financial issuesaccounting law changes ” forced many nonprofit organizations … B u s i n e s s F i n a n c e

I need 1 page, double spaced, explaining the issue, position, interest, and BATNA of Peggy Fischer from a negotiation case. Below is the overview of the case to get context from:

By 1997, Midwestern:: Contemporary Art Museum (MCA) was in a precarious financial position. In an ambitious undertaking, they are in the midst of an aggressive expansion project that could make MCA one of the largest Art Museum’s in the Midwest. However, the high debt load due to the construction costs and specifically the unfulfilled $5 Million dollar pledge, reported already as income, from Peter and Catherine Smith must be remedied immediately. The Board of Directors has tasked the new Chair of the Board, Peggy Fischer, to resolve the $5 Million payment promise from Peter Smith.

This conversation is extremely delicate and Peggy faces several major hurdles in reaching a payment resolution. Six (6) years have passed since the promise was made and the Smith’s have other personal financial obligations. Peter (a 10 year board member) hastily left the Board immediately after losing a BOD vote to his biggest internal adversary (MCA Director, Keith Schmidt), amidst concerns about rapid expansion plans specifically. In fact the Smiths’ ended all communication, volunteer activities and donations with the Midwestern:: Contemporary Art Museum (MCA) abruptly, and disappeared from the art scene entirely after the disagreement in 1991. We believe that with the right and considerate approach, Peggy can negotiate and secure a creative and mutually beneficial settlement with options that are in each parties best interest.

“By opening yourself up to consideration of a multitude of options, you may generate new possibilities, one of which might meet your interests while also satisfying the other side’s.” (Prepare, Prepare, Prepare Pg. 20)

Timeline of history leading up to the overview…

• Peter Smith
  • 1981: joins board of trustees
  • 1989: elected board chairman
  • 1991: Peter quits after conflict with Keith, replaced by Avery Truman
• Keith Schmidt
  • 1989: hired as executive director
• Peter vs Keith conflict
  • “Intense debates at board meeting … Heated arguments occurred over the direction and speed of the MCA’s expansion” (674).
  • Tension around financial decisions.
    • POV from John Stuart (other board member) that Keith was response with financial matters even if he didn’t agree with Peter (675).
    • Keith makes aggressive (but effective) decisions
  • 1991: board votes on whose guidance to go with (Peter’s conservative policy or Keith’s expansion plans). Group goes with Keith. Peter quits and board elects a new board member (675).
• Peggy Fischer
  • 1997: becomes chairman (6 months after new MCA facility is opened)
  • Learns about MCA being in financial trouble for not honoring a pledge they’d made, as promised by Peter Smith.
• Financial Issues
  • Accounting law changes ”forced many nonprofit organizations… to record pledges as income at the time of pledge” (677)
  • Late 1997: pledge hasn’t been paid and MCA is in financial crisis
  • Peggy seeks advice on how to handle, and chief counsel suggests legal action against Peter Smith
    • “In 1990, Peter Smith made a written pledge on behalf of himself and his wife” + more detail about legal bind and building the new facility because of this pledge money (677)
      • Agreement from other board members who worry about how things will get paid for if without this money
    • Other POV from board member to not take legal action (expensive legal fees and bad public behavior for being greedy) (678)
  • Peggy is concerned about finances, but also about losing a lawsuit + more uncomfortable based on the health of Peter and Catherine Smith

The following is the outline of how this paper section explaining Peggy’s negotiation strategy towards Peter must be articulated upon:

• Peggy Fischer, representing the MCA
  • Interests
    • Financial security, good MCA press and publicity
  • Issues
    • Get the money in the best / quietest / most peaceful way possible
    • Avoid any counter action from the city because of the laws around pledge funds (Peter was right about being financially conservative in hindsight)
      • How could Peter be included in the business to help them be successful → is this mutually beneficial for both MCA and Peter to acknowledge
      • Peggy leading with “Peter, you were right, and we’re in trouble / I’m getting a lot of pressure to file suit” + we’ll name the museum after you-type offer
  • Positions
    • Recoup the money as best as possible, to both get out of trouble with all FASB pledge contracts they previously signed AND to recoup money that was spent on building
  • BATNA
    • Collect some of the funds from Peter, if not all $5 million (enough to recoup money that’s been spent because they thought $5 million was coming)