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How deferred comp works & why we can shut up about it
Every LAD-related thread includes a litany of comments whining about deferred comp. So allow me to briefly explain how it works and why we can all shut up about it.
**What is it:**
1. Clubs can defer payments on any percentage of a player's contract.
2. The player starts receiving periodic payouts from the escrow account at a pre-determined date/time, generally 10+ years after the contract is signed.
2. Deferred money is placed into an escrow **today**, when the contract is signed. Clubs **are not** kicking the can down the road on contract payments when deferring comp because the clubs pay into the escrow account immediately.
4. **Mostly importantly**: escrowed funds can be invested in interest-bearing assets. This means that the club can invest the escrowed funds in extremely-low risk/zero-risk assets, like a government bond, and receive regular interest payouts before escrow payouts begin.
5. Those interest payments can be further capitalized years ahead of the start of escrow payouts.
**Why you can shut up about it:**
1. Deferred comp is explicitly allowed by the CBA without any restrictions whatsoever. **Everybody agreed to this system.** And even with all the uncertainty over the next CBA, I HIGHLY doubt any rules around deferred comp change because....
3. The MLBPA has made it extremely clear [via actions] their overarching priority is ensuring there is no ceiling on player earnings. Deferred comp is an extremely powerful tool to maximize the top 1% of player earnings. It's a win-win in the eyes of both the players [union] and the owners.
2. There is nothing magical about LAD in terms of their usage of deferred comp. Any MLB club EASILY could pull this lever for any contract, given they can front the capital to place into escrow. If an owner was truly motivated, I have no doubt they could solicit capital from creditors/investors to front the escrow while providing those investors with strong ROI. I don't care how poor your franchise is, your owner is a billionaire and knows other billionaires.
Now please stop diluting every damn thread here with bitchmoaning over deferred comp. It's not special and your favorite team could use it too if your ownership was actually motivated to win.
#sport
Every LAD-related thread includes a litany of comments whining about deferred comp. So allow me to briefly explain how it works and why we can all shut up about it.
**What is it:**
1. Clubs can defer payments on any percentage of a player's contract.
2. The player starts receiving periodic payouts from the escrow account at a pre-determined date/time, generally 10+ years after the contract is signed.
2. Deferred money is placed into an escrow **today**, when the contract is signed. Clubs **are not** kicking the can down the road on contract payments when deferring comp because the clubs pay into the escrow account immediately.
4. **Mostly importantly**: escrowed funds can be invested in interest-bearing assets. This means that the club can invest the escrowed funds in extremely-low risk/zero-risk assets, like a government bond, and receive regular interest payouts before escrow payouts begin.
5. Those interest payments can be further capitalized years ahead of the start of escrow payouts.
**Why you can shut up about it:**
1. Deferred comp is explicitly allowed by the CBA without any restrictions whatsoever. **Everybody agreed to this system.** And even with all the uncertainty over the next CBA, I HIGHLY doubt any rules around deferred comp change because....
3. The MLBPA has made it extremely clear [via actions] their overarching priority is ensuring there is no ceiling on player earnings. Deferred comp is an extremely powerful tool to maximize the top 1% of player earnings. It's a win-win in the eyes of both the players [union] and the owners.
2. There is nothing magical about LAD in terms of their usage of deferred comp. Any MLB club EASILY could pull this lever for any contract, given they can front the capital to place into escrow. If an owner was truly motivated, I have no doubt they could solicit capital from creditors/investors to front the escrow while providing those investors with strong ROI. I don't care how poor your franchise is, your owner is a billionaire and knows other billionaires.
Now please stop diluting every damn thread here with bitchmoaning over deferred comp. It's not special and your favorite team could use it too if your ownership was actually motivated to win.
#sport
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