The cost of confidentiality - is it worth it?

Lawyers are very smart people and the world would be a chaotic place without them but sometimes their advice while legally smart is downright dumb from a reputational perspective.

I’ve seen it so many times now and it makes my blood boil.  It often occurs when a company has found itself the subject of legal action as a result of some major incident that may have even resulted in the loss of property, injury to people or even death. 

In negotiating compensation packages the company will find itself being advised to settle out of court and often with a requirement that prevents either party from discussing the issue in public.  It sounds all neat and tidy but inevitably it doesn’t turn out that way.   The decision to apply confidentiality clauses to the settlement means that the issue is left unresolved in the Court of Public Opinion, the company is left looking secretive, shifty and even manipulative – the archetypal powerful business that has forced people into silence. I am sure there maybe sound legal reasons why lawyers advise their clients to go down this path – but for me this is where good PR people are worth their salt: Prepared to explain the consequences.  Sure, you might limit the risk on one side of the equation but can you really afford the net damage to your reputation?  I fear this consequence rarely gets enough consideration.  

It is understandable that boards and senior management just want the issue to go away, to be buried in corporate history.  The trouble is that isn’t the way reputation works.  People remember.  Weren’t they the mob who had the problem with…and covered it up??  What did they have to hide?  There must be something dark and disturbing that they don’t want brought out in the light.

For me best practice reputation management rejects confidentiality agreements and instead pays financial compensation (if that is appropriate) while still providing a platform for the company to explain itself.  That might include saying sorry, explaining mitigating circumstances that caused the incident to occur and outlining what has been done to ensure it doesn’t happen again.  I think the vast majority of the jury in the Court of Public Opinion will accept that mistakes do happen, and are prepared to give companies and individuals a second chance.  But cover up via confidentiality clauses just leaves the stench of guilt hanging in the air.  The few thousand dollars you save in the short-term might cost you millions in damage to your brand and reputation over time.  It is worth considering.