Midwestern Contemporary Art Dispute

     In the dispute over whether Peter Smith should be held accountable in honoring his pledge of $5,000,000 to the Midwestern Contemporary Art Museum, I chose to review the Three Approaches Model when analyzing negotiations.  In the 1980s, Peter Smith joined the MCA board for his love of art collecting.  He and his wife donated lots of money to better the museum and continue their passion of art collecting.  Later, Peter was elected board chairman devoted almost all his time to the MCA.  The dispute began after hiring Keith Schmidt, the executive director, who was very experienced in his field.  Keith had great plans to grow the museum, however Peter was more conservative, and Keith was very ambitious.  Even though both were passionate about the museum, they would argue over how the museum was run and how to spend money.  It seems that Peter would try to control Keith by micromanaging him instead of allowing him to do what he was hired to do.  Keith had great success with other museums and had already proven himself before coming onboard with MCA.  Keith has an entrepreneurial approach with an aggressive way of doing things, and he wanted MCA to be the greatest museum in the Midwest and wanted to expand it rapidly.    On the other hand, Peter had a more reserved way of handling things.  He was more concerned with costs and not taking risks, and this caused a conflict over who had the power.  In 1991, the board voted and the majority favored in Keith's aggressive plans.  Peter was quite upset and left the museum, and the board hired a new chairperson.  After Peter left the museum, he did not honor a $5,000,000 pledge he had made to the museum.  The challenge the museum was facing was the Financial Accounting Standards Board (FASB) had recently changed the rules, and nonprofit organizations now had to claim all pledges before they are honored.  So if a donor reneges or their pledge for any reason, the nonprofit organization still must claim that pledge.  Years before leaving MCA, Peter made a pledge to build a new facility, and now that the FASB rules have changed, the pledge is now legally binding.  In turn, the MCA had to become tough in collecting pledges.  The MCA board must decide whether to take legal action against Peter and his wife Catherine Smith.  Also, Peter was recently diagnosed with terminal cancer and may now need the funds for medical treatment.  In deciding whether to file a lawsuit or not, I decided to examine the Three Approaches Model to try and formulate a recommendation.  These three approaches to resolving disputes involve interests, rights, and power.  Although Peter and Keith had the same interests, and each had the right to do their job as best as they could, the struggle was over who had the power.  This is what led to the board voting and eventually going with Keith's plan.  If both parties would have been more focused on their interests, they may have been able to produce a more satisfactory outcome for both parties.  These may have resulted in better working relationships rather than Peter leaving and not honoring his pledge.  Sadly, it did not work out this way, so now MCA needs to make a decision on whether to file a lawsuit.  In general, an interests approach is less costly than a rights or power approach, and a rights approach is less costly than a power approach. Few disputes are resolved through reconciling interests or know as the Effective System, while many more are resolved through determining rights and power known as the Distressed System.  MCA could negotiate with an interest approach by reaching out to the Smith family before filing a lawsuit and try to resolve the matter that satisfies both parties interests.  If no resolution is made, the next step would be the rights approach.  Before the FASB changes, Peter had the right to not honor his pledge even though it's not morally right.  However, since the FASB changes, the MCA now has the right to collect even though it may not be morally right since Peter is now terminally ill.  If a lawsuit is filed, a power approach may legally bind Peter to honoring his pledge, and this may also cause others to be hesitant about future donations.  The tough question to be answered would be, does Peter have the power to not honor his pledge since the MCA was not run according to his plan?  Or does the MCA have the power to collect the pledge toward what was promised for a planned new building for the museum?  It is quite obvious the power approach is definitely more costly and distressing for everyone involved.  This is a perfect example of why the interest approach would be the best approach when negotiating.