The Unforgivable Conflict of Interest: Sports Agents, Robbing Their Ignorant Clients

The ethical course is to choose.

The ethical course is to choose.

Sports agents are rich, powerful, and ethically handicapped by inherent conflicts of interest. The first two qualities so far have insulated them from dealing fairly and openly with the second. This is wrong, and has got to stop. For it to stop, it would help if the players, their unions, the sports leagues and the sports media didn’t either intentionally pretend not to see the obvious, or weren’t too biased and ignorant to realize what’s going on.

Four years ago, I wrote about this problem in a long piece for Hardball Times, a baseball wonk blog of consistent high quality.  The specific agent I was writing about was Scott Boras, the king of baseball player agents, but the egregious conflict I flagged isn’t confined to that professional sport; it’s present in all of them. In the article, I argued that Boras, a lawyer, is engaged in the practice of law when serving as an agent and was therefore violating the legal ethics rules, which prohibits having clients whose interests are directly adverse to each other, specifically in the so-called “Zero-Sum Conflict” situation.

A lawyer can’t assist two clients bidding for the same contract, because the better job he does for one, the worse his other client fares. A lawyer can’t sue a defendant for every penny that defendant has on behalf of one client when he or she has another client or two that have grievances against that same defendant—if the lawyer is successful with the first client, he’s just ruined his other clients’ chances of recovery. There is some controversy over whether the legal ethics rules automatically apply to a lawyer-agent like Boras, but never mind—whether he is subject to the legal ethics rules or not when serving as an agent, the conflict of interest he is blithely ignoring still applies, still harms his clients, still puts money in his pockets, and still should not be permitted.

I heard one of the interchangeable out-of-work general managers on the MLB satellite network station go on about how “in most professions, what Boras does would be an illegal conflict of interest, but its not regarded as a conflict in baseball.” Wrong. It may not be illegal, but it is still a conflict of interest, and whether supposed experts like this sacked GM calls it a conflict or not, it still is one.

Just to avoid The Boras Zone for a nonce, let’s look at another player agent, Casey Close. He just closed a huge deal for his star client, Dodger pitching ace and Cy Young Award winner Clayton Kershaw, worth 210 million dollars, making Kershaw the game’s highest paid player. But Close is also the agent for Japanese free agent pitching star Masahiro Tanaka, who has until January 24 to sign with a major league team. Tanaka will go to the highest bidder, and he reportedly wants to play for a West Coast team, which includes Kershaw’s team, the L.A. Dodgers. Did Close’s huge contract deal for Kershaw take Tanaka’s favorite team out of the bidding for his services, by using up their discretionary resources for starting pitchers? If so, Tanaka was the victim of a conflict of interest. If Casey asked the Dodgers for more money for Kershaw, and the team’s GM responded by saying, “Casey, any more than 30 million a year, and we’ll have to drop out of the bidding for Tanaka, and we know, with your cut of his deal, you wouldn’t want that”? If so, Kershaw was the victim of a conflict of interest.

Will other teams, assuming that the Dodgers are tapped out, lower their bidding for Tanaka? Did Dodger brass have a meeting in which they said, “Well, if Close is going to demand that much, we can sign one of these guys, but not both”? There is only one way to avoid these problems for certain, and that is for Close to drop one of his Dodger-routed pitchers as a client , and let let another unconflicted agent serve that client’s needs without being constrained by obligations to other clients.

Now let’s look at one of Scott Boras’s current conflicts (he has over a hundred baseball clients; he most have conflicts all over). He is the agent for Stephen Drew, the Red Sox shortstop in 2013, now a free agent. Drew thought he had a chance at a big contract with one of the teams needing a shortstop, but such a deal hasn’t materialized: it looks like his best shot is to re-sign with Boston, though not for the money and the years he had expected or wanted. Boras also represents Xander Bogaerts, the Red Sox rookie who is slated to replace Drew if he doesn’t come back to the Sox in 2014. Bogaerts’ earning potential as a shortstop is greater than as a third baseman, the position he would likely play if Drew returns. As a shortstop, Bogaerts is considered a front-running candidate for Rookie of the Year; playing at third, probably not.

This is a classic Zero Sum conflict. If Boras persuades the Red Sox to sign Drew, he has cut off his other shortstop client. (Actually, Boras’s conflict is three deep: he also is the agent for Deven Marrero, the Red Sox’s next up-and-coming shortstop, who would also benefit if Drew went elsewhere.) The Sirius-XM “experts” agreed: if Boras could, he would steer Drew to the Mets. Steer him? For the benefit of Bogaerts and, by extension, Boras’s percentage of whatever he made down the line? There could not be a more blatant example of an impermissible conflict of interest. Why is it permitted?

Well, they say, the clients waive the conflict. Baloney. First and foremost, it’s an unwaivable conflict—in law, in common sense. A professional can’t allow himself or herself to work on behalf of two clients when a conflict forces him to trade off the welfare of one client against the other. It is wrong. It’s greedy and it’s indefensible. It is only ethical to ask clients to wave conflicts when you know that they won’t affect your performance of your duties at all and won’t harm the interests of either client. When two clients are competing for the same job, with the same team, or both trying to get a maximum cut of a limited budget, they can’t eliminate the conflicts by acceding to them.

Even if they could waive the conflicts—and they cannot—to do so would require that the conflicting clients fully comprehend what the conflict is so they can give informed consent. I doubt that is possible, and I doubt it is attempted. Do you really think Scott Boras says to Steven Drew, “Steve, I have a conflict, and I may have to tank negotiations with the Red Sox so the kid can get your job like he wants. You understand. OK?” Because if Boras doesn’t, and Drew doesn’t understand that’s the situation with him and Bogaerts, he isn’t giving informed consent. And if he did understand that, he wouldn’t give informed consent. And if he was so stupid that he would give informed consent when it’s obviously against his best interests, that’s exactly why it’s an unwaivable conflict.

If the player agents, who know they are conflicted, are so greedy that they continue to operate as if the conflicts don’t exist, the players unions, or the leagues, or the agents association, or the law, needs to stop them.

______________________________

Source: Hardball Times, USA Today

13 thoughts on “The Unforgivable Conflict of Interest: Sports Agents, Robbing Their Ignorant Clients

  1. While I think I understand your point, surely this applies to all talent agencies. Surely those agencies (often with a single high-flyer in charge of a multitude of stars) has the same conflict. I thinking of modeling etc agencies in particular. Surely you can’t really expect an agent to only represent a single person per class (i.e. One pitcher, one batter, one blonde, one redhead etc?)

    Further afield but similar, agents handling golfer or tennis player (who are freelance) advertising contracts.

      • My point Jack is not “everyone does it”, but rather one cannot make money as a sports agent if one does not have more than one client (particularly at the beginning where you’re probably in charge of the dross). And as soon as you have multiple clients you have the ethical problem. It may be that you think there should be agents at all. In which case instead of sniping from the sidelines, maybe you could invent and ethical solution. In the particular case of entire industries that are unethical by their very nature, I think that valid ethical complaints should be accompanied by solutions that are more than “don’t do that”.

        • “I think that valid ethical complaints should be accompanied by solutions that are more than “don’t do that”.”

          Why? There’s nothing wrong with identifying something needs improvement, without knowing a solution is. That’s just a cop-out argument made by people who don’t think there’s a problem.

          • Please don’t quote only a part of my comment. I specifically said in the case of entire industries with a flaw (how about Alcohol and Tobacco?).

            Basically here Jack is talking about dismantling the entire agency system because of a fundamental flaw in the machanics. I don’t necessary disagree, but in this case, what system WOUDLN’T have the same ethical problems.

            I would also say that while I definitely think there are ethical abuses, what he is talking about here should also be a matter of personal responsibilty/advice. If you know that Agent X also handles your biggest competitor (the best example of this sort of abuse – and something that should definitely be publicised up front), surely you need to think about moving because you know he won’t necessarilybe working for your best interests (although if he’s a superstar agent he might still get you a better deal than anyone else – even if not better than your competitor). In addition with agents I assume there is a No Deal – No Fee arrangement – so is he actually working for you if you haven’t paid him (which doesn’t actually get arround the fundamental ethics problems if he has promised to take you on)?

            • Even in the context of an entire industry, identifying a problem does not oblige the identifier to articulate a solution one iota.

              My comment stands. In fact I should have expanded my comment to include another part of your paragraph accusing Jack of sniping from the sidelines. Don’t be an ass. He’s not obligated to solve problems he identifies. Neither are you.

              I can easily understand the obligation one creates for oneself if, after identifying the problem, one continues to gripe and therefore imply the problem is one they care about solving. But that has not occurred here.

              • OK We’ll agree to disagree.
                I believe in constructive criticism. In terms of ethics this mostly can be “act like a nice guy”, or “act like everyone else in your industry does (or should)”. In this case that doesn’t work (because even if the agents believe they’re doing their best for everyone (i.e. being a nice guy) the fundamental zero-sum problems still comes into play).
                As for my terminology – if you think that makes me an ass, I personally believe I have read far worse cases of assiness on this blog and on the comments here (without those people getting called asses).

                I personally thinking I was using a colloquialism to make a blunt point and not being an ass.

                Pace.

    • Sports may be a special case. I read somewhere that a typical pro club in a televised sport league typically now (i.e. theres been a recent change) spend around 60-80% of revenue on players wages, with a high fraction of that sum going to the team’s 2-4 star players. That fraction puts a lot of burden on the clubs and, I can see, would create the zero sum clash as described. So maybe in modern times the supply (of highly individual top talent) is being choked off at source and rent (wages/fees) is being taken from a vassal consumer (the clubs) – i.e.near complete market failure. If so at some point the sports bodies will create a free market, by limiting/controlling the free conduct of agents. (But that makes professionalism, and Jack, a socialist – which seems unlikely…)

      I’m not sure that modelling agencies would encounter the same problem. There’s a lot of ‘jobs’ or time slots for models, needed at short notice. There are no leagues, no trading season, no teams in the modelling trade as far as I know. So maybe agents can set fees/hr and let the demand pull the supply – and the market rules ok. That’s all guesswork you understand.

      Imagine as a contrast an employment agency for CEO’s. Although high performing CEOs are individually highly sought after, the pay of CEOs is a very small part of total revenue of companies. So the market can still work (allegedly). (Now I think of it, surely no top CEO would entrust his remuneration to an agency. Which maybe says something by itself.)

      The other conflict (overburdened agents who can only represent their ‘star’ earners leaving the rest of the portfolio without support) i don’t think was part of the scope of the original post. But I’d tend to agree that it is unethical practice, being deliberate a breach of contract to a person who has been put in a position where they have no effective redress. But that would be harder to nail than a zero sum conflict, maybe.

  2. “Did Close’s huge contract deal for Kershaw take Tanaka’s favorite team out of the bidding for his services, by using up their discretionary resources for starting pitchers? If so, Tanaka was the victim of a conflict of interest.”

    This is just wrong on various levels. Imagine there is an attorney who represents two real estate development companies. One company develops exclusively in California and the other develops in Japan. The Japanese company has a goal of entering the US market and developing land in one of 30 different markets. The company has a preference for one the seven markets west of the Rockies but, of course, will strongly consider offers from the other 23 markets, too. Because money is money.

    So the California company is in negotiations to buy land in LA. This is known to the world and is a matter of public record. LA is one of the seven markets the Japanese company would like to enter, and might like that same property in LA. But the seller has not called the Japanese company, or otherwise shown any interest in selling that land or any other land from its portfolio.

    Where is the “conflict”? There is none. A conflict would only exist if the two companies were bidding on the same land in LA, and there were no other opportunities with the seller in LA. But that is simply not reality.

    Back to baseball — if the Dodgers tried to play their established two time Cy Young winning young pitcher against the Japanese pitcher who has not seen Batter No. 1 in the majors, and Boras was aware of that, THEN you could say there is a conflict. But the Dodgers have not bid on Tanaka, and Boras does not know or control their budget, either, such that he knows whether the Kershaw dead DOES preclude a Tanaka deal IF the Dodgers are even interested in him. So there is no actual conflict here because there are three levels of speculation wrapped up in the argument that dollars for Kershaw take dollars out of Tanaka’s pocket. (a) that the Dodgers like Tanaka, (b) that they cannot do both deals, and (c) that Tanaka would actually want to go there. Because, again, we don’t know that either . . . we only know that he wants to play in the majors. And I doubt he would refuse to consider joining Darvish in Texas or playing in Boston, which has a history of successful Japanese pitchers winning rings and never buying their own drinks ever again in that city.

    • Wrong.

      1. The agent WANTS the Dodgers to like Tanaka, if he’s looking out for Tanaka’s best interests. He has a duty to try to interest the Dodgers in Tanaka, but if they have such an interest, its a conflict for him due to his duty to maximize Kershaw’s income.
      2. Teams can’t spend all their money on pitchers. If there is even a chance that getting the best deal for one of his clients will undermine his efforts for the other, its a conflict. The conflict doesn’t have to be certain—it only has to be possible. Possible is still impermissable. He can onlt do his best for one client if HE is certain that it WON’T affect what the Dodgers can pay for the other.
      3. He does want to go there. Sources say he wants to be on the West coast, and the richest West coast team is the Dodgers. The fact that he may be happy going somewhere else after the agent has cut off his options by tapping out the #1 team to benefit another client (and himself) is irrelevant to the conflict analysis.

      Your real estate analysis is not analogous.

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