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Monday, December 12, 2011

Murray Chass: RAYS’ G.M. SHOWS LOYALTY; PUJOLS?


The Pujols’ negotiation was not based on infatuation but on negotiation. The Angels’ offer appealed to Pujols and his agent, Dan Lozano, because it was decidedly better than any other he received.

At the beginning of last week’s winter meetings, the newly-named and housed Miami Marlins made a big splash, offering a 10-year deal. But it reportedly included enough deferred money to reduce the present-day value of the package significantly, and the Marlins declined Pujols’ request for a no-trade clause in the contract.

According to the St. Louis Post-Dispatch, the Cardinals, whose talks for a contract extension Pujols cut off at the start of last spring training (rejecting a 9-year $198 million proposal), began post-season negotiations with a five-year $130 million offer.

With 10-year offers in the air and on the table, that proposal grew to $210 million for 10 years. As with the Marlins’ offer, though, this one included a significant amount of deferred money. One person told me the Cardinals proposed deferring $30 million for 20 years without interest.

Since the deal was not accepted, the people who usually compute present-day value of contracts that include deferred compensation didn’t do the math, but as a rule of thumb I have used in such instances in the past, I think it’s safe to figure that the $30 million deferred would produce a present-day value of roughly have [sic] that amount. That means the Cardinals’ $210 million offer was really under $200 million, say $195 million at most.

The Angels came in with their 10-year offer of $254 million – nothing deferred – and also, the Post-Dispatch said, loaded with bonuses for milestone incentives that could make the package worth more than $280 million. ...

In terms of money, though, the argument could be made that the Cardinals’ offer provided Pujols with enough money and how much more did he need. But if you reduce the Cardinals’ $210 million because of the deferred money and raise the Angels’ $254 million offer because of the potential bonuses, the difference becomes more than a paltry few million a year. ...

Fay Vincent, the former baseball commissioner, thinks the Cardinals and other teams with such high-priced superstars could and should do something else. Taking a cue from Hollywood, where he once ran Columbia Pictures, Vincent believes the time has come for teams to pay part of an expensive contract in team equity.

Instead of paying astronomical salaries, he says, give player a small ownership share of the team, and when he leaves the team, he can sell the share back to the team. The player would benefit from the plan as well as the club because his capital-gains tax would be less than his income tax.

Earlier this year I saw an isolated mention of the Cardinals having made such a proposal but having Pujols reject it, but I have not confirmed that development.

If it did happen, it would not surprise me if the player rejected the idea because his agent would strongly oppose it. Agents want their commissions now, not 5 or 10 years from now when the player might sell back his share of the team and receive his monetary share.

Come to think of it, owning a piece of the team might induce greater loyalty on both sides.

bobm Posted: December 12, 2011 at 03:09 AM | 23 comment(s) Login to Bookmark
  Tags: angels, business, cardinals, miami

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   1. Coot Veal and Cot Deal taste like Old Bay Posted: December 12, 2011 at 04:44 AM (#4013775)
there seems to be a disconnect between the rather lengthty excerpt and the headline...
   2. Rough Carrigan Posted: December 12, 2011 at 04:47 AM (#4013776)
The Boston Bruins made just such an offer to Bobby Orr near the end of his career. Unfortunately, Orr's agent was scumbag Alan Eagleson who never informed Orr of the offer.
   3. Textbook Editor Posted: December 12, 2011 at 05:17 AM (#4013787)
WHY DO WE CARE WHAT A MAN IN HIS MOTHER'S BASEMENT THINKS, MR. PRESIDENT?
   4. Sleepy's not going to blame himself Posted: December 12, 2011 at 06:50 AM (#4013809)
Since the deal was not accepted, the people who usually compute present-day value of contracts that include deferred compensation didn’t do the math, but as a rule of thumb I have used in such instances in the past, I think it’s safe to figure that the $30 million deferred would produce a present-day value of roughly have [sic] that amount.


well, Maf is Hard. So hard U gotta half ppl to do it for U.

[sic]
   5. Something Other Posted: December 12, 2011 at 07:32 AM (#4013821)
Why would an agent's compensation be deferred? Just put a reasonable, present-day value on it and the agent gets his usual cut. What's so hard about that?
   6. The Piehole of David Wells Posted: December 12, 2011 at 08:01 AM (#4013826)
there seems to be a disconnect between the rather lengthty excerpt and the headline...


You know how it is for professional journalists. Your editor chooses your title.
   7. Mike Emeigh Posted: December 12, 2011 at 01:05 PM (#4013840)
If you didn't RTFA, this is what Murray said:

Pujols owes St. Louis nothing. The Cardinals drafted him and sent him out to play. He did the rest. If anything, the Cardinals and their fans owe Pujols for his monstrous annual production and his most-valuable-player-like contribution to two World Series championships. Without him they don’t have those seasons.

The Cardinals, on the other hand, should not be blamed for failing to sign Pujols. They might have benefited from a more aggressive approach, but based on the dollars they offered, it’s obvious they were stretching their resources as far as they felt they could while making sure they had enough money left to sign the rest of the unsigned roster.


-- MWE
   8. Bring Me the Head of Alfredo Griffin (Vlad) Posted: December 12, 2011 at 01:56 PM (#4013853)
It’s possible that Friedman had reasons other than loyalty to stay where he is. Maybe he didn’t want to have to try to build another contender out of the mess that the Astros have become.


This, pretty much. I doubt "loyalty" had all that much to do with it. Tampa is simply a much better job right now.

If Friedman wants to be GM of the Astros, he can apply in five years, after they fire the new guy for not turning the team around by then.
   9. RoyalsRetro (AG#1F) Posted: December 12, 2011 at 02:07 PM (#4013857)

Team ownership for active players is a slippery slope that I don't think the MLBPA wants to go down. The collective is weakened if the player has interests on both sides of ownership.


Look how quickly Michael Jordan has turned.
   10. Greg Pope Posted: December 12, 2011 at 02:07 PM (#4013858)
Also, I don't think that the player would save on taxes. If he gets stock as part of compensation, then he pays income tax on the value of the stock in the year he receives it.
   11. SOLockwood Posted: December 12, 2011 at 02:50 PM (#4013882)
Not to mention that since stock in MLB clubs isn't publicly traded, it would be very hard to decide what the precise value of said stock was when the player received it. There would also be the problem of him having to sell it quickly if he was traded or became a free agent.
   12. Zach Posted: December 12, 2011 at 03:12 PM (#4013887)
The Cardinals, on the other hand, should not be blamed for failing to sign Pujols. They might have benefited from a more aggressive approach, but based on the dollars they offered, it’s obvious they were stretching their resources as far as they felt they could while making sure they had enough money left to sign the rest of the unsigned roster.

You might even go so far as to say they came up with an offer that sounded competitive, but really wasn't. $30 million deferred with no interest for 20 years doesn't sound like a proposal you expect someone to accept.
   13. You Know Nothing JT Snow (YR) Posted: December 12, 2011 at 03:21 PM (#4013891)
Look how quickly Michael Jordan has turned.


Yeah, he's such an arrogant selfish jerk now.
   14. Cris E Posted: December 12, 2011 at 03:32 PM (#4013898)
Pujols showed *NO LOYALTY AT ALL* to the Rays. Whaddabum...
   15. RoyalsRetro (AG#1F) Posted: December 12, 2011 at 03:42 PM (#4013904)
I want to know where is the Cardinals loyalty to Ryan Theriot!
   16. Bob Evans Posted: December 12, 2011 at 06:40 PM (#4014136)
Yeah, he's such an arrogant selfish jerk now.

Michael Jordan fan, but...LOL!
   17. Dan The Mediocre is one of "the rest" Posted: December 12, 2011 at 08:12 PM (#4014262)
Team ownership for active players is a slippery slope that I don't think the MLBPA wants to go down. The collective is weakened if the player has interests on both sides of ownership.


The biggest issue is that if they left, the team would have to buy out their share(so there is no conflict of interest), which means that it's a very large exit fee. A 3% stake in a team valued at $700 million becomes a $21 million buy out.

Agents would recognize this as a great bargaining position. Teams don't want to lose liquidity so they could easily be leveraged into much higher contracts simply because they can't afford not to do it.

It's an interesting idea, but I don't think any owner wants to have to deal with that potential, so I doubt it ever happens.
   18. Walt Davis Posted: December 12, 2011 at 08:15 PM (#4014268)
Not to mention that since stock in MLB clubs isn't publicly traded, it would be very hard to decide what the precise value of said stock was when the player received it. There would also be the problem of him having to sell it quickly if he was traded or became a free agent.

You could make it a post-retirement payment to get around some of these issues.

But it seems to me the real problem here is that you only get to do such a deal maybe once or twice. You can't go around giving away 5% of equity to every big name FA your team signs over the next 50 years.

Perhaps more realistic is a Hollywood type of approach where a player gets a cut of team revenue. Or an attendance clause.
   19. Gotham Dave Posted: December 12, 2011 at 08:18 PM (#4014277)
Jordan hosed the union every chance he got when he was a player anyway, so he fits right in at the owners' golf outings.
   20. Bob Tufts Posted: December 12, 2011 at 09:12 PM (#4014342)
You can't go around giving away 5% of equity to every big name FA your team signs over the next 50 years.


Bialystock and Bloom (and Madoff) beg to differ.
   21. Zonk is a Doppleclapper Posted: December 12, 2011 at 09:31 PM (#4014366)
Also, I don't think that the player would save on taxes. If he gets stock as part of compensation, then he pays income tax on the value of the stock in the year he receives it.


Capital gains are taxed at a far lower rate than earned income.... shouldn't be, at least across the board, but are.
   22. jwb Posted: December 14, 2011 at 04:17 PM (#4016226)
It's against the rules (MLB Rule 20(e)), unless approved by Bud, for very good reasons.

As SOLockwood pointed out:
There would also be the problem of him having to sell it quickly if he was traded or became a free agent.

This was exactly the case with Rogers Hornsby and the St. Louis Cardinals. Hornsby was given stock because the Cardinals were short of cash. When Hornsby was traded to the Giants after the 1926 season, principal owner Sam Breadon and Hornsby disagreed on the value of the stock. In order to keep the case out of the courts, the other NL owners made up the difference.

John McGraw owned a piece of the Baltimore Orioles, also a cash poor organization at the time which had no majority owner. AL President Ban Johnson wanted to move the team to New York. New York Giants owner Andrew Freedman was opposed to this idea and bought out enough of the shareholders, including McGraw, to become the Orioles' majority owner. He then sold most of the Orioles' good players, including McGraw, to the Giants and some of the rest to the Cincinnati Reds, owned by his friend John T. Brush. This lead to the Orioles being unable to field a team. Johnson took players from other AL teams and assigned them to the Orioles. The Orioles did move to New York and become the Yankees.

So having players as part owners has been tried, has not worked out well, and has been largely prohibited.

While looking this up, I ran across rule 20(a), which covers ownership of more than one team. It's not against the rule as long as the entity does own more than 5% of any team. So the New York Times can own small pieces of the Yankees and the Red Sox and George F. Will can own small pieces of the Padres and the Orioles (does he still?). These were obvious conflicts of interest which bothered me and it bothered me that Bud was doing nothing about it.

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