there was an obligation to report any crime on any ship in the region. “We wanted to be able to say hand on heart to customers that we can’t guarantee nothing will happen but here’s what steps we will take,” she notes. “Boards don’t run the companies so another challenge for us is how do you hold executives to account for this change? How do you monitor it and how do you know?”

    Jake Blundell, a senior associate at law firm Banki Haddock Fiora, says a challenge is the speed at which companies are expected to respond in today’s media environment.

    “From a legal point these things need to be carefully considered,” he says. “There are certainly competing considerations and the speed doesn’t help.” Among the considerations for directors of listed companies is that statements of regret could affect the value of a company’s shares.

    “There are so many complications to consider that aren’t just on the legal front,” Blundell says. “But I think those community expectations are the forefront of people’s minds. And very difficult to navigate your way around.”

    However, Blundell sees no reason to run from making an apology even when under the pressure of a short news cycle.

    “I think there’s a lot of fear of giving the game away or appearing weak,” he says.

    “The apology puts you on the back foot immediately, it opens up a can of worms but I also think that’s just one side of the ledger. It’s also a powerful way to take the heat out of a situation.”

    Robyn Sefiani, a specialist in corporate and brand reputation management and the founder of Sefiani Communications, says professional communicators and legal counsel can generally settle on a statement that is acceptable to both.

    “Although lawyers will be typically cautious believing less is best and in some cases no apology is even better,” she says.

    “An apology can be authentic and show regret and commitment to change without expressing legal liability. In circumstances where the communicator and the lawyer reach an impasse it’s the client who makes the call after carefully weighing the advice.”

    Saying sorry is seldom a bad thing to do, according to Anthony Mitchell, a former chairman of Amnesty International Australia and co-founder of consultancy Bendelta.

    “It shows awareness, humility and concern for impact on others,” he says. “That said, there are many ways to do it poorly.”

    Directors need to understand the difference between an apology and wallowing in self-pity.

    “The role of a board is to be accountable not to self-flagellate,” he says.

    “In and of itself, guilt holds no value to customers, shareholders, staff or community. By all means, apologise deeply and sincerely for harm done, but also focus on the practical steps that the board will take to make the future better than the past.”

    Saying sorry can have a tangible impact — especially on the victims of abuse.

    Kate Alexander, a NSW Family and Community Services social worker who won the Public Service Medal in 2018, had government lawyers in tears at a Law Society of NSW conference in September with stories of the many times she has apologised on behalf of the state to women who resisted and survived institutional abuse at the Parramatta Girls Home.

    Alexander said: “Being sorry means not doing it again”.

    Latest news

    This is of of your complimentary pieces of content

    This is exclusive content.

    You have reached your limit for guest contents. The content you are trying to access is exclusive for AICD members. Please become a member for unlimited access.