March 20, 2012
Background The present paper reviews a case study as written by Lewicky, Saunders and Barry in the text Negotiations titled Midwestern::Contemporary Art, case number 6. Its focus is on a financial crisis that the museum is facing due to a donors failure to pay a five million dollar pledge. The donor was the museums previous president of the board of directors who had a falling out with the museum director over financial matters and felt minimized by the lack support by board members. The museum is in the process of completing a major capital project and faces the near term possibility of bankruptcy if the pledge is not fulfilled.
Results Legal counsel for the museum recommends suing to collect the funding but that strategy presents several negative outcomes. First is that there are very few cases where a museum has sued a donor successfully so this is not a tested option and even if they were successful, collecting the amount awarded by the court may prove very difficult. Secondly, it raises the likelihood of creating negative public relations that could adversely affect future contributions. Lastly, some of the board members are opposed to this idea. Another course of action is to enter in to negotiations to secure the funding. The current president of the board must decide on a course of action to obtain the necessary funding and unite the board in a functional manner. Conclusions A renewed focus on the future relationship between this donor and the MCA needs to be forged through skilled negotiations in a way that will benefit everyone involved. The legal route should not be the first course of action for the MCA to obtain the five million dollar pledge. The board should first try to implement a well planned negotiation strategy to include the legal option as the BATNA. Situation.
The Midwestern Contemporary Art (MCA) Museum opened in 1976 and is devoted to modern art. In January of 1989 the MCA hired Keith Schmidt as executive director, and due to his extensive experience much was expected of him. That same year a reputable lawyer from the area named Peter Smith was selected as the board president. He had been a board member since 1981 and was an avid collector of contemporary art along with his wife. Together they had acquired the largest art collection of this type in the Great Lakes area.
Peter Smith and Keith Schmidt had very different leadership styles and it led to disagreements on how to expand and grow the MCA. These arguments often became personal and led to animosity and mistrust. Most of their arguments had to deal with the speed of MCA’s expansion, which was pushed by Keith Schmidt. Peter Smith was more concerned about the finances and did not trust that Schmidt could operate the museum in the black. Smith presented his concerns about Schmidt to the other board members but they didn’t share the same feelings of mistrust since Mr. Schmidt’s performance had not proven deficient so far. Due to problems between the two men, Peter Smith resigned from the board in December 1991.
The Smiths disappeared from the art scene at the end of 1991 and missed all payments on their $5 million pledge to the MCA. This became a problem because the MCA was planning on constructing a new building. The Smiths’ pledge was a significant amount and the new MCA facilities completion depended on their pledge. Also, the Financial Accounting Standards Board (FASB) required all non-profit organizations to record pledges as income so the MCA had already accounted for the money. This caused an even more financial hardship on the museum, and in late 1997, MCA found itself in a financial crisis due to high debt resulting from the construction and the Smiths’ unfulfilled pledge. The current board director is Peggy Fischer and she has just finished a meeting with the board to discuss the possibility...