NBA: Looking Into Contract Incentives
I know that you and I had the same exact thought when the Cavaliers offered hustle player Anderson Varejao to a six-year, $50 million dollar contract: "WTF are you doing Danny Ferry? Are you drunk?." Rightfully so. On the surface, that contract appears to pay Varejao an average of $8.3 million a year for six whole years. A bit much? Further investigation shows us that these "incentives" exist in his contract, but what does that matter, the guy signed for $50 million!
Well, it actually does matter Anderson, because these incentives will likely turn that $50 million into a much lesser sum. Figured I would just let you all in on the big secret of "contract incentives."
Did you know that these players would have earned:
$1.5 million dollar bonus for Luke Ridnour if he won Defensive Player of the Year.
$500,000 for Nick Collison if he won the League MVP!
$500,00 for Adonyle Foyle if would of won Finals MVP!
And so many other just almost mockingly genius incentives planted into the contract.
Don't get me wrong, Luke Ridnour is a nice little all around point guard. But we all know he's an offensive PG, and out of the starting 30 PG's in the NBA, he might be the 30th when it comes defense...yes, Nash is a better all around defender than Ridnour. So it was almost like the GM was mocking Luke when he asked him to sign the contract, just so he could see the look on Luke's face when he read "$1.5 million for Defensive Player of the Year;" Luke must of laughed at it...or at least I hope so...
My point is simple. In these nasty economic times, these contract incentives becomes so far-fetched that the entire point of having them is pretty much useless. When a it appears that "Anderson Varejao signed a six-year, $50 million dollar that is only half the truth. There is obviously a team option, maybe two or three in it. There are TONS of incentives; I'm sure he has to average a double/double each year to get one million each year. Or maybe he has to lead the league in charges and he gets $500,000. Or maybe he has to average a double/double while the Cavs win the Finals and he gets a two million dollar "bonus." Reality: it's not a bonus. That "six-year, 50 million" is the MAXIMUM he will possibly make in that time; I'd give it a 0.2 percent chance of happening.
But who knows, these are just estimations. I did actually read that I believe around $40-$42 of his actual contract is guaranteed. That makes it sound a lot less ridiculous. From almost $10 million a year to analyzing it and realizing it's more like $6.7 mil a year.
That specific example was just one of the many, many contract incentives that exist. I have only mentioned five or six, when most all contracts have some type of incentive in it. I know Mario Chalmers got an "extra" $25,000 for showing up to training camp in good shape and participating throughout. Not bad. So who knows, maybe Ridnour will work on his defense the next year and climb to the ranks of the Dwight Howard's, Ron Artest's, Marcus Camby's, Ben Wallace's, and Shane Battier's for DPOY. They are the only thing standing between his $1.5 million.
Then again, Eric Dampier might end up as the getting voted in by coaches for the back-up Center gig on the Western Conference All-Star Team this season(09-10). When it's officially, Mark Cuban I believe has $750,000, or maybe a straight up $1.0 million due to Eric.
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