Letter from Roger Goodell (1 Viewer)

[Insomniac]

So you could make the argument that the individual NFL franchises are merely shareholders in a uniform entity that is the NFL rather than being individual competing businesses that are in cahoots to fix prices. In fact, a shareholder situation is pretty similar to how they act. If that's the case, the NFL would be the business and its competition would be other entertainment providers which would at least include other post-collegiate football leagues and could conceivably include other professional sports and perhaps even other television production entities and live entertainment events like Muppets On Ice.

The NFL made an argument very much like that to the US Supreme Court in the American Needle case. It was rejected 9-0. The law says the different NFL teams are separate businesses and no matter how much you want to believe it should be considered 1 business the question has been decided against your belief.

 

[FUBAR]

Mawae said that if the NFL contends the union walked away from mediation, "that's a fabrication and a lie. We sat in that room ... Tuesday and Wednesday of last week for 16 hours. ... We met face-to-face a total of 30 minutes."

http://sportsillustr...r.ap/index.html

I'm having a hard time understanding this.

No kidding. Mr. Mawae, if you walked out on Thursday, it doesn't matter what you did on Tuesday and Wednesday, you still walked out on Thursday.

Let's assume for a minute that his statement is accurate. Are you actually going to sit around the 3rd day after basically being ignored the other 2?

Who says he was being ignored? He may be trying to get you to think that. But that's not what he actually said.I'm not privy to NFL/NFLPA mediation practices. But the mediations I have been involved in had very little in the way of "face time" between the parties. There would be an initial introductory face-to-face session where the parties might state their current positions/wants and their objections to prior proposals, but then the parties would each retire to their respective rooms/suites for the ongoing negotiation. The mediator would work back and forth between the two sides taking proposals and counter-proposals back and forth. So, yes, you might sit there for a while whilst the mediator is over in the other side's room discussing with them your last counter offer you sent with him. And you'll wait some more while they formulate a counter-proposal, which the mediator then brings back for you to consider.

If the NFL's mediation practice is like that sort, Mawae either has a wrongheaded idea of how the process is supposed to work, which means we can ignore him, or he's intentionally trying to mislead us and spin criticism away, which reflects poorly on him. But, again, I've not been a party to an NFL mediation format so take my insight, or lack thereof, with a pound or two of salt.

The mediator in those situations is not a judge, he's a tool for negotiation. He'll carry proposals back and forth and try to explain where the other side is coming from without the emotional charge that would be attached if that party were saying it himself. But he may also try to inject some pragmatism and objectivity (as in "this is how I see it playing out...") into the matter to encourage some movement by a party. He might play devil's advocvate with an idea so that party revises it and puts a solid proposal forward. He's unbiased as to the actual issue, so his assesment, at least in theory, should be neutral and without agenda. He just tries to help the parties find the middle ground, if one is to be found.

Critics of mediation will say that a mediator does have a bias. It's getting a deal done so the mediator can market himself for future mediations. Some would argue that he then puts his own gain above that of brokering an agreement for the maximum benefit of both parties. He instead tries to get the less resolute party to cave so he can pad his resume. And, of coourse, one could argue that no one is capable of being completely neutral on an issue so some subconscious bias may sneak in as well.

My comment assumed Mawae's comment was 100% accurate, it very well may not have been. If, as Atallah said, the sides are very far apart, they need to discuss things face to face. Even if the mediator was going back and forth and they just weren't meeting face to face, there's no reason for them to be in the same building.Both sides are trying their tactics in a power play, if this continues much longer they're going to lose fans. I'll be one of them who could be turned off by this crap power-plays between people who are blessed with talent but spoiled by it.

 

[Ice Cream Man]

That's not an argument, it's a tautology; some companies who pay CEOs a lot stick around, therefore, companies who pay CEOs a lot are making the right choices. The tautology works the other way, too; some companies who pay CEOs a lot go bankrupt, therefore, companies who pay CEOs a lot are making the wrong choices.

I have no idea what you're talking about here. Firms that pay CEO's "a lot," but in line with their contributions to the firm --based on coming up with new ideas and strategies -- is obviously a good thing for the firm. Efficient firms live on; those that act inefficiently die out. It's a rather straightforward argument.

The question is, are companies getting good value for what they're paying CEOs? As I said, there's been no evidence provided for that other than the fact that CEOs are paid a lot. If you cut the pay of CEOs by 90%, so that the head of B of A was making $3 million/year instead of $30 million/year, I don't think the success of the company would be substantively affected.

There's no way this would be true. All you would have to do is convince one firm to cut it's CEO pay by that amount and price every other firm out of business. The funny thing is that even the CEO of that firm would love this kind of plan because, once the rest of the industry has been removed, they can pay him even more than he was getting before the pay cut. [in fact it would be the CEO who would have thought of this plan!]Not only does this not happen, but nothing even remotely close to it happens. The reason is simple: CEO pay is fairly competitive.

This idea that there is millions (billions?) of free money on the table, and no one is taking advantage of it, just goes against everything we know about human behavior.

 

[CalBear]

That's not an argument, it's a tautology; some companies who pay CEOs a lot stick around, therefore, companies who pay CEOs a lot are making the right choices. The tautology works the other way, too; some companies who pay CEOs a lot go bankrupt, therefore, companies who pay CEOs a lot are making the wrong choices.

I have no idea what you're talking about here. Firms that pay CEO's "a lot," but in line with their contributions to the firm --based on coming up with new ideas and strategies -- is obviously a good thing for the firm. Efficient firms live on; those that act inefficiently die out. It's a rather straightforward argument.

Again, your "argument" proves absolutely nothing about whether CEO compensation is appropriate.

The question is, are companies getting good value for what they're paying CEOs? As I said, there's been no evidence provided for that other than the fact that CEOs are paid a lot. If you cut the pay of CEOs by 90%, so that the head of B of A was making $3 million/year instead of $30 million/year, I don't think the success of the company would be substantively affected.

There's no way this would be true. All you would have to do is convince one firm to cut it's CEO pay by that amount and price every other firm out of business. The funny thing is that even the CEO of that firm would love this kind of plan because, once the rest of the industry has been removed, they can pay him even more than he was getting before the pay cut. [in fact it would be the CEO who would have thought of this plan!]Not only does this not happen, but nothing even remotely close to it happens. The reason is simple: CEO pay is fairly competitive.

This idea that there is millions (billions?) of free money on the table, and no one is taking advantage of it, just goes against everything we know about human behavior.

You really think that a group of people with power and money collaborating to give themselves more power and money goes against what we know about human behavior? How many humans have you met?

 

[CalBear]

Let me expand on this, because fantasy players have a tool to understand the issue here.

Let's say you're in an auction league, and you're trying to figure out whether RBs are fairly valued in this league. You can pull up historical data and figure out that the top RB tends to go for about 40% of the salary cap, but does that mean that 40% of the salary cap is the right number? How could you tell? Is spending 40% of your cap on your RB1 and 10% of your cap on your QB better or worse than spending 25% of your cap on each of them?

Any good fantasy player knows the answer to this one; the question boils down to, how much value per dollar is the player providing above a replacement-level player at the same position? We can project VBD numbers before the season, and look at the actual data after the season; the right strategy is the one that returns the most points above the baseline. If it turns out that the $40 RB1 and $10 QB provide more value than the $25 RB1 and $25 QB, then RB1 is undervalued (or QBs are overvalued); if it turns out that the $25 pair provides better value, then RB1 is overvalued (or the QB is undervalued). We can measure this and test it.

According to Ice Cream Man's argument, the fact that some teams succeed and some teams fail proves that RB1 is paid correctly, but it does nothing of the sort. He assumes that the market is efficient (players are always paid what they're worth), because any inefficiencies will be eliminated by the magic of the invisible hand of the market, and therefore the market is efficient. As I said, it's a tautology; it does nothing at all to prove that RB1 is getting paid a fair salary.

In the corporate analogy, let's say BofA's CEO is getting $30 million a year (which he is, more or less). Let's compare him to the best 300 employees of the company, whose average salary is $100K. Is he providing more value above the baseline than those 300 employees combined? Would the impact on the company be greater if the CEO left, or the 300 best employees? The efficient market hypothesis (which doesn't even qualify as a theory) suggests that their value is the same, because their pay is the same, but that's a load of bull. You could replace BofA's CEO with a baseline CEO, and if you still had your 300 best employees, the company would keep chugging along. Whereas if you replace your 300 best employees with 300 baseline employees, you're going to be in trouble in all your lines of business.

Returning to the NFL, how much value above the baseline do the owners provide to the league, relative to player value? This question is complicated by the fact that baseline players get replaced, while baseline owners (and even below-baseline owners) can hang around indefinitely, especially with the league revenue-sharing arrangements. So while you can pretty much assume that there are no below-baseline players in the NFL, there are certainly a number of below-baseline owners.

 

[Ice Cream Man]

According to Ice Cream Man's argument, the fact that some teams succeed and some teams fail proves that RB1 is paid correctly, but it does nothing of the sort. He assumes that the market is efficient (players are always paid what they're worth), because any inefficiencies will be eliminated by the magic of the invisible hand of the market, and therefore the market is efficient. As I said, it's a tautology; it does nothing at all to prove that RB1 is getting paid a fair salary.

A more apt comparison would be a environment where you didn't have a means to measure player performance, other than observing how well your team did overall (win-loss record). Given this imperfect information, if a fantasy team wins 10 years in a row, then one would reasonably conclude their selection of players was pretty efficient. If one lost 10 in a row, one would reasonably come to the opposite conclusion.

 

[Ice Cream Man]

You really think that a group of people with power and money collaborating to give themselves more power and money goes against what we know about human behavior? How many humans have you met?

I've articulated why, using your own assumptions, why this would lead to firms rationally choosing to undercut CEO pay dramatically. That it never happens suggests your underlying assumptions are wrong.

 

[Ice Cream Man]

In the corporate analogy, let's say BofA's CEO is getting $30 million a year (which he is, more or less). Let's compare him to the best 300 employees of the company, whose average salary is $100K. Is he providing more value above the baseline than those 300 employees combined? Would the impact on the company be greater if the CEO left, or the 300 best employees? The efficient market hypothesis (which doesn't even qualify as a theory) suggests that their value is the same, because their pay is the same, but that's a load of bull. You could replace BofA's CEO with a baseline CEO, and if you still had your 300 best employees, the company would keep chugging along. Whereas if you replace your 300 best employees with 300 baseline employees, you're going to be in trouble in all your lines of business.

It's irrelevant how much 'above the baseline' (if such a thing could even be calculated) a CEO or worker is or is not. Their pay reflects the very variation from that baseline or average. Essentially you are arguing that a bunch of above-average workers that do small things for the company, are more important than one worker who does major things for the company. A strange argument, given that without the CEO -- who came up with the product/idea in the first place, and hence the existence of the firm -- there would not be jobs for "a bunch of above-average workers" to fill.

 

[CalBear]

It's irrelevant how much 'above the baseline' (if such a thing could even be calculated) a CEO or worker is or is not. Their pay reflects the very variation from that baseline or average.

You're asserting this without proof. And of course it's relevant; if you have a replacement-level CEO, you can replace him with no loss of performance. Why would you pay him good money if you can replace him for nothing?

Essentially you are arguing that a bunch of above-average workers that do small things for the company, are more important than one worker who does major things for the company. A strange argument, given that without the CEO -- who came up with the product/idea in the first place, and hence the existence of the firm -- there would not be jobs for "a bunch of above-average workers" to fill.

Tom Montag hasn't come up with anything other than schemes to destroy multiple once-proud financial firms, with implications still being felt by everyone in the country, except Tom Montag, who is still styling with an 8-figure income. We're not talking about Amadeo Giannini here. Giannini had a lot of value above the baseline; Tom Montag doesn't.

 

[Maurile Tremblay]

The players have responded to the letter. That article includes links to pages 2 and 3 of the four-page response, but says that the entire letter will be published at some point.

 

[Maurile Tremblay]

Do any other businesses impose a salary cap on their employees?

I didn't know that the players had individual caps. However, my employer has put a cap on my job. I've already been told that the most my current position will ever pay is x amount.

That's fine. Any employer is allowed to put a cap on its own employees' salaries. What's not fine is having all the employers in a particular industry collude to enact a shared salary cap that they'll all obey. That's price-fixing.

 

[wakelawyer]

Do any other businesses impose a salary cap on their employees?

I didn't know that the players had individual caps. However, my employer has put a cap on my job. I've already been told that the most my current position will ever pay is x amount.

That's fine. Any employer is allowed to put a cap on its own employees' salaries. What's not fine is having all the employers in a particular industry collude to enact a shared salary cap that they'll all obey. That's price-fixing.

But it's not all of the employers in a particular industry. There is the UFL, Arena Football, the CFL and other opportunities. I don't see the NFL any different than I do other franchise type industries. If I want to be a manager at a Quiznos, there is a range for my salary even though each franchise is owned by different people. The irony is that the players want the owners to act collectively. If they didn't and each team could spend as much or as little as they wanted with no restrictions whatsoever, I guarantee that, overall, total salaries would decrease. I can guarantee that no 2nd string fullback or long snapper would receive the now current minimum salary. Moreover, if the tv money is not evenly split and revenue sharing disappears (which does violate anti-trust law), many teams would be forced to fold or would certainly not be able to spend $100+ million per year in salaries. The players should be careful because they may end up getting what they ask for and it would be tragic for all but the top tier of players.Edit to add that I did not read all of the posts so I apologize if I repeated earlier arguments.

 

[David Dodds]

I do think if the owners were serious about a deal (or even continuing negotiations), why didn't they attend the last week of meetings? The NFLPA brought everyone that was needed to make a decision. The owners did not.

When the owners did make a last minute proposal, it had some things that were considerably different at the last moment. Even if the players thought the deal made sense, changing a bunch of things a few hours before the clock expires is a sure way to not get a deal done.

Based on the response to Goodell's letter, I think the players are inclined to take their chances in court. That sucks for all of us, but is likely the player's best use of leverage.

After April 6th, one side will have considerably more leverage. Hopefully the egos are not such that a deal cannot get done after those initial rulings are made.

 

[Cripster]

I do think if the owners were serious about a deal (or even continuing negotiations), why didn't they attend the last week of meetings? The NFLPA brought everyone that was needed to make a decision. The owners did not. When the owners did make a last minute proposal, it had some things that were considerably different at the last moment. Even if the players thought the deal made sense, changing a bunch of things a few hours before the clock expires is a sure way to not get a deal done. Based on the response to Goodell's letter, I think the players are inclined to take their chances in court. That sucks for all of us, but is likely the player's best use of leverage.After April 6th, one side will have considerably more leverage. Hopefully the egos are not such that a deal cannot get done after those initial rulings are made.

I think it will be longer than April 6th. I am afraid whoever loses will appeal and nothing will happen to after the appeal.