When it comes to saying sorry, how your organisation handles an apology is everything. The Royal Commission early this year saw some powerful lessons for Chairs and CEOs, we saw many reputations shattered. With some top name CEO’s and Directors falling on their swords. Highlighting NO ONE is immune from a PR disaster.
Below I examine the tensions between what’s legally required versus media strategy, reputation management and community expectations.
At the end of the day no one is perfect, mistakes are made which can give rise to an apology being needed. Some directors get it right, some inadvertently get it wrong, making things worse (and much worse in some cases).
But Doesn’t Saying Sorry Mean I’m Responsible?
If the time ever comes for your Board to say sorry for something, what should or shouldn’t the Board do from a legal perspective? I am often asked for advice on how directors can ensure they discharge their duties effectively (and legally) and an apology can create an opportunity to review these duties, as well as the laws that impose personal liability on directors.
Ensuring that your Board expresses regret in a way that is legal and also in compliance with the directors obligations will first require a review of the situation that has created the need to say sorry.
As lawyers always say, “It depends” – what we mean is, every fact and circumstance is different and therefore there is no one size fits all for legal advice.
As a lawyer, my number one piece of advice in the initial stages is to gather the facts of the event or situation that has occurred and get a detailed understanding of what actually transpired. In the meantime, acknowledge the event has occurred and state that an investigation is currently taking place.
Organisations are subject to laws which dictate minimum compliance and operating standards for the protection of their stakeholders – from shareholders or members to creditors to employees and customers, an even the environment. Urgently reviewing the board’s position is the first step.
Apologising In Light of Director’s Duties
Directors are expected to carry out their duties with reasonable care and diligence. A failure to do so can attract the penalty provisions of the Corporations Act 2001 (Cth). Penalties include:
- disqualification from acting as a director
- significant fines; and
- orders to personally pay compensation.
BEFORE any apology is made, a careful review of the situation needs to be done to consider whether the board has been carrying out their duties with reasonable care and diligence, and so as not to put the directors or any insurance policy that might be in place at risk.
The other duty that is incredibly important is your duty of confidentiality to the company, any apology made, of course, must not breach that duty!
What About Legislation?
Understanding other legislation that may impose personal liability on those at the helm of a company can be useful as well.
For example, the Workplace Health and Safety (WHS) legislation imposes personal liability on officers of organisations. An officer found to have committed a tier one offence, that is, has recklessly engaged in conduct that exposes someone to injury or death is personally liable to a maximum penalty of $600,000 or five years imprisonment. A tier two offence involving a failure to exercise due care and diligence may attract a fine of up to $300,000.
There are environmental offences that attract personal liability as well, so if an environmental situation has occurred then getting advice early on the director’s personal liability could be very important.
FIVE Steps To Getting It Right:
- Get the right people with diverse perspectives at the table before making any statements internal or external. Have experts at the table who can provide the necessary guidance such as legal counsel and risk managers.
- Act fast; speed matters. The sooner you are seen to respond to a situation the better the capacity to take control. Don’t ignore the situation and hope it will go away — it won’t.
- Drop the corporate lingo when making any public statements – speak to your stakeholders, staff and shareholders as humans. Be empathetic and authentic – people can see through it when you’re not.
- It’s is okay to recognise the harm that has been caused. It’s also okay to convey that all hands are on deck to solve the problem. Stating an issue / problem is being addressed doesn’t admit culpability. State the facts about what you know and do not speculate. Individual legal advice must be sought on this before taking this action, insurers may also need to be across this.
- Provide ongoing updates, this remove doubt and sets a very clear indication of where directors and the board stand.
Key Take Away’s:
As every director knows, risk is inherent in all decisions, and the outcome of all decisions is not predicable. There are a myriad of ways unforeseen events can affect your organisation, including making or not making an apology. With the proper plans and processes in place, you can reduce the unknowns around these events and ensure the longevity of your organisation and its reputation.