(Photo by Stephen Shugerman/Getty Images)
Kevin Garnett has a career in finance waiting for him after the NBA.
His basketball career has obviously lived up to any expectations ever imagined for him—Multiple All-Star appearances, Defensive Player of the Year, NBA MVP, NBA Champion. Yet these many accomplishments, though noteworthy and historic, do not give us a true sense of what Mr. Garnett can do for America moving forward.
When Kevin Garnett signed his six-year, $127 million deal in 1997—the single largest contract in professional sports at the time—it made sense since it was what another larger market franchise (Chicago, New York) would have paid for him, as he was emerging as one of the NBA's top players.
Though there were other factors with rookie contracts among other issues, this contract was hugely responsible for structural redesigns in a new Collective Bargaining Agreement between the players and owners, leveling the playing field between large and small franchises by instilling a rule about the salary cap, beyond which teams must match dollar for dollar the amount they exceed that cap, though there is a small window of room between the cap and the penalty tax, called the luxury tax. The money is then redistributed to franchises whose wealth doesn’t allow them to compete on the free agent market.
With a team like the New York Knicks, for example, there was an inherent unethical imbalance with their ability to outspend smaller franchises on talent. That created a lack of competition between them and a team like Minnesota, who could barely afford to spend on one player, making the ultimate product—the games themselves—uncompetitive. To compensate, the Knicks now have to match dollar for dollar the amount they spend on player contracts over the salary cap.
Does any of this sound familiar? We are now in the process of rewriting the rules that govern our financial markets. In capitalism, money talks. As long as a company is on its feet and can afford to pay large amounts of money to retain its talent, there’s no need for them to be considerate to the notion of letting other companies be competitive with them. But when outside forces beyond shareholders and creditors are on the hook for a business' livelyhood, how much can that business overspend without establishing some level of responsibility?
The recent issue with AIG is they are paying retainers to employees who have in some cases been directly responsible for the country’s financial fallout. AIG is so important that their bad debt is far-reaching enough that it has affected everything else in the credit market.
In order to stay competitive in the marketplace...in order to stay afloat, they needed an infusion of capital rather than being allowed to fail.
This is a little bit like Minnesota needing money from the other franchises in order to pay their player contracts. Was Garnett a bad guy because he signed that contract and committed his franchise to paying an unmanageable dollar amount?
If the Timberwolves had signed Garnett and then had the leverage on the NBA to not be allowed to fail, and required multiple cash infusions to stay afloat, would Garnett’s contract have been palatable to any of the other franchises? Or would the other 29 teams have demanded a restructuring of it?
AS it turned out, the contract stayed in place but an accountability system across the board made it possible for small market teams to pay incoming free agents AND retain its own star players, remaining competitive in spite of their smaller recource pool.
Financial companies shouldn’t need a dollar sharing program as long as they’re solitarily successful. But when they start needing taxpayer’s money to support themselves, a restructuring of the system is necessary. Does that mean previously agreed to contracts need restructuring?
In a word, no. Garnett didn’t have his contract renegotiated (though his team wasn’t able to sign any significant complementary players until he took less money before the 03-04 season). The solution was a restructuring of the entire system enabling the contract to stay in place, and allowing the competitive balance of the rich vs. poor to be leveled.
Because of his unique position in the situation, I’m putting this out there for President Obama and the rest of America: Kevin Garnett, Minister of Finance (its an honorary title).
We're going to send you the most entertaining NBA articles, videos, and podcasts from around the web.
2 Comments
Loading more comments...
This comment and all replies have been deleted This comment has been deleted Undo delete