Principles of fairness in negotiation
An Aesop Fable on Fairness
Several animals find treasure and must decide how to divide it fairly. The lion speaks up and says, “First, we must carefully divide the treasure into four parts. The first part goes to me, since I am king of the beasts. The second part is mine, owing to my strength. The third part is mine because of my courage. As to the fourth part, anyone who cares to dispute it with me can do so, at his own risk.”
A Bitter Divorce
In 1997 Gary Wendt, the chief executive of GE Capital, divorced his fifty-four-year-old wife of thirty-two years, Lorna Wendt. Gary’s net worth was about $100 million. Lorna wanted a 50-50 split. In court, Gary argued that since it was his talents that accumulated virtually all of the wealth he was entitled to the bulk of the assets. The judge awarded Lorna $20 million. Divorce law in Connecticut calls for equitable not equal distribution of assets.
Principles of Fairness
Our notions of fairness are guided by three, often conflicting principles:
- The principle of equality says that regardless of contribution, everyone is entitled to an equal share.
- The principle of equity prescribes that rewards should be based on each person’s contribution.
- The principle of need prescribes that benefits should be based on need.
Tips and Tactics
- When slicing up the cake, always ask to whom will the recipient(s) compare themselves. People often care more about how their slice compares to others than they do about the absolute size of the pie.
- Make sure the process is seen to be fair and equitable. Commitment to a deal increases when the process is viewed as just and transparent.
- Aim for simplicity, clarity, and justifiability. Perceptions of fairness increase when agreements are simple to follow, deliver clear outcomes and can be easily explained.
- Remember, our egos clash with our notions of fairness. People pay themselves far more than they are willing to pay others for the same job.
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