I especially liked the strategies used in #6. The Chen Guangcheng Crisis and 5. Talks with North Korea
Top 10 Negotiation Stories of 2012
December 21, 2012
Edited by: PON_Staff, filed in: Negotiation Skills
Here’s a recap of some of the most interesting and challenging negotiations of 2012 – some of which are ongoing:
10. Disney’s Purchase of Lucasfilm
On October 30, the Walt Disney Company made a surprise announcement that it was acquiring Lucasfilm, home of the immensely successful Star Wars brand, from its founder, George Lucas, for $4.05 billion, split evenly between stock and cash. Lucas is the sole shareholder in his company.
The acquisition bolsters Disney’s status as a leader in animation and superhero films and gives it the opportunity to reap huge earnings from the already lucrative Star Wars media and merchandising empire. Disney promised to begin producing and releasing new films in the Star Wars franchise every two or three years. The acquisition even included a detailed script treatment for the next three Star Wars films.
The 68-year old Lucas decided to sell his company after beginning to plan his retirement several years ago. According to Walt Disney Chairman Robert Iger, he and Lucas conducted the negotiations personally, beginning in early 2011. Speaking of Lucas’ decision to hand over his creative legacy to Disney, Iger told the New York Times, “There was a lot of trust there.”
9. Apple and U.S. Book Publishers
On April 12, 2012 the United States Department of Justice (DOJ) sued Apple and five major U.S. publishers for colluding to raise the prices of ebooks. Three of the publishers settled the suit; two others and Apple have been unwilling to settle.
By January 2010, the publishers negotiated a new business model for ebook pricing with Apple as it prepared to launch the iPad: in exchange for a 30% sales commission, Apple would let the publishers set their own prices for ebooks. For the publishers, this pricing model appeared to be a vast improvement on their wholesaling arrangement with Amazon. After at least one of the publishers threatened to delay release of its digital editions, Amazon reluctantly replaced its flat $9.99 price for ebooks with Apple’s model, and prices rose industry-wide to about $14.99 on average.
The DOJ’s lawsuit suggests that the negotiators and attorneys involved may have neglected to thoroughly analyze whether their agreement would truly create value for consumers—and thus whether it fell within the parameters of U.S. antitrust law. In the flush of hammering out a deal that appears to create synergy for everyone involved, negotiators sometimes neglect to consider how their agreement could affect outsiders, an oversight with ethical and legal implications.
8. The Chicago Teachers’ Strike
After being elected mayor of Chicago in February 2011, Rahm Emanuel, President Obama’s former chief of staff, took a series of actions that alienated Chicago schoolteachers, such as rescinding a promised pay raise and lobbying the Illinois state legislature for an education-reform that limited the issues the Chicago Teachers Union (CTU) could negotiate and strike over.
In mid-2012, failed contract negotiations between the CTU and the City of Chicago led to a 10-day strike. The CTU and the school board eventually reached an agreement that provided victories for both sides, including a longer school day and annual teacher raises.
When a conflict looms, it can be tempting to try to make unilateral decisions on key issues for fear that negotiation with the other side will be a dead end. This strategy may pay off in the short term, but it’s important to factor in the long-term cost of a backlash.
7. The Mortgage Foreclosure Settlement
In early February, following months of difficult negotiations, the attorneys general of 49 states and the Obama administration reached a settlement agreement with five of the nation’s largest banks aimed at stabilizing the U.S. housing market and punishing the banks for foreclosure abuses, theNew York Times reports.
Some analysts cheered the agreement as a positive sign that the country was beginning to move on from the housing crisis. But others criticized it for helping only a fraction of affected homeowners. The negotiations reflect the difficulty of balancing multiple goals in complex multiparty talks—a challenge that stronger communication and negotiation within each party could help to resolve.
6. The Chen Guangcheng Crisis
The Obama administration’s powers of diplomacy were put to the test this spring when Chinese dissident Chen Guangcheng made a dramatic escape from house arrest to the American Embassy in Beijing on the eve of the United States and China’s annual negotiations on strategic and economic issues.
Negotiations between U.S. and Chinese officials involving Chen’s fate were conducted under top secrecy, at the Chinese government’s insistence. Only after Chen decided he wanted to leave China for the United States did Secretary of State Hillary Rodham Clinton broach the topic of his fate with her Chinese counterparts, and even then she did so indirectly. Within hours, the Timesreports, the Chinese announced that Chen had been granted permission to study in New York.
“Face is more important in Asian society than any contract,” one senior American officials told theTimes, emphasizing China’s need to keep the sensitive negotiations under wraps and speak only indirectly about Chen. The talks illustrate the potential value of adapting to your counterpart’s negotiating style in international negotiations.
5. Talks with North Korea
Beginning in 2011, the United States negotiated for many months with the erratic, secretive leadership of North Korea. The drawn-out talks began in the era of Kim Jong-il and, after his death, resumed under the new regime of his son Kim Jong-un.
On February 29, the countries announced an agreement in which North Korea promised to freeze its enriched-uranium weapons program and its long-range-missile activities in exchange for large amounts of U.S. food aid. But just 17 days later, North Korea sabotaged the deal by announcing plans to launch a satellite using a long-range missile. On April 13, North Korea launched its rocket, which exploded in midair.
When dealing with untrustworthy counterparts, it can be worthwhile to negotiate a “test” agreement within which you make only a few concessions, but be sure the consequences of reneging are explicit to the other party. Prepare for the potential consequences of a broken deal, including damage to your reputation.
4. Iran’s Nuclear Option
In a White House meeting on March 5, Israeli Prime Minister Benjamin Netanyahu expressed skepticism that international pressure will succeed in convincing Iran’s leaders to halt the country’s nuclear program. Netanyahu reportedly told President Barack Obama that the West should not reopen negotiations with Iran until it agreed to suspend its uranium enrichment activities, according to the New York Times.
Obama is said to have disagreed, saying this condition would doom talks from the start. He urged Netanyahu to give economic sanctions and diplomacy a chance to work before considering military action. Meanwhile, some Republicans expressed impatience with the notion that U.S. negotiations with Iran could be effective.
Instead of writing off a negotiation with someone you deem to be evil, irrational, or unethical on principle, advises Program on Negotiation chair Robert Mnookin, thoroughly analyze the decision regarding whether to negotiate, including the potential costs and benefits. Examine factors such as your interests, the other side’s interests, your alternatives to the negotiation, the shape of a potential deal, the various costs you might incur, and the likelihood that you can successfully follow through on a deal.
3. The European Debt Crisis
On June 5, another casualty in the European debt crisis emerged, as Spain announced that it soon would be unable to borrow in the bond market without assistance from other European Union nations. Spain’s announcement launched unofficial negotiations over a deal to rescue the nation’s banks. As the euro zone’s fourth-largest economy, Spain was considered too big too fail. By demanding emergency aid for its banks, Spain tried to avoid the austerity measures and deep recessions faced by smaller nations such as Greece, Portugal, and Ireland.
Spain’s banking crisis underscores how the European Union has lurched from one crisis negotiation to the next. “The strategy of plugging holes only works for so long,” Friedrich Mostböck, chief economist and head of research for the Erste Group in Vienna, told the Times. “Eventually, you come to the point where a common euro area requires a common fiscal policy.”
This lack of a unified, guiding fiscal policy gave Spain and other troubled countries negotiating power—possibly at the expense of the broader European economy. The situation illustrates the value of establishing ground rules and policies before a crisis hits to make sure that you are playing on a level, fair field.
2. The Conflict in Syria
On August 2, former U.S. secretary general Kofi Annan announced he was resigning as the special peace envoy of the United Nations and the Arab League to the conflict in Syria. The peaceful uprising against President Bashar Assad that began in early 2011 has since exploded into a civil war.
Annan had negotiated a proposal that called for the Syrian government to withdraw heavy weapons and troops from populated areas and for opposition fighters to disarm. The proposal also detailed a process for political transition that included replacing Assad. Assad vowed to abide by the peace plan, but his government never took steps to implement it; nor did the rebels put down their weapons.
Annan had received unanimous backing from the U.N. Security Council, but Russia and China, which had veto power, opposed additional coercive measures that might have imposed a change of government by outside powers or foreign military intervention. The United States, Britain, and France clashed with Russia and China on the issue.
Insufficient pre-negotiation with Security Council members prior to the drafting of Annan’s proposal may have contributed to the international conflict over the terms of the deal and its implementation. Annan’s resignation underscores the importance of securing a mandate to negotiate from one’s constituents before engaging in a significant negotiation or conflict-resolution effort.
1. The Fiscal Cliff
Soon after his reelection, Obama signaled some flexibility on the issue of whether tax rates for affluent Americans should go up as part of a negotiated plan with Congressional Republicans to reduce the deficit and avoid the “fiscal cliff.” But weeks later, Obama did an about face, saying he would insist on higher tax rates for on top earners.
Many Republicans in Congress have said they would not support a tax increase for any Americans. In early December, however, some Republican leaders reportedly were weighing a “fallback position”—legislation to extend middle-class tax cuts while delaying more difficult negotiations over spending and taxes until late January or February 2013.
The Republicans’ search for a compromise reflects their relatively weak BATNA, or best alternative to a negotiated agreement, as compared to that of the Democrats. Polls suggest most Americans supported tax increases for the top 2% and would blame Republicans more than Democrats if the country went over the fiscal cliff. Moreover, the cliff itself was a better BATNA for Congressional Democrats than for their Republican counterparts, as the spending cuts and Clinton-era tax codes that would be triggered are less onerous to Democrats than Republicans.
In their most important negotiations, business negotiators would be wise to spend a great deal of time thinking about what would happen in the event of impasse in the current negotiation—and looking for ways to make their BATNA better.
I especially liked the strategies used in #6. The Chen Guangcheng Crisis and 5. Talks with North Korea
Top 10 Negotiation Stories of 2012
December 21, 2012
Edited by: PON_Staff, filed in: Negotiation Skills
Edited by: PON_Staff, filed in: Negotiation Skills
|
Here’s a recap of some of the most interesting and challenging negotiations of 2012 – some of which are ongoing:
10. Disney’s Purchase of Lucasfilm
On October 30, the Walt Disney Company made a surprise announcement that it was acquiring Lucasfilm, home of the immensely successful Star Wars brand, from its founder, George Lucas, for $4.05 billion, split evenly between stock and cash. Lucas is the sole shareholder in his company.
The acquisition bolsters Disney’s status as a leader in animation and superhero films and gives it the opportunity to reap huge earnings from the already lucrative Star Wars media and merchandising empire. Disney promised to begin producing and releasing new films in the Star Wars franchise every two or three years. The acquisition even included a detailed script treatment for the next three Star Wars films.
The 68-year old Lucas decided to sell his company after beginning to plan his retirement several years ago. According to Walt Disney Chairman Robert Iger, he and Lucas conducted the negotiations personally, beginning in early 2011. Speaking of Lucas’ decision to hand over his creative legacy to Disney, Iger told the New York Times, “There was a lot of trust there.”
9. Apple and U.S. Book Publishers
On April 12, 2012 the United States Department of Justice (DOJ) sued Apple and five major U.S. publishers for colluding to raise the prices of ebooks. Three of the publishers settled the suit; two others and Apple have been unwilling to settle.
By January 2010, the publishers negotiated a new business model for ebook pricing with Apple as it prepared to launch the iPad: in exchange for a 30% sales commission, Apple would let the publishers set their own prices for ebooks. For the publishers, this pricing model appeared to be a vast improvement on their wholesaling arrangement with Amazon. After at least one of the publishers threatened to delay release of its digital editions, Amazon reluctantly replaced its flat $9.99 price for ebooks with Apple’s model, and prices rose industry-wide to about $14.99 on average.
The DOJ’s lawsuit suggests that the negotiators and attorneys involved may have neglected to thoroughly analyze whether their agreement would truly create value for consumers—and thus whether it fell within the parameters of U.S. antitrust law. In the flush of hammering out a deal that appears to create synergy for everyone involved, negotiators sometimes neglect to consider how their agreement could affect outsiders, an oversight with ethical and legal implications.
8. The Chicago Teachers’ Strike
After being elected mayor of Chicago in February 2011, Rahm Emanuel, President Obama’s former chief of staff, took a series of actions that alienated Chicago schoolteachers, such as rescinding a promised pay raise and lobbying the Illinois state legislature for an education-reform that limited the issues the Chicago Teachers Union (CTU) could negotiate and strike over.
In mid-2012, failed contract negotiations between the CTU and the City of Chicago led to a 10-day strike. The CTU and the school board eventually reached an agreement that provided victories for both sides, including a longer school day and annual teacher raises.
When a conflict looms, it can be tempting to try to make unilateral decisions on key issues for fear that negotiation with the other side will be a dead end. This strategy may pay off in the short term, but it’s important to factor in the long-term cost of a backlash.
7. The Mortgage Foreclosure Settlement
In early February, following months of difficult negotiations, the attorneys general of 49 states and the Obama administration reached a settlement agreement with five of the nation’s largest banks aimed at stabilizing the U.S. housing market and punishing the banks for foreclosure abuses, theNew York Times reports.
Some analysts cheered the agreement as a positive sign that the country was beginning to move on from the housing crisis. But others criticized it for helping only a fraction of affected homeowners. The negotiations reflect the difficulty of balancing multiple goals in complex multiparty talks—a challenge that stronger communication and negotiation within each party could help to resolve.
6. The Chen Guangcheng Crisis
The Obama administration’s powers of diplomacy were put to the test this spring when Chinese dissident Chen Guangcheng made a dramatic escape from house arrest to the American Embassy in Beijing on the eve of the United States and China’s annual negotiations on strategic and economic issues.
Negotiations between U.S. and Chinese officials involving Chen’s fate were conducted under top secrecy, at the Chinese government’s insistence. Only after Chen decided he wanted to leave China for the United States did Secretary of State Hillary Rodham Clinton broach the topic of his fate with her Chinese counterparts, and even then she did so indirectly. Within hours, the Timesreports, the Chinese announced that Chen had been granted permission to study in New York.
“Face is more important in Asian society than any contract,” one senior American officials told theTimes, emphasizing China’s need to keep the sensitive negotiations under wraps and speak only indirectly about Chen. The talks illustrate the potential value of adapting to your counterpart’s negotiating style in international negotiations.
5. Talks with North Korea
Beginning in 2011, the United States negotiated for many months with the erratic, secretive leadership of North Korea. The drawn-out talks began in the era of Kim Jong-il and, after his death, resumed under the new regime of his son Kim Jong-un.
On February 29, the countries announced an agreement in which North Korea promised to freeze its enriched-uranium weapons program and its long-range-missile activities in exchange for large amounts of U.S. food aid. But just 17 days later, North Korea sabotaged the deal by announcing plans to launch a satellite using a long-range missile. On April 13, North Korea launched its rocket, which exploded in midair.
When dealing with untrustworthy counterparts, it can be worthwhile to negotiate a “test” agreement within which you make only a few concessions, but be sure the consequences of reneging are explicit to the other party. Prepare for the potential consequences of a broken deal, including damage to your reputation.
4. Iran’s Nuclear Option
In a White House meeting on March 5, Israeli Prime Minister Benjamin Netanyahu expressed skepticism that international pressure will succeed in convincing Iran’s leaders to halt the country’s nuclear program. Netanyahu reportedly told President Barack Obama that the West should not reopen negotiations with Iran until it agreed to suspend its uranium enrichment activities, according to the New York Times.
Obama is said to have disagreed, saying this condition would doom talks from the start. He urged Netanyahu to give economic sanctions and diplomacy a chance to work before considering military action. Meanwhile, some Republicans expressed impatience with the notion that U.S. negotiations with Iran could be effective.
Instead of writing off a negotiation with someone you deem to be evil, irrational, or unethical on principle, advises Program on Negotiation chair Robert Mnookin, thoroughly analyze the decision regarding whether to negotiate, including the potential costs and benefits. Examine factors such as your interests, the other side’s interests, your alternatives to the negotiation, the shape of a potential deal, the various costs you might incur, and the likelihood that you can successfully follow through on a deal.
3. The European Debt Crisis
On June 5, another casualty in the European debt crisis emerged, as Spain announced that it soon would be unable to borrow in the bond market without assistance from other European Union nations. Spain’s announcement launched unofficial negotiations over a deal to rescue the nation’s banks. As the euro zone’s fourth-largest economy, Spain was considered too big too fail. By demanding emergency aid for its banks, Spain tried to avoid the austerity measures and deep recessions faced by smaller nations such as Greece, Portugal, and Ireland.
Spain’s banking crisis underscores how the European Union has lurched from one crisis negotiation to the next. “The strategy of plugging holes only works for so long,” Friedrich Mostböck, chief economist and head of research for the Erste Group in Vienna, told the Times. “Eventually, you come to the point where a common euro area requires a common fiscal policy.”
This lack of a unified, guiding fiscal policy gave Spain and other troubled countries negotiating power—possibly at the expense of the broader European economy. The situation illustrates the value of establishing ground rules and policies before a crisis hits to make sure that you are playing on a level, fair field.
2. The Conflict in Syria
On August 2, former U.S. secretary general Kofi Annan announced he was resigning as the special peace envoy of the United Nations and the Arab League to the conflict in Syria. The peaceful uprising against President Bashar Assad that began in early 2011 has since exploded into a civil war.
Annan had negotiated a proposal that called for the Syrian government to withdraw heavy weapons and troops from populated areas and for opposition fighters to disarm. The proposal also detailed a process for political transition that included replacing Assad. Assad vowed to abide by the peace plan, but his government never took steps to implement it; nor did the rebels put down their weapons.
Annan had received unanimous backing from the U.N. Security Council, but Russia and China, which had veto power, opposed additional coercive measures that might have imposed a change of government by outside powers or foreign military intervention. The United States, Britain, and France clashed with Russia and China on the issue.
Insufficient pre-negotiation with Security Council members prior to the drafting of Annan’s proposal may have contributed to the international conflict over the terms of the deal and its implementation. Annan’s resignation underscores the importance of securing a mandate to negotiate from one’s constituents before engaging in a significant negotiation or conflict-resolution effort.
1. The Fiscal Cliff
Soon after his reelection, Obama signaled some flexibility on the issue of whether tax rates for affluent Americans should go up as part of a negotiated plan with Congressional Republicans to reduce the deficit and avoid the “fiscal cliff.” But weeks later, Obama did an about face, saying he would insist on higher tax rates for on top earners.
Many Republicans in Congress have said they would not support a tax increase for any Americans. In early December, however, some Republican leaders reportedly were weighing a “fallback position”—legislation to extend middle-class tax cuts while delaying more difficult negotiations over spending and taxes until late January or February 2013.
The Republicans’ search for a compromise reflects their relatively weak BATNA, or best alternative to a negotiated agreement, as compared to that of the Democrats. Polls suggest most Americans supported tax increases for the top 2% and would blame Republicans more than Democrats if the country went over the fiscal cliff. Moreover, the cliff itself was a better BATNA for Congressional Democrats than for their Republican counterparts, as the spending cuts and Clinton-era tax codes that would be triggered are less onerous to Democrats than Republicans.
In their most important negotiations, business negotiators would be wise to spend a great deal of time thinking about what would happen in the event of impasse in the current negotiation—and looking for ways to make their BATNA better.
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