How many times have we heard the refrain,” But, it is not fair!” or “I just want to be fair about this!” Or “All I want is fairness!”  Or some similar retort?

Suppose these comments arise out of a dispute between three partners: Jane, Joan and Sally. Jane put in twice as many hours as Joan who worked elsewhere as she is a single parent barely making ends meet. Sally put in most of the money to get the business up and running but did not spend much time working in the business. Jane was paid nominally for her time as she hit the lottery last year and became a millionaire.  After two years, the business has taken off and it is time to split the profits. What would be a “fair” way to do so?

The Harvard Pons Blog posted a short but insightful post entitled “Fairness in Negotiation” by Silva Glick on May 10, 2022. In it, Ms. Glick notes that researchers have identified three ways of determining fairness. The first is equality– perhaps a one-third split. The second is equity or a split that is in proportion to the amount contributed by each party while the third is need or a split that is based on how much more one party “needs” it   than the other. (Id.)

Psychologist David Messick has found that we will determine what is “fair” based upon our greed; we do it in a way that most serves our own interests. (Id.)

So- how do Jane, Joan and Sally split the profits? Should they each get one-third? Or does Jane get more because she put in the most time working in the business? Does Sally get more because she put in most of the money to start the business? Or does Joan get more of the profits because as a single parent barely making ends meet, she “needs” it more?

Naturally, Jane, Joan and Sally are unable to resolve this on their own, and so they go to arbitration.  However, a study by Max Bazerman (Straus Professor at Harvard Business School) found that arbitrators used a fourth way to decide fairness: “maintaining the status quo” or using a resolution that resists “radical change.” (Id.) So, in our example, chances are the arbitrator will simply “split the baby into thirds” or decide on a one-third split!

So, while we all want what is “fair,” we should first define what we mean by the term which may be a separate negotiation in and of itself!

…. Just something to think about.


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