The Equifax Effect: In Corporate Apologies, Words Are Often Not Enough

October 26, 2017

[shawn hill]
[shawn hill]

Companies should apologize for their mistakes, but doing so might not prevent further consequences, author John Kador wrote for Chief Executive magazine. Two weeks after Equifax chairman and CEO Richard F. Smith apologized for a data breach in which the private financial information of 143 million people was stolen, the company’s stock had fallen by 30 percent and two executives were forced out. Congress is investigating the breach, class action lawsuits have been filed and millions of consumers are angry. Then, on Sept. 26, Smith announced that he was stepping down.

The breach itself was just the beginning of the problem for the consumer credit-reporting agency. Equifax discovered the breach on July 29 but didn’t alert the public until six weeks later, on Sept. 7. The company then hastily offered measures that only made consumers more anxious. Making matters worse, Equifax customer service had been directing victims to a fake phishing site for several weeks, according to published reports on Sept. 20.

It was later reported that in the days after Equifax discovered the breach, three of its senior executives sold $2 million worth of the company’s stock. Smith issued a video apology for the breach, and Equifax published an apology ad in USA Today.

An apology can help a company defuse resentments, avoid unnecessary costs and litigation, build good will and move forward. A well-timed apology might even leave an organization’s relationship with customers and the public stronger than they were before. But words alone won’t suffice. Action is required, which could mean paying large government fines and restitution to those affected or contributing to charity. Executives might have to resign or even go to jail. 

As Kador opined, “Equifax skimped on the roll-out of its apology response and will now incur even more expense. The evidence is compelling: However costly, effective corporate apology is less expensive than the alternatives of deny and defend.”  — Greg Beaubien


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