Strong Bargaining Position Research Articles

The Strategic Use of CEO Compensation in Labor Contract Negotiations

We find evidence that labor unions affect CEO compensation. First, we find that firms with strong unions pay their CEOs less. The negative effect is robust to various tests for endogeneity, including cross-sectional variations and a regression discontinuity design. Second, we find that CEO compensation is curbed before union contract negotiations, especially when the compensation is discretionary and the unions have a strong bargaining position. Third, we report that curbing CEO compensation mitigates the chance of a labor strike, thus providing a rationale for firms to pay CEOs less when facing strong unions.

Are sovereign wealth funds “white knights”?

PurposeIn the continuing credit squeeze, sovereign wealth funds (SWFs) are still active in international lending and are eagerly sought out by large, cash‐strapped companies in the West. The purpose of this paper is to examine their nature and strategies before and after the onslaught of the credit crunch and global economic downturn in order to advise corporates on how best to design their strategies and terms in approaching the SWFs for funds.Design/methodology/approachAn analysis is made of SWFs in their dealings with Western corporate borrowers and a case study made of Barclays Bank which, faced with three major options in 2008 to raise a large amount of cash, chose to attract funding from three Gulf SWFs.FindingsSWFs certainly qualify as lenders of last resort (“white knights”), providing ready loans, albeit on premium terms, at a current time of severely restricted credit supply from other sources. Alternative sources of funds – stockholders and government bail‐out – also suffer from disadvantages relating to the characteristics of their loans.Practical implicationsCorporate borrowers should currently view SWFs as attractive “white knight” sources of loans when other providers are constrained. The analysis in this paper, including the experience of a major borrower, Barclays Bank, suggests that SWFs are demanding tougher terms as a result of their strong bargaining positions and historical losses, and that companies should tailor SWF loan contracts to contain maximum incentives and safeguards to produce successful results.Originality/valueThis is the first paper to analyse the new role and strategies of SWFs in the credit crisis context, as well as the required response of cash‐strapped companies seeking loans from them.

Mining to profit Africa’s people

Mineral-rich countries in Africa enjoyed a mining boom between 2002 and 2007 as metal and oil prices nearly tripled. Companies competed furiously for new mines to meet growing world demand. As a result, a number of African nations found themselves in a much stronger bargaining position with foreign investors, who previously were able to demand—and get—huge breaks before they would invest. Now governments could strike better deals with new investors, and even renegotiate old mining contracts. “We just want to make sure that we are getting the best [deal] for our deposits,” Alhaji Abubakarr Jalloh, Sierra Leone’s minister of mines, said in September 2007.

SETTING PRINCIPLES FOR LEGISLATION

ON FEB. 3, key Democratic senators put forth principles for legislation that they say will give the U.S. greater leverage in upcoming global negotiations on a new climate-change treaty. Sen. Barbara Boxer (D-Calif.), who chairs the Senate Environment & Public Works Committee, expects to introduce a bill based on the principles in coming weeks. Supporting the principles that Boxer drafted are the nine other Democrats and one Independent on the panel. Boxer pledged that her committee would finalize the global-warming measure by the end of the year. By having legislation in hand detailing how the U.S. will reduce its greenhouse gas emissions, the Obama Administration will have a stronger bargaining position at upcoming international climate talks, said Sen. Amy Klobuchar (D-Minn.), a member of Boxer’s committee. Negotiations on a new international pact to combat global warming are scheduled to conclude in December. Boxer’s broad principles are the basis for the political horse-trading that will shape ...

Urgensi Perlindungan Hak-hak Konsumen Dalam Transaksi Di E-Commerce

The change of transaction method in business, which was previously real in character but change into virtual transaction, causing some new legal problems in trade transaction, particularly for consumer protection. Protection for consumer is needed because the consumers have not strong bargaining position. The legal protection of consumer’s rights in global e-commerce not only regulated by one legal aspect, but needs set of legal system which able to give simultaneous and comprehensive protection. Therefore, legal protection for consumer must be performed by using international approach through legal harmonisation dan cooperation between law officer intitutions.

Resource Dependency, Costs and Revenues of a Street Festival

The financial position of a tourism-oriented street festival in Sweden is examined within the context of resource dependency and stakeholder management theory, focused on testing two hypotheses derived from this theoretical base. Data from a five-year period revealed how costs associated with the strongest stakeholders (that is, with the greatest bargaining power) greatly increased relative to costs associated with weak stakeholders. The festival was also more able to increase its revenues from weak stakeholders than from those in strong bargaining positions. Conclusions are drawn on how this case confirms and elaborates upon theory, particularly by applying it to the festival sector. Management implications are also drawn on how festival organizations should manage relationships when they hold strong or weak positions relative to stakeholders.

Safeguarding Specific Investments in Real Estate Purchases

This paper deals with real estate sale contracts between private actors. During contracting which proceeds incrementally, parties cannot ex ante fully determine the "price" of the exchange, because they usually lack the information to do so. Therefore; if the buyer commits himself to buy, he necessarily has to rely on the seller's reciprocal commitment to sell when he specifically invests his resources in the further development of the contracting process. In this context, the seller is in a stronger bargaining position, as he not only has the real estate, but also all the relevant information, on the basis of which the potential buyer grounds his acquisition decision. On the other hand, compared to the seller, the buyer is more vulnerable towards opportunistic behaviour, as he necessarily has to undertake highly specific investments in the preliminary phase, in order to be in the position of making an informed decision. Due to the asymmetry of specific investments in the pre-contractual phase, the weak contractual party has to face, at most, the risk of being subjected to the typical hold-up problem, as the stronger contractual party might have an incentive to exploit the bilateral dependence in order to expropriate the rents accruing to the specific assets. All these sets of circumstances are generally perceived as a 'bundle of complexity' which can lead to serious difficulties in the bargaining as well as the contract formation processes, hindering parties from making rational decisions based on cost-benefit analysis. This article wants to compare the usual real estate purchase procedures in Italy and Germany, pointing out efficiency traps in the course of such transactions, and especially focusing on pre-contractual bargaining situations in which parties have specifically invested their resources. It further argues that the danger of opportunism arises especially during the preliminary negotiation of agreements, and should be considered to be directly proportional to the degree of asymmetry among parties' initial transaction-specific investments.

FISCAL INDULGENCE IN CENTRAL EUROPE: LOSS OF THE EXTERNAL ANCHOR?

ABSTRACTIn recent years, fiscal performance in Central Europe has steadily deteriorated, in contrast to the improvement in the Baltics. This paper explores the determinants of such differences among countries on the path to European Union (EU) accession. Regression estimates suggest that economic and institutional fundamentals do not provide a full explanation. An alternative explanation lies in the political economy of the accession process, and a game‐theoretic model illustrates why a country with a stronger bargaining position might have an incentive to deviate from convergence to the Maastricht criteria. The model generates alternative fiscal policy regimes – allowing for regime shifts – depending on country characteristics and EU policies.

Political Bias and War

We examine how countries' incentives to go to war depend on the “political bias” of their pivotal decision makers. This bias is measured by a decision maker's risk/reward ratio from a war compared to that of the country at large. If there is no political bias, then there are mutually acceptable transfers from one country to the other that will avoid a war in the presence of commitment or enforceability of peace treaties. There are cases with a strong enough bias on the part of one or both countries where war cannot be prevented by any transfer payments. Our results shed some new light on the uneven contender paradox and the interpretation of the “democratic peace.” We examine countries' choices of the bias of their leaders and show that when transfers are possible, at least one country will choose a biased leader, as that leads to a strong bargaining position and extraction of transfers. (JEL D72, D74)

Subsidiary Initiative in Indian Software Subsidiaries of MNCs

In this paper, the author investigates intrapreneurship in software subsidiaries of multinational corporations in India using an analogous concept—subsidiary initiative— that has been used in the international business literature. Subsidiary initiative is a discrete, proactive undertaking by an operational unit situated outside the home country that advances a new way for the corporation to use or expand its resources. Based on an analysis of published case studies written on the Indian software subsidiaries of Motorola, Philips, and Siemens, the author finds that subsidiary initiative played a visible role in obtaining business at the early stages of the subsidiary�s evolution when organizational credibility was lacking and the liability of the country of origin had to be overcome. Subsidiary initiative is also critical if the subsidiary wishes to reposition itself in its market, i.e., in the network of the multinational parent. Barriers to subsidiary initiative include the following: administrative heritage of the subsidiary difficulties in the evaluation of business potential lack of funds to develop new capabilities the attrition of qualified people. Moving to a higher position on the value curve is impeded by the nature of past relationships with internal customers and the strong bargaining position of these customers. These barriers are accentuated by asymmetries in the flexibility allowed to product divisions and subsidiaries. High levels of subsidiary initiative are associated with low levels of integration and high levels of autonomy. This is contrary to earlier research done on multinational subsidiaries in the developed country context. The author proposes that the explanation for this contrast lies in the different contexts in which these subsidiaries operate. Specifically, subsidiary initiative in the Indian context is an outcome of subsidiary managers seeking to cope with the environment in which they operate.The distinctive features of this environment include: the pressure of retaining and motivating engineers with multiple career options pressures from the media and wider social expectations a desire to control one�s destiny when there is a realization that India�s time has come. The author also finds a new trend in the organizational arrangements of software subsidiaries within multinationals in that some multinational parents are allowing subsidiaries to chart their own destiny in return for dilution of a part (or whole) of their stake in the subsidiary. Based on this trend, he proposes a new model titled ‘Competitiveness for Growth Opportunities’ for the subsidiary-parent relationship to replace the existing ‘Loyalty for Security in the MNC Network’ model. In conclusion, the author argues that more multinational corporations will have to shift to this new model to achieve the level of agility required to compete in an era of rapid changes in technology and enhanced competition.

Sell the Plant? The Impact of Contract Manufacturing on Innovation, Capacity, and Profitability

In the electronics industry and others, original equipment manufacturers (OEMs) are selling their production facilities to contract manufacturers (CMs). The CMs achieve high capacity utilization through pooling (supplying many different OEMs). Meanwhile, the OEMs focus on innovation: research and development, product design, and marketing. We examine how this change in industry structure affects investment in innovation and capacity, and thus profitability. In particular, innovation is noncontractible, so OEMs will invest less in innovation than is ideal for the industry as a whole. Hence, although contract manufacturing improves capacity utilization, it may reduce the profitability of the industry as a whole by weakening the incentives for innovation. Contract manufacturing is not the only means to achieve capacity pooling. Alternatively, the OEMs can pool capacity with one another through supply contracts or a joint venture. This may result in underinvestment or overinvestment in innovation and capacity, but always increases profitability. We find that the sale of production facilities to a CM improves profitability for the industry as a whole if and only if OEMs are subsequently in a strong bargaining position vis-à-vis the CM. If the OEMs are indeed very strong, the gain from pooling capacity via contract manufacturing is maximized in industries with moderate cost of capacity.

What is the Magic in Equity Deals? Theory and Evidence on the Means of Payment in Asset Sales

We develop a general asymmetric information model that explains the value-enhancing role of equity in asset sales, without having to specify a particular negotiation or sales procedure. We demonstrate that the identity of the informed party is crucial to explaining the positive effects of equity as a means of payment. When sellers (and not buyers) have the private information, equity-based transactions generate greater increases in aggregate wealth than cash sales. Buyers obtain a significant portion of combined gains because sellers need to send a credible signal. Empirical tests support that model's predictions and indicate that sellers have an informational advantage and are in a stronger bargaining position than buyers.

Environmental policy and the equilibrium rate of unemployment

This paper integrates environmental policy instruments with the theory of equilibrium unemployment. We investigate the question of whether a low equilibrium rate of unemployment and a high quality of the environment are complementary policy goals or must be traded off. It turns out that an interval exists for a tax on emissions where the two goals are indeed complementary. The tax stimulates the emergence of an abatement sector which provides pollution control and vacancies for the job seekers. For constrained efficiency, the policy maker operates five instruments to internalize the environmental and the search externalities. A tax on emissions, employment subsidies and recruiting allowances for the polluting industries are sufficient to implement the first-best. The optimal emission tax is an increasing function of the workers’ bargaining strength. For labor markets where workers have a strong bargaining position, the optimal pollution tax may easily exceed the Pigouvian tax.

Fiscal Indulgence in Central Europe: Loss of the External Anchor

In recent years, fiscal performance in Central Europe has steadily deteriorated, in contrast to the improvement in the Baltics. This paper explores the determinants of such differences among countries slated for EU accession. Regression estimates suggest that economic and institutional fundamentals do not provide a full explanation. An alternative explanation lies in the political economy of the accession process, and a game-theoretic model illustrates why a country with a stronger bargaining position might have an incentive to deviate from convergence to the Maastricht criteria. The model generates alternative fiscal policy regimes-allowing for regime shifts-depending on country characteristics and EU policies.

Fiscal Indulgence in Central Europe: Loss of the External Anchor?

In recent years, fiscal performance in Central Europe has steadily deteriorated, in contrast to the improvement in the Baltics. This paper explores the determinants of such differences among countries on the path to EU accession. Regression estimates suggest that economic and institutional fundamentals do not provide a full explanation. An alternative explanation lies in the political economy of the accession process, and a game-theoretic model illustrates why a country with a stronger bargaining position might have an incentive to deviate from convergence to the Maastricht criteria. The model generates alternative fiscal policy regimes - allowing for regime shifts - depending on country characteristics and EU policies.

Greenland, US Bases and Missile Defence

The US Thule Air Base in Greenland will need upgrading should President Bush's missile defence programme go ahead. This has already brought the US administration into three-sided negotiations between itself, Denmark and Greenland. The article looks at the historical background to the present negotiations and, using an adaptation of Putnam's `logic of two-level games', traces the move from one-level to two-level and three-level negotiations in previous negotiations and the ones now emerging. Over time, US dealings about their bases in Greenland have evolved from the one-level negotiations of 1941 and 1951 to the two-level game of the 1980s — with a smattering of early Greenlandic involvement — to the current three-level game. Should the US and Greenland face each other directly over the negotiating table, a new two-level game will begin with the Greenlanders in a stronger bargaining position than Denmark, according to a reading of Putnam.

A Case Study of the Management of Innovation Implementation within a Construction Project Organization

The purpose of this paper is to analyse and present how an innovative idea can be successfully implemented in a construction project organisation, through the case study approach. The scope of the innovation is the top-down construction technique that was implemented successfully in a building project in Singapore. The sequence of construction makes top-down construction different from conventional technique. In conventional construction, the sequence starts from the very bottom level of structure with fully completed sub-structure. In the case of the top-down technique, construction of super-structure and sub-structure can be undertaken simultaneously with the help of partially finished main support at basement and substructure level.It is concluded that the innovative technique could be successfully implemented because three main forces exist in the construction project organisation: (1) expectancy driven normative forces; (2) result driven instrumental forces; and (3) inter-organisational interactive forces. This paper is important because it shows that for innovation to be successfully implemented, the following conditions must be met: (1) clients must play an active role in the innovation; (2) client and the party who proposes the innovation must have strong bargaining positions; (3) other supporting parties to the innovation must be willing to compromise and have good working relationships with one another.

Assemblies of the French Clergy from Philip the Fair to Louis XIII

SUMMARY Though comparatively little known, the Assemblies of the Clergy were the most consistently influential representative institution of the French old regime. They were created by the monarchy in the Middle Ages as an occasional and generally tractable extension of the royal council, particularly useful during conflicts with the papacy. In the course of the Great Schism and its aftermath, they began to arrogate some of the (ill-defined) status of a national ecclesiastical council, but this was a development more important in theory than in practice. It was only after 1560, during the Wars of Religion, that they achieved the internal coherence, strong bargaining position, and regularity of meetings that would make them a powerful independent force in the kingdom. The decisive factors behind this development were the government's desperate need for funds, which the Clergy provided under a periodic contractual arrangement, and a new solidarity within the clerical estate in the face of the Protestant threat and, more importantly, of an increasingly aggressive Gallican judiciary that threatened ecclesiastical status and privilege. This allowed the clergy to demand and receive a substantially increased role in the French political system, one that they retained until the eve of the Revolution.

“Better” part‐time jobs?

Part‐time working has been traditionally associated with poor quality, low skill jobs in the secondary labour market. Explores the expansion of part‐time work into skilled occupations using case studies in nursing and the police. Employees in both services have pay and conditions wholly pro‐rated with full‐time colleagues. However, despite a potentially strong bargaining position in relation to the employer, these part‐timers had not achieved complete equality with full time counterparts. Demonstrates a breaking of the mould of poor quality part‐time jobs showing that better jobs can be worked on a part‐time basis. Concludes, however, that full equality is unlikely to be achieved without strategic intervention at the workplace level.

Marching at the Pace of the Slowest: A Model of International Climate-Change Negotiations

We model international negotiations on climate change. Leaders such as the European Union and the US can make proposals and influence veto players, including other countries and domestic lobbies, who must choose whether to accept or reject proposals. We explain why policy change has been minimal in this issue area, which veto-players receive the greatest and least attention and why leader actors wishing to see less progress are in such a strong bargaining position.