The Negotiation Process Exhibit 14-5 The Negotiation Process Preparation and planning Definition of ground rules Clarification and justification Bargaining and problem solving Closure and implementation Preparation and planning: assess what you think are the other party's goals consider your relationship with the other party develop a strategy, know how the other party will respond to any given situation determine your and the other side's best alternative to negotiated agreement, or BATNA BATNA: the best alternative to a negotiated agreement; the least the individual should accept. Definition of ground rules: define with the other party what the ground rules will be, the procedures of the negotiation itself. Who will do the negotiating? Where will it take place? What time constraints will apply? The parties will exchange their initial proposals or demands Clarification and justification: opportunity to explain, amplify, clarify, bolster, and justify your original demands opportunity to educate each other on issues, explain why they are important, and explain how you arrived at your initial demands. provide documentation to support your position Bargaining and problem solving: give-and-take in trying to hash out an agreement both parties need to make concessions/compromises Closure and implementation formalize your agreement and develop procedures for implementing and monitoring it Formal: hammering out the specifics in a formal contract Informal: handshake 284 MINI CASE WIN-LOSE NEGOTIATION TACTICS LEAD TO CORPORATE HUMILIATION Conflict that takes place within an organization can quickly make its way outside the organiza- tion, leading to public embarrassment and brand diminishment. This reality hit home for Premier Tech (PT) and its controlling shareholder Gestion Bernard Belanger (GBB) in July 2015 when the Quebec Court of Appeal dismissed their appeal and supported an earlier court decision related to their former executive Christian Dollo. Christian had engaged in a lengthy and ulti- mately successful legal battle to win back $2,000,000 worth of stock options. The options had been lost when he was terminated, a termination deemed unjust and problematic by the courts. The situation developed in early 2001. Christian Dollo was a senior executive in a PT subsidiary and his compensation package included significant stock options. Between 2001 and 2010 he was granted and he vested over 200,000 options. In 2007, the company reverted from a publicly traded to a private corporation; however, this did not impact his options. In fact, it seemed like a wise decision. The company succeeded as a private entity. The stock tripled in value in the three years (between 2007-2010), such that Christian's shares were worth almost $2,000,000 by 2010. He expected the trend to continue and intended to hold onto his options for the long term, seeing them as contributing to his eventual retirement. Christian's financial future was top of mind for him in 2010; he was going through a divorce and focused on division of assets. As part of that process he reviewed his stock option plan, and was surprised and chagrined to find a clause stipulating that termination for any reason would result in a loss of all stock options even if the termination was not for Part 6 Leading, Understanding, and Transforming the Organization System cause. Concerned, Christian contacted PT's CEO and CFO, to whom he reported. Both provided assurances they would never fire him without also permitting him to keep his options. But the fact that the written regulations stated something different continued to make Christian very uncomfortable. Weeks later, he made a formal request to have the written clause changed. Once again, his concerns were dismissed. The regulations remained unchanged. Christian left for a brief vacation still very worried. On his return he was called into another meeting with the PT CEO at which he was fired and offered a severance package. When he asked about stock options, the CEO would not answer him. He later discovered that his options had been rescinded. He wrote to the board of directors to make a formal complaint and request that the options be reinstated. They flatly refused without making a counteroffer or engaging in negotiations. However, this decision represented a clear conflict of interest: it had been made on the basis of legal advice provided by the law firm representing GBB, the majority shareholder in PT. Paying out the options would have significant financial repercussions for GBB. Upset by what he perceived as unfair treatment, Christian launched a suit before the Superior Court. He argued that he was terminated without cause, that the provision with- drawing options upon termination was abusive, and furthermore that he had been inten- tionally misled about its applicability to his situation. Christian also argued that the board members had acted in bad faith in relying on a legal opinion that they should have known was biased. Justice Clement Samson agreed, on all counts. His employer was required to allow Christian to sell his stock options and take his profits. He was also awarded interest on the sales price, since the court proceedings had delayed the sale. Both GBB and PT filed appeals, neither successful. In fact, all the appeals did was highlight the many procedural errors they had made along the way, most notably at the board-of-directors level. It is too early to fully assess the costs of this fiasco for GBB and PT. There are direct costs associated with providing the stock options and paying court costs, but there are also indirect costs. The company has gotten a reputation for being abusive and untrustworthy. This reputation will impact everything from consumer perceptions to the calibre of candi- dates they can attract for future executive roles. They have also acquired a reputation as manipulative and unwilling to negotiate in good faith. The ramifications of that image in the public eye remain to be seen.