Appendices
APPENDIX E: Rationale Behind Player Compensation Section, II.B.
a. Over all goals:
1.#1 from which all other follow: to protect and enhance the goose
that lays the golden eggs
2. To obtain wealth building
without wealth busting for players/coaches/owner
3. To increase the brand recognition
and brand building of the team 4.
To keep the best players, despite free agency, by meeting the challenge
of developing new stars and follow the model to keep them with the team
when they become free agents.
5. To keep all stakeholders
and constituencies happy and satisfied
6. To avoid the strike damaging
action that is in baseball’s future
7. To avoid “second season
only” viewing of the NBA
8. To become an “experiment”
for the team’s league if the league isn’t sure about adopting
some of these ingredients of our recipe for success league wide.
This is OK. The team will greatly benefit from being the early adopter.
b. Goals of the various stakeholders and constituencies:
(1).. Player goals: to
maximize income, especially signing bonuses, to have a great “crib,”
to survive economically if they encounter career ending injuries, support
entourages, earn “respect” for themselves, play on a championship
team. In addition: never have their legs worked out from under
them, have their safety and health paramount and thus not get rushed back
in prematurely after an injury, and have an appropriate training program
to get them back to playing condition as soon as possible after an injury.
Hence, they want long term incentives for short term career windows.
(2).. Coach goals: to
maximize ability to sign or not sign players, retain or let go players,
according to what the team needs to build, minimally, a competitive team
and, maximally, a championship team (achieve excellence in play, not mediocrity).
(3).. Owner goals: to
maximize investment, keep players and fans happy, not lose players to
free agency and still stay within a spending discipline (the “salary
cap”), and do so without having to go into tremendous debt or risk
financial red ink, all the while developing a championship team.
(4).. Investor goals:
to earn a significant return on investment (with appropriate patience
and exit strategy), prestige, attend training camp, meet players, watch
games in the team private suite, and be part of a championship team.
(5).. Fan goals: to have
their heroes play “forever” and bring home a championship and
have local bragging rights.
(6).. TV goals:
to have top viewing ratings, both in the U.S. and world wide.
(7).. Advertiser goals:
to maximize exposure of message(s) to as many target demographics as possible.
(8).. Employee goals
of companies doing business with or because of the team (whether
large or small firm, whether directly or indirectly involved): to
be productive in whatever product or service is made or provided that
is related to the team, directly or indirectly, and to be part of a championship
season.
(9).. Government goals
(state, counties, cities): to maximize revenues over the long
term, bask in the team’s reflected glory, and have bragging rights
that come from not only having a team, but also from having a division,
conference and/or league championship.
(10).. Note the common goal of all:
to have a championship/be part of a championship season. BUT, only
1 National Football League team out of 32 teams can be the overall champion,
although, if you count conference and division champions, you open the
competitive door to 12 teams competing for 9 championships, which will
be held by 6 of the teams (with one team holding two: division,
conference, and one holding three: division, conference, league).
Therefore, the “product” can never be the Superbowl. The
only product that counts is the game and the way it’s played.
Individuals and teams can have off days. But they should be far
and few between. In the language of “the old West,” there
is always a faster gun”. In sports, if the other team is faster
on the draw, so be it. You live to come back and stand at high noon
again. The product has to be a great game played at the highest
level by all team members, which is also the only legitimate criteria
for evaluating coaches, not W-L. As John Wooden says, when the game
is over the key is not whether you won or lost but whether you can say
you played the very best that you can. That equals a good game.
And they are obtained by players playing for great coaches.
(11).. League goals: produce
top product, sustain growth domestically and around the world, all the
while doing so profitably. The salary cap of payrolls is really
only the #2 issue in the National Football League. It is raised
to status of #2 because of the free agency (which used to be about fairness
to individuals, long since resolved). But salary cap and free agency
pale before the key, #1 issue: protecting the GOOSE that lays the
golden eggs for (1) players, (2) coaches, (3) owners, (4) investors, (5)
cities, (6) states, (7) businesses, (8) TV, (9) products and services
of all kinds (via endorsements of players and through advertising during
games), and (10) employees being paid directly and indirectly because
of working for someone under #’s 1-9.
(12).. New TV Public Relations goals:
(1) Hold a League TV team special, or some other kind of broadcast ceremony,
honoring all 12 teams prior to the playoffs. The movies do it (Oscars),
music does it (country music and MTV awards), TV does it (Emmys), etc.,
etc., etc. Regardless, 12 cities would get to celebrate. It
opens a positive way to spotlight the warrior culture of the National
Football League over the WWF. It widens the support for the overall
goose that lays the golden eggs, letting in fans from the 16 teams which
will not make the playoffs in a 32 team league to pick new team(s) to
root for in the playoffs, and thus stay engaged. This helps feed
the goose. (2) Hold a League TV individual special, or some other
kind of broadcast ceremony, honoring top record setters. (3) Hold
a League TV coach special, or some other kind of broadcast ceremony, honoring
top head coaches and assistants.
d. Wealth Building Goals: horizontal and
vertical for the League, teams, individuals
(1) The key to corporate and
individual financial success is multiple sources of income and the ability
to influence the decisions about those sources, vertically (as individuals;
a ranked return formula can be worked out based on productivity, meaning
differentials for star players vis a vis the others, rather than huge,
up front salary packages), and horizontally (as they engage in other projects
outside the organization).
(2) The key wealth generator
for owners, coaches, and players, is the combo of (1) organizational changes,
(2) building a new stadium, (3) the 40 in 26, and (4) new opportunities
coming over the event horizon.
(3) Additional
sources for wealth building that apply to any team, both horizontally
and vertically, are the revenue generating ways in Section II of this
model, all of which can, in some way, also apply to individuals, and can
add to both team and individual benefits.
(4) Vertical example:
pieces like (1) the investment pool and (2) other projects (for instance,
we have one which could be used by player/coach wives to make money which
would add to their income), which can provide additional downstream income
to players to help offset salary cap limitations that threaten to destroy
every team in terms of putting key players and obvious hall of famers
into musical chair rotations around the league, enriching themselves while
devastating teams and roster plans and slowly but ever so surely killing
the goose that lays the golden eggs as fans either drift away or lose
team loyalty and follow the player(s) instead (we live in a soap opera
culture with fans attached to their heroes, both the continuing dramas
of their athletic teams and their afternoon and evening continuing dramas
(hence Vince McMahon wrestling programs are more soap opera interactions
than they are actually wrestling; couch potatoes, by definition, live
vicariously through the drama of others).
(5) Fake “free”
money seems to be the point of view by sportscasters and fans and most
media types, as they eagerly urge and applaud players to skip town under
the money umbrella of free agency, expressing, perhaps, their own yearnings
(of sports writers, other media and broadcast types, and even fans) to
escape town. They appear to be fascinated to the point of being
hypnotized by players leaving in free agency for big bucks, complaining
of the high cost of tickets as they applaud the actions that cause it.
Its as if they are playing monopoly – the money is free and fake,
so help yourself. In a word, they feel with other people’s
money. It’s like watching “Who wants to be a millionaire”,
as if breaking away for ludicrous sums of money is the determiner of value
and worth. Ironically, as these sportscasters, fans, and media types
root for players to get all they can, they are also sowing the seeds of
their own team’s destruction. That’s a train wreck in
the making. Good coaches will be fired for losing and lousy coaches
will finesse staying by blaming it on free agency, and players will be
in a dollar denominated caste system that could eventually lead to the
demise of the game, either because people become disdainful of the monies
made (although no one minds retirement funds) or because those same monies
require such increases in costs of stadium seats and cable TV viewing
or pay-for-view, that fans will leave for other sports. This is
a goose killer.
(6) Horizontal
example: a company like Arrakis, a wholly owned start-up of J.P.
Morgan & Co., has been dubbed “Building the Anti-J.P. Morgan”
by Business Week (9-18-00, p. 134). Its goal: to acquire “a
quarter of North America’s estimated 7 million millionaires to sign
up with Morgan Online for $2,500/year,” providing a service which
can “offer new features to clients every 90 days.” They
are working on a full breadth software: “The software can spit
out a lifetime’s income and spending estimates, crunching everything
from executive stock options to municipal bonds, college tuition, and
taxes.” 100 developers are working on the software. They
are moving quickly as competition is coming: “Goldman, Sachs
& Co. is expected to come out with a competitive offering in the U.S.
this fall. By then, J.P. Morgan hopes to be signing up the new rich
in Europe and Japan. Teams could partner with local or NYC or Chicago
investment firms to manage parts of player salaries that go directly into
the pool for management, with the earnings to be paid out either when
they leave the team or rolled over into a retirement fund with payouts
beginning at specific ages reached by the player.
(7) These would be great tools
for the League in general and, if the league is hesitant, something any
team could experiment with by making it a factor in its structure to save
upfront dollars and pay from invested downstream dollars, which is a win-win
for both the team and players, generating wealth for both owner and players.
(8) And here
is a great hook: for any investment vehicles in which the contributions
are made solely by the team: they help foster longevity (golden
handcuffs) with the player, as they have to be vested to collect.
Vestment would be based on either a set number of years or when the player
either retired or whose career was cut short due to injury. Thus,
the player would have to be vested to gain all of the funds, meaning that
if he took a free agency trade elsewhere within a specified time frame,
the penalty would be assessed, just as is done with other retirement funds:
anywhere from giving up 25% to 100% of what has already been put aside
for the player as well as that which is projected income after vestment.
To keep it fair, any player cut from the team would automatically be vested
(per the rules at the time). The only penalty assessed, forfeiture,
would be only on those, as corporations do, for a player who leaves voluntarily
to join another team or who break specific contract stipulations (drug
use, felony convictions, morals clause violations, etc.) The forfeited
funds stay in the pool.
d. Making it happen
To make this work, the league will have to engage the union about this
salary cap and free agency situation, to have them join first as either
junior partners or “senior partners” as is done in law firms,
consulting firms, investment funds, etc. The college ranks offer
an example, where they have instituted steps to foster parity as well,
resulting in generating more revenues.
All of these suggestions are designed to enable the League to engage in
wealth building for all without wealth busting.
How to keep from killing the goose that lays the golden eggs? Allow
wiggle room (a “tax” on over spenders), and then raise the low
end of salaries and lower the high end to get more players to buy in,
while at the same time establishing the investment pools that will pay
off according to a point system based on number of years played and contributions
in terms of comparing them to others in their position (star performance
levels vs. non-star), and then add a vested principle, to foster both
longer staying with teams and still providing more money, relatively speaking,
for top players.
In business, stock options that can be cashed later are called golden
handcuffs, making executives think twice before leaving. Why not
in the National Football League? Indeed, teams could create stock
plans tied to revenue (not profits which can be “accounted”
to zero, no matter how much is taken in) and install a similar “option”
plan, using not ownership stock, but a tracking stock or similar non-owning,
non-voting investment vehicle.
At the same time, purposefully shave operations costs and reduce ticket
costs, generating more excitement and fan participation to increase profits
all around in order to allow players a higher amount in their profit share
at the end of the season. In this way, well coached teams with players
who will show up to play each game will win. Well run organizations
will have profits to share. And even if they don’t win, if
they play their best, with no “dogging”, interest will remain
and the fans will still watch and stay engaged.
In other words, give players an additional freedom, not less: not
just the freedom to leave for higher salaries, but the freedom to stay
where they want to (when they want to), and earn “lost” free
agent dollars back from the profit pool and vested retirement plan with
a team and city they don’t want to leave.
After being with one team for a while and living in their city, there
are those who don’t want to move, while there are others who, for
non-monetary reasons, want to move regardless of money. This plan
would satisfy both.
Appendices