effective or ineffective management
Professor Deepak Malhotra and Maly Hout (MBA Candidate 2006) prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2006 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.
D E E P A K M A L H O T R A
M A L Y H O U T
Negotiating on Thin Ice: The 2004–2005 NHL Dispute (A)
Introduction
National Hockey League veteran player Trevor Linden was gearing up for another face-off. But this time, he was not wearing his skates and helmet; he was wearing a business suit. And, instead of walking onto the ice, clutching his hockey stick, he was walking into yet another union meeting, clutching his briefcase. The irony of the situation was not lost on Trevor: his toughest and most consequential of battles had not lasted three periods in a skating rink, but five months in negotiations with the National Hockey League. And now, as the “game” went into overtime, he was unsure which side would prevail.
At issue was the negotiation of a new collective bargaining agreement (CBA) between the players, represented by the National Hockey League Players’ Association (NHLPA), and the team owners, represented by the National Hockey League (NHL). The CBA provided the basic framework for players’ salary contracts, and was the keystone for agreements on a wide array of issues, including salary arbitration, free agency, and guaranteed contracts.
The CBA had been renegotiated many times before, but this time was different. The league, insistent on cutting costs and curtailing the growth of players’ salaries, was resolute on two key issues: 1) the introduction of a salary cap, which would establish a limit on player salaries, and 2) the linkage of salary to revenues, such that league-wide salaries would not exceed a fixed percentage of league-wide revenues. Meanwhile, the players adamantly opposed both proposals. As a result, this negotiation had been longer, more acrimonious, and less productive than any in the past.
The previous CBA had expired on September 15, 2004. Since the two sides had failed to negotiate a new CBA by that date, NHL Commissioner Gary Bettman locked out the players.a This meant that no hockey would be played, no revenues would be collected, and no salaries would be paid. This was no idle threat, and it was not taken idly. With the lockout in effect, 150 NHL players promptly joined European hockey clubs1, sports arenas began finding other sources of revenue, and the Canadian Broadcasting Corporation (CBC) replaced “Hockey Night in Canada” with “Movie Night in Canada”.
a A lockout is initiated by owners; it forcibly suspends salary payments by halting operations. A strike, in contrast, is initiated by players; it forcibly halts operations through a collective refusal to work. In this case, it was the owners that had decided not to start the season until a new CBA was signed.
Distributed by The Case Centre North America Rest of the world www.thecasecentre.org t +1 781 239 5884 t +44 (0)1234 750903 All rights reserved e info.usa@thecasecentre.org e info@thecasecentre.orgcase centre