Companies don't like to apologize -- who does? In the old days they didn't apologize for anything, but now at least they'll say they're sorry for spilling things, like 4 million gal. of diesel fuel on the Pittsburgh area. Ashland Oil made an apology for that in 1988, soon to be followed by Exxon's apology for spreading 11 million gal. on Alaska. For being a few days late with its statement, Exxon was branded a lout.
Companies have also apologized for recent gaffes that Marge Schott might have appreciated, such as Radio Shack's putting out a video game with a swastika in it, or an American Airlines ground crew's ordering a change of pillows after a gay-rights group exited the aircraft. Once in a while, companies apologize to avoid a libel suit, as nbc did after it rigged a crash test so a General Motors pickup truck would be sure to explode.
But when it comes to financial misconduct -- stealing, cheating, fraud -- companies have a terrific out. They can settle the charges without admitting they've done anything wrong. In return for large wads of cash, the Securities and Exchange Commission (SEC) allows most corporate offenders to dodge acknowledgment of their offenses. This helps make up for the fact that companies can't blame alcohol or drugs or say their lousy childhood made them do it, and wiggle out of trouble the human way.
The rationale for corporate nolo contendere is that the offending company must be kept sound enough to repay its victims via the settlement. If it were forced to plead guilty, the firm would be subjected to a flood of further lawsuits that could sink it. Given the number of companies that take advantage of this opportunity, we could start a pretty good nolo mutual fund.
This fund could include Sears, whose zealous auto mechanics performed extra work on cars that didn't need it. Sears settled with the State of California and offered $50 rebate coupons. Then there's Salomon Brothers, whose enthusiastic bond department hoodwinked Uncle Sam by buying more government bonds than it was entitled to. Salomon settled with the SEC for $290 million. Finally, there's Prudential Securities, the brokerage arm of the Rock of Gibraltar, which paid $370 million to settle a multitude of claims from investors who were coaxed into buying some trendy limited partnerships, which limited them to big losses.
There's a pattern to these cases. Once the scandal breaks, the company expresses total shock that any of its employees could have done such a thing. Then it volunteers to work with authorities in nabbing the culprits. No matter how many millions of dollars are involved, the culprits turn out to be loners. Their superiors hardly knew their name. This is the "the butler did it" phase.
Next comes the settlement stage and the big payout and the nolo plea, along with the letter to shareholders that often winds up in the papers as a full- page ad. The letter writer, usually the CEO, refers to "problems" and "mistakes" and emphasizes that these mistakes were in the past and entirely the work of rogue individuals. The company announces concrete steps to ensure that whatever they haven't admitted to doing will never happen again.