Michael 3

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  Michael Reich A.   Preparation: a.   Information: 1.   I had increased his equity share in Founder’s equity by 9% stating that Georg and Phuc have not contributed much to the company’s progress  2.   Under my new plan, I would have 45% of equity, Georg would have 28% and Phuc would have 26%. Warren, for his contributions, would get 1%. 3.   Equity split-up should be based on the one page partnership agreement signed in November, 2006 b.   ZOPA: Equity split: Michael  –  39% to 45% Phuc Salary: Between $70000 (with no change in fou nder’s equity) & $90000 Seed equity capital: Max  Michael: 33.33% to 50% c.   Strategy & Plan: My strategy is to give Phuc max salary while cutting down on his equity share, as his commitment to the company is still not sure and responsibilities were not as much as assigned to Georg and myself. Since I am doing most of the work, I shall push for a higher equity share but not significantly higher than Georg’s.   During a)   Opening –   Warming up I discussed issues regarding the company’s future (angel investor etc) also , what future roles Phuc will play as we are giving him a very high salary (with a possible increment) and he also has a equity in the company b)   Information –   Confirmation Value creation and contribution by each party was discussed. Deepak (from section 2) played Georg for u , as we were only assigned a Group of 2. He negotiated with us as a team and we concentrated on creating maximum value from the beginning as every person was important to the company. We discussed various parameters on which our negotiation will take place.    c)   Value Creation The goal was to ensure that each of us got a fair share of equity and happiness. We started by following the technique of log rolling by discussing multiple issues simultaneously so as to maximise the value. Our aim was to create a win-win situation for all of us. I aimed at creating maximum value for myself, but at the same time wanted the other parties to not to lose. The trade-off between issues was handled using scoring system by each one of us. I attempted at identifying other party’s multiple interests. Though there was some illusion of superiority during the negotiation process, but our ability to see throu gh each other’s facts helped the negotiation to take a forward leap. Throughout the process we aimed at Pareto improvements i.e. we kept on making changes to a deal so as to make at least one person better off without making anyone worse off. d)    Anchoring Phuc set the ball rolling by negotiating his equity. Intially he started with a +2 percent anchor, but he eventually had to settle for 27 % (+1) in the end. e)   Concessions Phuc agreed to take higher seed equity and a lower founder equity. f)   Results Vs. Relations  We created value  for all of us. My results were well within my ZOPA. As we managed to create win-win situation for all of us, our relations were intact. My score was +135 as I only lost 85 points and played well within the range. PSN: a)   Founder’s Equity a.   Michael  –  44% b.   Georg  –  27% c.   Phuc  –  28% d.   Warren 1% b)   Phuc’s salary   - $90,000 c)   Seed Equity a.   Michael  –  33% b.   Georg  –  33% c.   Phuc  –  33%
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