As Government Calls, GCs Weigh When to Resist or Collaborate

“Hi, the FTC is on line 1. The Missouri Attorney General’s office is on line 2. Somebody from the FBI is here in the lobby for you. And I’ve got a letter from Senator Warren that just arrived.”

For general counsel, sometimes it seems that just about every federal and state regulator has a question for you—or a complaint. A lot of these inquiries are routine, or perhaps a request to change a business practice or a product offering, but they can also hit on public controversies and hot-button issues.

I’ve been there. While heading up trust and safety for eBay in the early 2000s, I dealt with a dizzying array of regulators and enforcement officials from around the world, including most state attorney general offices, the FBI, Federal Trade Commission, Consumer Product Safety Commission, Department of Defense, Postal Inspection, Customs, State Department, Environmental Protection Agency, and state boards, just to name a few.

Here are a few things that I’d keep in mind when the government comes calling.

First, identify whether you have friends with that agency that can help—smart businesses establish and maintain a network of connections with government officials who might one day have an impact on your business. Trust and familiarity are important elements of government relations—you should always be cultivating strong relationships in the right places, particularly when you don’t need anything from those relationships. It’s harder to work with strangers when a problem arises. Government relations seems like just an expensive cost item, until it saves you from immeasurable damage.

Second, don’t be afraid to get help early—there may be an initial inclination as an in-house lawyer to think that “I can resolve this myself.” But if you don’t know the government players or have a command of the legal framework, you run the risk of making a bad situation worse. Find an outside lawyer who has worked with—and has a strong relationship with—the key players in this area. Get the lay of the land from them first, they may help you understand the government’s motivations, and perhaps play a role in intermediating the problem before it explodes.

Sometimes, you can work collaboratively with the government, explain your position, and the problem goes away. I’ve worked with dozens of reasonable government officials over the decades who simply want to do the right thing. When you sit down with them and talk, you can get great results before the issue gets contentious or politicized. But you aren’t always so lucky.

For example, in 2018, the New York State Department of Financial Services superintendent made statements encouraging banks and insurance companies to assess and cut ties with gun organizations like the National Rifle Association due to potential reputational risk. Those statements undoubtedly put the companies in a difficult position, forced to choose between firing a paying (but controversial) customer, or risking the wrath of a key regulator.

Were the companies within their rights in working with the NRA? Yes. But several firms chose to cut ties with the NRA anyway, leading the NRA to file suit alleging that the DFS had violated its First Amendment rights, punishing it for its advocacy of an emotional, controversial issue.

The latest debate around diversity, equity, and inclusion provides another illustration of the challenges companies face when the government comes calling. The Trump administration is exerting considerable influence to persuade private companies to abandon their practices around DEI. How do you evaluate where to go when it gets really uncomfortable, and a nuanced discussion of diversity and merit won’t likely get you anywhere? Take a stand? Cave? Or try to find a middle ground?

I’d start with a quick evaluation of your past practices and written internal and external statements in light of the evolving DEI case law. When DEI was in its heyday, you might find that exuberant leaders went too far in using race or gender as the basis for hiring decisions, or in communicating support for DEI. Those mistakes will make you more vulnerable to legal pressure now.

Most importantly, do some hard thinking about your company’s north star mission and values—would moving away from DEI be consistent with those core principles? And will your customers and employees feel whiplash (and get angry) if the programs you supported so enthusiastically six months ago are quickly thrown on the scrap heap? You might look foolish for changing positions so quickly. You might also look foolish for failing to adapt quickly enough to rapidly changing circumstances. No one said leadership was easy.

You should also think about whether you can articulate exactly how diversity plays a role in driving your business. If you’re Costco, for example, you’ve been very clear in stating how diversity has driven your business success, by reflecting its diverse customer base and enhancing the Costco shopping experience. You’ve got decades of outstanding financial performance to back up your claims—not to mention an iconic $1.50 hot dog and soda deal that appeals to customers across party lines. You can withstand the political pressures of the moment, if it’s right for your business.

You might also explore a middle ground. The NFL, for example, hasn’t backed off its commitment to DEI. But it’s probably no coincidence that the words “End Racism” didn’t appear on the edge of the end zone of the Super Bowl for the first time since 2021 once President Donald Trump said he’d be attending. Don’t poke the bear. Or some companies have decided to reword their policies to eliminate DEI language likely to attract negative attention, while reaffirming their commitment to diverse hiring and inclusion practices.

There’s no one right answer for every company—but what’s easy (being a wind sock) and what’s right (standing up for what you believe, especially when it isn’t in vogue) aren’t always the same thing.

A call from the government can pressure test what you stand for, and that ultimately will make you stronger.

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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