Grayson was in the process of guiding the Whites to promotion out of League One in 2009/10 and opted to stay and see that through.
His loyalty has been rewarded this season, with Leeds currently flying high in the Championship table as they target a return to the top flight.
Bates told Sky Sports News: "Simon is in it for the long run. He was approached and offered a job on a much bigger salary, in the Premiership, over a year ago and he said, 'I came to Leeds to do a job and I'm going to finish it'. If he manages in the Premiership he wants it to be with Leeds.
"We have got a good relationship. He rings me when we lose, which I know some managers don't. If he has a problem we talk about it, which is the only way to do things. We have total trust in each other.
"He is a Leeds apprentice who has come home. He has done the rounds and come home."
Bates feels Leeds' success over recent years is based on an understanding between himself and his manager that he will not meddle in any business relating to the playing side of the club.
"There never has been as far as I'm concerned, wherever I have been," he said. "The manager has to be judged by his results so the only fair way is to let him pick his players. If he fails it's because he picked the wrong players.
"You can't do what some clubs do and have chairmen introducing players to the manager after they've been signed. That's not our policy here."