Another Reason to Love Warren Buffet

by Robins Kaplan LLP
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“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” – Warren Buffett

On Sept. 22, my colleague Sharon Roberg Perez wrote about the WeConnect App that has Standard Innovation Corp facing class action claims related to wire-tapping, prohibited eaves-dropping, intrusion upon seclusion, and deceptive business practices. As SRP noted, there are unsettled legal questions at the root of the lawsuits, and as we all know it could take years before they are ultimately resolved in the regulatory or legal system.

The practical question this raises for me is: will the resolution of the legal questions ultimately matter for Standard Innovation?  How many times have we seen questionable behavior wreak havoc on a corporation’s reputation long before the legal question has been resolved?  Perhaps the most well-known example is Arthur Andersen Accounting, which, by the time it was ultimately exonerated, had long gone out of business.

We also have several examples in the current news: with companies accused of treating customers with disregard in the name of increasing profits.  Although the legal challenges are just beginning, many customers are “voting” with their feet and walking away.  All the while legislators are publicly excoriating the leaders of the companies.

My point?  In instances such as these, very often the best lawsuit is the one that never happens.  They can often be avoided by building a strong corporate culture of values and responsibility.

How?  Encourage honest, although often uncomfortable, situations.  Communicate to the teams that profit is the goal, but not at any cost.  Listen.  Respond.  Listen some more.  Be available for feedback.  Create strong internal controls and processes; Test them regularly.  Reward people for doing the right thing.  Beware of compensation schemes that drive inadvertent, unwanted behavior.

Doing these things will reduce your chances of litigation, but obviously won’t avoid all bad acts or actors.  If, or when, that happens, you will be in a far better position to prove that you took reasonable preventive efforts, and that your promise to redouble your efforts are believable.  You can then get back to business doing what you love, being a valued member of the business community and an employer that attracts the best candidates.

Maybe best of all, you can choose when you get your face and your company’s name on every newsfeed and displayed prominently in print media.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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