General Negotiation January 15, 2014

Intimidation by Financial Hostages and Other Hostage Types

Hostages are collateral in negotiation.   They can be traded for something else...

Hostages are collateral in negotiation.  They can be traded for something else.  The United States learned in Iran and Lebanon that televised pictures of Americans held hostage by a foreign power, no matter how small or weak, have an enormous impact on our subsequent actions.

The hostage in business is rarely a person but something else of value.  It may be money, goods, property, secrets or a company’s reputation.  In effect, the hostage holder says, “If you don’t give me what I want, you won’t get back what I’m holding.”

Hostages in the world of business come in various shapes and styles.  I once saw a movie in which a house was held hostage by a tenant who wouldn’t leave and wouldn’t pay the rent no matter what the landlord did.  When the owner threatened legal action, the tenant threatened to tear up the place.  In a similar but legal way, tax authorities tie up a citizen’s bank account and then negotiate the merits of a tax delinquency case.  All of us have heard of car mechanics who refused to release an automobile until the bill in dispute was paid by certified check.  When the other side holds something we need, they limit our ability to deal freely.  We are inhibited from taking actions we might normally pursue.  The hostage taker gains the initiative.

As Presidents Carter and Reagan learned in dealing with Iran, it’s never easy to bargain with hostage takers.  But there are countermeasures we may employ which help us resist those who kidnap our assets and hold them for ransom.

We can raise the stakes by taking hostages in reprisal.  We can forfeit the hostaged asset. Or we can place it in greater jeopardy by taking aggressive action that deprives the hostage taker of things they need.  We may go to court to settle the dispute, or resort to mediation or arbitration. Or we may do nothing and hope that holding the assets hostage may, in time, cost the holder more than they are worth.

Of course, the best way to deal with hostage problems is to anticipate them in advance.  Introducing severe penalties into the initial contract will make it less profitable for the other side to hold your assets or property.

None of these defenses is easy or inexpensive.  That’s why hostages, or even the threat of hostage taking, is so intimidating.
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