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 baseballs future
7. To avoid second season only viewing of the NBA
8. To become an experiment for the teams league if the league isnt 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 teams 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 its 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 peoples money. Its 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 teams destruction. Thats 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 Americas 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 lifetimes 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 dont 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 dont want to leave.
After being with one team for a while and living in their city, there are those who dont want to move, while there are others who, for non-monetary reasons, want to move regardless of money. This plan would satisfy both.