Along with many of you, I am a fan of the Toronto Raptors. Underachieving — so we are led to believe — but with a whopping US$50 million+ payroll; you have to ask yourself why the team is so many games below .500 despite the fact that most NBA franchises spend about the same on their players as we do.
Credit an incredibly impressive union effort, for sure.
Wednesday’s WSJ controversy is the news item that 149 Merrill Lynch employees made more than US$3 million last year. Of their tens of thousands of employees, the percentage of big earners at Merrill is quite small when you consider that the average NBA player salary is US$5.6 million (skewed a bit by the guys making US$25MM per year). And the average NBA team sucks the tailpipe.
New York Attorney General Andrew Cuomo is hot on the heels of former Merrill CEO John Thain. Unhappy he is that Mr. Thain and the old Merrill Board paid out US$3+ billion of bonuses (a big chunk being underwater stock) in the wake of Merrill’s US$27.6 billion loss.
Paying bonuses in the wake of corporate losses might strike some as strange, unless of course you are the guy or gal that earned the firm $500 million in profitable revenue from your unit; what any bulge bracket i-banker should be paid to advise on a US$101 billion M&A deal is worthy of debate. But it isn’t criminal in my mind.
We’ll learn more about what AG Cuomo has in mind for the Merrill crew next week. But once he is done with AIG and Merrill, perhaps he would be kind enough to turn his mind to the salaries of underperforming NBA players. 25 of the NBA’s 30 teams are not living up to their billing. At US$5.6 million for an average player, the idea of pay-for-performance has long gone by the wayside.
The fact that an average NBA player salary has jumped from US$275,000 in 1982-83 to US$5.6 million today more than swamps the growth of your average pay for an i-banker on Wall Street or Bay Street.
And NBA players get paid after each and every game, in cash. Direct deposit. Not one of them is getting half of their comp in so-called “long term incentive” stock payments in the form of the team’s equity shares. Ask any i-banker if they’d like to trade places with that model.
How would Tony Parker’s performance be on any given night if he knew that going 1-7 would earn him a fraction of his target compensation for that game? That’s how it works on Bay Street and Wall Street. In the NBA, guaranteed contracts ensure you make a killing even if you sleepwalk during games, as both Vince Carter and Tracy McGrady have done this year.
AG Cuomo need only to stop by Madison Square Garden to see a Knicks game. If he does, the formal investigation into NBA salary rape might start the very next day. Chasing Merrill’s top dogs is the worst of selective prosecution/persecution.