Management in a small company has recently realized a $100,000 increase in profits. This has occurred after two years of poor economic performance due to expensive storm damage in two of its facilities. It needs to stabilize its costs and conserve some of the funds for future shortfalls. It has designated $30,000 for labor in this year’s budget. This represents a 5% increase in the hourly wage for employees. If it delays the development of two technology upgrades, it could provide an 8% wage increase but customers might then gravitate to a competitor. Managers will receive an 8% salary increase plus bonuses of 10%. The union was able to avoid a wage concession in the last two years, but employees did not have an increase. During that time, the industry standard for wage increases was 3%. This year it is 5%. The election of union officers occurs next year. This year the union hopes to secure a 10% hourly wage increase without losing any other financial benefits. It estimates that it could get a 6% increase ratified but anything less would not be supported.

In a distributive strategy, if the union makes the opening proposal, its initial offer should be:

a) 20%

b) 15%

c) 12%

d) 10%