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U.S. corporations now widely use Alternative Dispute Resolution over litigation to solve disputes, national survey shows

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Alternative Dispute Resolution (ADR) is now used widely among U.S. corporations to resolve complex business disputes, according to a survey of the nation's top corporations. ADR refers to any form of mediation or arbitration and their use in resolving disputes.

The study also found that, according to corporations, ADR is "a more satisfactory process" than litigation when it comes to resolving disputes. But the study showed some reluctance with the technique on the part of corporate America: Many respondents expressed concern over the qualifications of outside mediators or arbitrators who help settle disputes.

The survey, The Use of ADR in U.S. Corporations, a joint initiative of the Institute on Conflict Resolution at Cornell University's School of Industrial and Labor Relations, the Foundation for the Prevention and Early Resolution of Conflict (PERC) and Price Waterhouse LLP, polled more than 530 corporations in the Fortune 1,000 category.

"These kinds of procedures have been widely used in union-management relations, but now we're seeing this technique to resolve disputes in product liability and other non-employment related areas," said Ronald L. Seeber, a Cornell professor and associate director of the Institute on Conflict Resolution (ICR) who served as principal investigator of the study with David B. Lipsky, Cornell professor and ICR director.

One reason for the widespread use of ADR is its cost-effectiveness in resolving disputes compared to the courts. Of the survey respondents, 90 percent viewed ADR as a critical cost-control technique and more than half (54 percent) said cost pressures directly affected their decision to use ADR.

Another reason cited for the increased use of ADR is that a growing number of legal mandates require the use of mediation and arbitration to solve disputes. Six out of every 10 respondents (64 percent) said they have used mediation because of court mandates. The Civil Rights Act of 1991 and the Americans with Disabilities Act both encourage the use of ADR.

Corporate America appears satisfied with the way ADR has worked in resolving disputes. Eight out of 10 respondents (81 percent) indicated that they use ADR because it provides a "more satisfactory process" than litigation; 66 percent said ADR provides "satisfactory settlements"; and 59 percent said ADR "preserves good relationships."

The most popular form of ADR is mediation, with nearly nine out of 10 respondents (88 percent) having used mediation over the past three years to settle disputes. Listed below is the percentage of use of other ADR forms over the past three years by American corporations:

-- arbitration 79 %

-- mediation-arbitration 41 %

-- in-house grievance 23 %

-- fact-finding 21 %

-- peer review 11 %

-- ombudsperson less than 10 %

Despite the widespread use of ADR and the high marks for its abilities to resolve disputes, many in corporate America remain uncomfortable with the qualifications of arbitrators and mediators.

Almost half of the respondents (49 percent) expressed a lack of confidence in the arbitrator and 29 percent were concerned about qualifications. Mediators fared somewhat better: 30 percent of those surveyed exhibited a lack of confidence in the mediator and 20 percent complained about the lack of experienced people.

The lack of confidence in arbitrators is understandable, according to Seeber. "Arbitrators have quasi-judicial powers and their rulings are binding, so the stakes are higher when they are involved in resolving disputes," he said. "But there is no real national credential system for arbitrators. Virtually anyone can claim themselves to be an arbitrator. Corporations seem to accept the qualifications of mediators with less reservation, because one does not have to rely on their findings."

Seeber said additional study is necessary to find out how the use of ADR affects corporate culture and business practices.

The phone and mail survey was conducted by the Computer-Assisted Survey Team at Cornell. Corporate respondents were identified as general counsel, deputy counsel or chief litigator.

More information on the study is available from the Institute on Conflict Resolution at Cornell University. The institute, which opened last fall, is supported by the Foundation for the Prevention and Early Resolution of Conflict (PERC), a nonprofit organization dedicated to "hands-on" engagement in conflict prevention and resolution. The Institute for Conflict Resolution can be found on the World Wide Web at http.www.ilr.cornell.edu.