GCs Pull Levers to Build or Erode Trust With Customers, Employees

When I read stories about great companies that continue to thrive decade after decade, one word keeps popping up. It’s not cash, or profit, or marketing. It’s trust.

Trust is at the heart of all human relationships, but most companies don’t think about trust much, because it doesn’t fit on a spreadsheet, and it’s almost impossible to measure or quantify. But as Albert Einstein has been credited for saying, not everything that counts can be counted. Trust matters, and it often falls to the legal department—where so many uncountable things fall—to think about how to grow it.

The legal department is engaged in trust-building, and trust-eroding exercises every day.

Do regulators trust your company to be transparent with them, and to make best efforts to follow the law?

Do your customers trust your company to be honest with them in your marketing communications, to be transparent in how their data is going to be used, and to treat them fairly when a problem arises?

Do your business partners trust you to work with them to make the relationship successful for both parties?

And do your employees trust your company to treat them fairly?

The touch points are often small, and the temptation to take an aggressive position “because you can” is great. Doing what’s in your client’s best long-term interests may require some thinking that’s a little unconventional, but you’re investing in trust, and that can pay off down the line.

How you deal with disputes is just one way that can establish or strain trust in a business relationship. Take Walt Disney Parks and Resorts, whose legal department was in the news recently for its handling of a wrongful death lawsuit where the plaintiff alleged that his wife had died from an allergic reaction to a meal served at a Disney resort restaurant.

Disney’s original response was that the case should be sent to arbitration, in part because the plaintiff’s widower had agreed to a trial of the Disney+ streaming service years earlier that required him to resolve all disputes with the company through arbitration.

After a public uproar over the attempt to use an arbitration clause from one service to a different service, Disney backed down, citing a desire to “put humanity above all other considerations.” It was the right call, but damage to Disney’s relationship with its customers had been done, and its arbitration waiver clauses haven’t changed.

What about business partnerships? I’ve seen contracts delayed for a week or more while the parties dispute which company’s jurisdiction will prevail as the forum choice if things go wrong. Bigger companies often try to insert clauses requiring disputes to be resolved in their home court, just because they have more negotiating power. I’ve often found, though, that you can get the relationship off to a better start by reckoning the interests of the other side up front.

In many cases, I’ve proposed a clause that requires the suing party to file in the home court of the other party (known as the “he who sues, travels” clause). Treating the other side in a fair, balanced, and respectful manner sends a positive signal right up front and builds trust.

The same thinking can apply to how you address potential disputes with your own employees. Employers commonly require their employees to sign agreements requiring that they forgo class actions and arbitrate claims against the company. But arbitration clauses had the effect of effectively silencing victims of sexual harassment, and in 2021 Congress passed a law allowing victims of sexual harassment and assault to pursue their claims in court instead of arbitration.

It’s not hard to imagine that Congress may create another exception to arbitration for claims related to race or gender discrimination. Class action waivers haven’t always worked out well either, as plaintiffs lawyers have responded by filing dozens of simultaneous individual arbitration cases.

Yes, in 2018 the Supreme Court issued a 5-4 decision in Epic Systems v. Lewis, upholding arbitration clauses that required individualized arbitration proceedings. But arbitration isn’t always an ideal forum, and such clauses can hurt your brand and employee morale.

Some companies are simply dropping class action waivers and mandatory arbitration clauses for employees altogether. That sends a powerful message—we will treat you fairly, we have confidence that we can work out any issues that arise in connection with your employment, and if we can’t resolve them, you can choose arbitration or the courts.

Sometimes, you have the power to require a provision in agreements with others that, on its face, seems to give you the upper hand. But in the long run, flexing your muscles with these provisions can erode trust—something worth thinking about the next time you ponder what’s worth counting that you can’t count.

Now for the legal disclaimer. This approach isn’t for every legal department or every situation. You might have significant wage and hour employment risks where class action plaintiffs are just waiting for an opening. Or a contentious potential business partner in a jurisdiction where you just aren’t willing to litigate. Or a consumer business where litigation is particularly problematic.

The point isn’t that you should give away the business. It’s that often, in the heat of running a legal department, there’s a temptation to focus so much on always “getting an edge” that you can lose sight of the intangibles, that zealously representing your client could allow for stepping back and taking the long view. You can cite Einstein for that.

Rob Chesnut consults on legal and ethical issues and was formerly general counsel and chief ethics officer at Airbnb. He spent more than a decade as a Justice Department prosecutor and he writes on in-house, corporate, and ethics issues.

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