Negotiation 101: How to Get Corporations to Do What You Want
I just got back from driving across the rust belt – Syracuse, Buffalo, Cleveland, Toledo, MI – and am catching up on all the interesting conversations you’ve been having this week while I was celebrating my mom’s birthday (thanks, once again, to bmaz for watching the liquor cabinet while I was gone). So for the moment I want to make one quick comment.
The WSJ has a story describing how BP heroically pushed back against two of the Administration’s most onerous demands: that it pay for the costs of the moratorium on new drilling, and it pay to restore the Gulf to its natural state, rather than the state it was in when the Deepwater Horizon disaster struck.
BP PLC, despite being put under pressure by the U.S. government to pay for the oil-spill aftermath, has succeeded in pushing back on two White House proposals it considered unreasonable, even as it made big concessions, said officials familiar with the matter. BP last week agreed to hand over $20 billion – to cover spill victims such as fishermen and hotel workers who lost wages, and to pay for the cleanup costs – a move some politicians dubbed a “shake down” by the White House. Others have portrayed it as a capitulation by an oil giant responsible for one of the worst environmental disasters in history. A more accurate picture falls somewhere between.
The fund is a big financial hit to BP. But behind the scenes, according to people on both sides of the negotiations, the company achieved victories that appear to have softened the blow.
BP successfully argued it shouldn’t be liable for most of the broader economic distress caused by the president’s six-month moratorium on deep-water drilling in the Gulf of Mexico. And it fended off demands to pay for restoration of the Gulf coast beyond its prespill conditions.
Now, I know WSJ’s job is to make corporations look good, so I’m unsurprised by this spin. And I’m skeptical the $20 billion will get in the hands of those who need it in a timely fashion.
But it seems to me that the real story is that – for the first time I can think of – the Obama Administration has actually taken a tough approach to negotiation. Normally, of course, Obama starts by ceding on key issues (such as drug reimportation, oil drilling, and real financial reform) and from that incredibly weakened position, further damaging his policy position. Perhaps this time is different because the Administration is under a much greater public opinion threat. Perhaps this time is different because BP is a corporation (though so are the drug companies) not the opposing political party.
But this time is different.
I actually agree with the WSJ that Obama was unlikely to get BP to pay for the moratorium on drilling. But that may have not been the point. It established the window of possibility far beyond what it had been, and made the $20 billion escrow account look reasonable by comparison. And voila! BP at least said they agreed to cough up $20 billion.
It’s called negotiation!
Whoever came up with this novel idea really ought to get a bigger policy portfolio.
Sorry, I don’t trust Rahm Obama. Seems to me the way to look at this Administration and its action/inaction, as I’ve written previously, is cui bono. Negotiation’s required to agree to and set up a $20,000,000,000 account in one day is not going to happen (granted the ground work may have set the conditions). That’s why I wonder what quid pro quo BP got from Rahm Obama.
Maybe Rahm was on the losing side here.
We don’t know who came up with it, after all.
Actually, Obama has to cut this deal as he was already in trouble for backing continued offshore drilling even as the polling for it was fast sinking like a damaged wellhead. Plus, the GOP’s automatic rush to BP’s defense provided him with the opportunity to put some daylight between the Dems and the Republicans, and in a good way.
This may well be the first time he ever talked tough to someone who wasn’t a union head, a Veal Pen member, or anyone else who represented key parts of the Democratic base. Good for him!
I actually wonder whether this was a reflection of Bob Bauer’s involvement. He’s a smart cookie. Understands the whole negotiating thing.
As I understand it Roger Altman & Co have been brought in to advise BP. He and Geitner know each other pretty well from the Clinton days
Your point that this does look like more aggressive negotiating than in the past is well taken, but if you follow the money trails a bit, it looks slightly more like taxpayers’ are subsidizing the cleanup.
http://www.policyarchive.org/handle/10207/bitstreams/18708.pdf
http://www.usaspending.gov/explore?carryfilters=on&fromfiscal=yes&tab=By+Recipient&fiscal_year=2008&contractorid=243243&tab=By+Recipient&fiscal_year=&fromfiscal=yes&carryfilters=on&Submit=Go
[BP pays some royalties on the oil they extract, minus massive tax breaks big oil corps get, refines the oil, then sells it to DOD which is taxpayer funded.]
That’s a fair point to raise. We had that discussion a few weeks back in an EW thread. Thanks for revisiting the concern.
I think the negotiations with China have gone reasonably well (note the announcement on the floating of the Chinese currency). If you want details, go read James Fallows (actually you should be reading him anyway).
I would turn this argument around (and I don’t think ew disagrees with this, but we’ll see). There’s good evidence Obama & Co. know exactly how to negotiate. We should interpret their behavior in those other areas as reflecting something about their true (versus their stated) policy goals.
I would venture the theory that the BP situation may simply be the first one in which Obama’s polling needs actually overwhelmingly required an anti-corporation action. So that’s what they did, and they extracted agreements which may well prove to be way lowball since the full extent of the damage can’t yet be known.
Key question: Has the administration promised to go back for more later if we discover it’s needed?
Agree, they’ve been good on China.
I think their success at negotiation is rather more about who is doing it than whether they, in general, know how. Rahm doesn’t know how or doesn’t want to do it right. As I said upthread, my gut feel is taht Bob Bauer can negotiate the pants off anyone. And a Hillary-led team of professional diplomats can negotiate too.
I don’t think this process is as adversarial as you are making it out to be. BP’s bankers are connected to Geitner as I said above… they’ve negotiated something that is arguably favorable to BP and one of the things they did in this 20B agreement was to hold out specific assets. As recently as last Friday the bankers were saying they thought the most serious risk to BP was general loss of credit in the market– not any sort of coup-de-gras from Obama
wohjr:
“I don’t think this process is as adversarial as you’re making it out to be.”
Hammer-nail-bang.
As the political chickens are flapping their wings back to the White House, watching progressive bloggers steadily move to trying to cover Obama’s feckless ass, is going to be one HELL of a spectator sport in the next few months, and then, even better (or worse…) as the shelf-life on the clusterfuck withdrawal plans expires.
My take on the negotiation is less sanguine. The restoration of the gulf to its pre-“spill” level is restitution for caused harm. To pay for restitution beyond that would be payment of punitive damages, and it appears that has been “negotiated” away (at least here in the pre-litigation phase).
I think they have – for example, Kagan argues in favor of putting lawyers who show people how to file human rights complaints in jail for material support of terrorism – and she gets a Sup Ct nod.
http://www.huffingtonpost.com/2010/06/21/supreme-court-upholds-ant_n_619444.html
Contrary to a popular rightwing meme, it is not remotely unfair or abusive for this government to negotiate or play hardball with BP. BP is no babe in the woods needing anyone’s protection. It and its predecessor companies over the decades have made and broken governments, local industries and elites. It is we who need protection from it; it’s what we pay and empower our government to do on our behalf.
Quite. The plainness of this bit of evidence, against an opposite that probably thought it had more high cards than it has turned out to have, should lead to much clearer air in the future. At least, so I hope.
hello my muse
got some rare manday time to kill, so i thought I would respond to a few points
so basically, Obama agreed that the Gulf of Mexico was pretty fucked up before BP KILLED IT
an BMAZ wasn’t watchin the likker cabinet, he was practicin Admiralty Law, you could look it up
(why do lawyers always have to practice so much any way, do they ever actually do any “Law”)
an this:
maybe it’s because they told Obama that there is no way to stop the leak, we’re all gonna die, and you gotta help stop the panic …
did anybody ever think of that ???
Having negotiated years’ worth of contracts, I also know not to celebrate the press release.
The contract you get is never the contract you are promised.
The White House has tremendous leverage — imposing the normal per-gallon fine for oil spills would amount to $20 billion easily. They can also refuse BP the right to drill any more. It’s not a weak hand that they’re negotiating from.
But until we know what the White House gave up (the ability of BP to pay dividends & loot the company so most of the $20 billion will never be there? A cap on damages?), celebrating seems a bit premature.
I’d file it with Obama’s promise to have Geithner claw back the AIG bonuses — sounds promising, but worth taking a “wait and see” attitude on. You’re more likely to get actual follow-through that way.
But until we know what the White House gave up (the ability of BP to pay dividends & loot the company so most of the $20 billion will never be there? A cap on damages?), celebrating seems a bit premature.
Throttling back on criminal inquires, maybe? I dunno…
Does someone have specific information on which oil rigs are not drilling due to the “moratorium”?
Are you kidding me? The BP execs were absolutely giddy when they emerged from those tough negotiations. The $20 billion is so low balling it it’s not even funny. I think BP and the Obama admin. have worked in perfect concert, and there is no evidence of tough negotiations to be seen. Nice WH spin, though.
Have I missed a link to the agreement?
Is the discussion about an actual signed agreement, or perhaps an agreement in principle?
If the actual agreement is not finalized, and available for perusal; then it is hard to evaluate.
Eagerly awaiting media while “negotiations continued” might be an excellent pressure tactic, or on the other hand, might be kabuki theater.
Just in — MMS being rebranded. W the F. What kind of situation do they think they’re dealing with here, “New Coke”?
http://www.cnn.com/2010/US/06/21/gulf.oil.disaster/index.html?hpt=T2
“The Minerals Management Service will be called the Bureau of Ocean Energy Management, Regulation and Enforcement, according to an order signed by Interior Secretary Ken Salazar requesting the name change.
The announcement coincided with the swearing-in of the bureau’s new head, former Justice Department Inspector-General Michael Bromwich, who is tasked with overhauling the troubled government agency. Critics, including President Barack Obama, have said the MMS has too often catered to the interests of the industry it is responsible for policing.”
(Apologies for x-post, seems more appropriate here.)
Think there will also be a Bureau of Land Energy Mgmt? WTF is right.
I still can’t believe Salazar hasn’t gotten the heave-ho. He is incompetent or worse.
It’s all kabuki
I gave a link yesterday, or the day before, that said BP was probably going to get a tax break on the $20B
Found it
http://www.straitstimes.com/BreakingNews/Money/Story/STIStory_542134.html
In other words the tax payers will pay for it
… wonder why the Republicans aren’t screaming bloody murder about this? /s
“It’s all Kabuki.”
It sure is, John.
Here’s the check-out of the Great BP-busting $20 bil compensation fund:
http://politifi.com/news/FACT-CHECK-Obama-raises-hopes-of-complete-oil-spill-recovery-that-have-been-dashed-in-past-824052.html
Tough negotiation? What BS. The Obama Administration is doing whatever is necessary to try to deflect any blame from sticking to them.
The actual exploratory drilling for the EXPLODED BP WELL was approved by the Obama administration on April 6, 2009.
Within days of that approval, the Center for Biological Diversity (and others) won a court order vacating the Cheney/Bush Five-Year Offshore Drilling Plan.
Instead of using the court order as a timeout to craft a new plan on new offshore drilling, Ken Salazar, Obama’s New Sheriff in Town, filed a special motion with the court to exempt approved oil drilling in the Gulf of Mexico. Specifically, he identified BP’s operation as one that should be released from the vacature.
In July 2009, the court agreed to Salazar’s request, which released all approved offshore oil drilling — including the BP operation — from the vacature.
I’ll believe it when I see it that BP ponies up the measly $20bn.
Micki; that’s a devastating post.
You done good, Hon. :o)
“The actual exploratory drilling for the EXPLODED BP WELL was approved by the Obama administration on April 6, 2009.
Within days of that approval, the Center for Biological Diversity (and others) won a court order vacating the Cheney/Bush Five-Year Offshore Drilling Plan.
Instead of using the court order as a timeout to craft a new plan on new offshore drilling, Ken Salazar, Obama’s New Sheriff in Town, filed a special motion with the court to exempt approved oil drilling in the Gulf of Mexico. Specifically, he identified BP’s operation as one that should be released from the vacature.
In July 2009, the court agreed to Salazar’s request, which released all approved offshore oil drilling — including the BP operation — from the vacature”
Sure not hearing about this in the MSM. Have not heard Rachel, Keith, Ed, Dylan anyone else say anything of the kind.
“Negotiation 101: How to Get Corporations to Do What You Want”
Why did the Negotiations go so badly on HCR & Fin Reg?
I don’t think Rahm or Obama are any better at negotiating than Bush and Cheney. Cheney didn’t negotiate; he bludgeoned or he hid, he didn’t trade. Bush didn’t know how to negotiate, except to open the Treasury doors wider and wider, giving away other people’s money to Congress and corporations in the guise of tax givebacks, subsidies and legal immunities. The public whose money he spent got nothing in return, but Mr. Bush stayed in office, a double loss.
Mr. Obama gives up his campaign promises as readily as did his liberal campaign staff and his campaign persona. What does he get back? Nothing for the public, certainly. It’s not clear he’ll even stay in office.
How far will $20B really go? IIRC, that’s a small multiple (like less than one hand) of Golden Sacks executive bonuses… and that’s supposed to compensate regional losses and clean up a sea?
Circle-jerkular (h/t Jon Stewart) Republican leadership to BP-kissing Rep. Joe Barton: “Plug the damn hole, Joe, plug the damn hole.”
Circle-jerkular Republican leaders are afraid that United States voters will learn that Republicans only care about multi-national corporations and to hell with U.S. small businesses and U.S. workers. Psssst, I think that oiled cat is already out of the leaky BP bag.
Of course, there are other circle-jerkular Republicans who aren’t telling BP-kissing Rep. Joe Barton to plug his damn pie hole, but are instead joining in, doing some of their own BP butt-kissing, showing that they can out-butt-kiss multinational corporations better. Republicans: circle-jerkular corporate butt-kissers, one and all, and to hell with the United States of America.
Marcy; the great, corporate-ass-busting $20 bil fund has been busted for having more holes in it than a piece of Swiss cheese.
And, considering that Obama had 16 months in which to review those sweetheart offshore drilling regs, and do something about stiffening them, and considering that three weeks before the platform blew and sank, he signed off on MORE drilling, it seems fair to include him in the corporate ass-kissing, instead of cheering for him for Kabuki populism.
Plus, his sustaining of bush’s two shitmires, now HIS two shitmires, aint exactly a slap in the face to some huge defense contractors.
BTW, did you know that his state department just awarded a $120 million dollar contract to our old buds, Blackwater, to continue doing “security” in Afghanistan?
http://www.thenation.com/blog/36444/obama-administration-keeping-blackwater-armed-and-dangerous-afghanistan
I would like to have seen O. “negotiating” with some other corporation than XE, or Blackwater or whatever their name is this month, or even better, I’d like to see him negotiating our asses out of there.
I know they’ve changed their name, but I don’t think the leopard has changed his spots.
Let’s cut to the chase here: what we’re getting is progressive bloggers, faced with seeing this president and his democratic jellyfish herd getting righteously shellacked at the up-coming mid-terms, starting to freak out at the prospect of what little power we had, being pissed down the Obama- urinal.
So now, they’re slowly but steadily morphing into centrist flacks, as they try to keep progressives on board and all comfy in the OTHER veal pen.
Marcy, I promise you:
“Vote for us! We’re not as bad as the republicans!” as a campaign slogan, is a prescription for disaster. The voters are nauseated at the prospect of hitting the touchscreen for yet another political hack.
You can’t blame us.
Obama should:
Freeze BP’s assets
Send in, UNANNOUNCED, armed federal marshall’s, to take over everything BP’s doing down there, especially, their computers and communications about what they knew and when they knew it.
Then he should sic NASA engineers onto this misery. They’ve forgotten more about problem-solving in a hostile environment than BP will ever know.
I have this deep-seated conviction that the real problem with stopping it, is that BP is focused on salvaging it for re-use, instead of permanently shutting it down. Also, by it’s continuing, it’s slowly but steadily conditioning americans to accept the premise that gosharootie, some corporate fuckups just can’t be fixed, no matter how bad they are, and WTF; the NFL season is just around the corner.
OTOH, at this point, it’s not just about stopping the gusher (and the gusher bullshit, along with it…). Now, it’s about saving his presidency. If he would literally put the government on this, lock, stock, and barrel, and get it stopped in a relatively short period of time, he’d come out of it looking like Captain America.
Of course, there’s the “downside” of his re-establishing direct federal domain over these giant corporations, and I think this preznint would rather have a vasectomy with a sheetrock knife than do that.
Of course, what we’re debating about here, is whether or not Barack Obama is growing a vestigial spinal column on behalf of the american people.
I would say: not yet.
And relative to that, here’s a fresh piece on how Gen. McChrystal has (again) climbed up on Obama’s desk and farted in his face…this time, in Rolling Stone, of all places.
http://apnews.myway.com//article/20100622/D9GGAGO00.html
Stan has been called back to the White House for another ritual wrist-slap, for publicly dissing the prez. It’s too good. If this were LBJ, he’d be shuffling papers in Fort Mooseturd, Alaska. We can only hope.
What Marcy! You took days off to be with your family from the vital task of guarding the site and left a minion (albeit a highly qualified minion, sorry bmaz)in charge! How dare you? We all know that’s forbidden. Rahm sys so.
interesting elaborate interview Sunday June 20 2010 with Lisa Margonelli re reconfig of MMS. Audio available via a link on that page. Pacifica radio. She also writes @The Atlantic, and works @NewAmericaFdn.