…as Major League Baseball ignores it, as usual.
Ethics alarms test: Scott Boras, lawyer and player agent, represents two Washington Nationals free agents in their prime. One is Stephen Strasburg, one of the best and most sought after starting pitchers in the game. He was seeking, on the advice of his agent, a long-term contract of more than 30 million dollars a year. Another is Anthony Rendon, third-baseman, and the Nationals’ best player in 2019, their championship year. He also is seeking a salary of at least 30 million per year, over many years. He is a fan favorite in Washington, D.C., and obviously enjoys playing there. Contrary to popular belief, however, Major League baseball teams do not have endless supplies of money, though they have a lot. Mike Rizzo, Washington Nationals general manager, told the sports media and Washington fans that the team could not afford to sign both Strasberg and Rendon at the rates they were demanding and the marketplace dictated.
Is there a problem, and if so, what is it?
You shouldn’t need much time to answer, but then again, thousands of baseball sportswriters and the entire baseball establishment havn’t figured this out over many years, do I’ll give you a “Jeopardy!” period of reflection:
OK, contestants,what’s your answer?
The answer is that Scott Boras has a conflict of interest, because both players are seeking a single high-paying slot on the same team, and only one can have it. If one is successful, the other is not. There is no way around this, either: while it is true that other teams are also willing and eager to sign Rendon or Strasberg, if Boras persuades the Nationals to sign one, his other client is harmed.
This particular conflict of interest is known as a Zero Sum conflict. Imagine a lawyer is representing a client seeking a government contract. Can that lawyer, or his or her firm, also represent another client seeking the same government contract? No! If that lawyer or firm succeeds for one client, the efforts to achieve that success harm the interests of the other client.
I have written about these conflicts in the context of sports agents before, and only the amounts of money involved have changed. I wrote about Zero Sum conflicts in a long piece for the baseball wonk site Hardball Times, then here five years ago, and again earlier this year, when the piece concluded,
This time, the Zero Sum Conflict is a little different. Boras represents the last two highest priced free-agents, Harper and Houston starter Dallas Keuchel. Keuchel turned down a 5 year, 90 million dollar contract in 2016, so it is assumed that it will cost more than $100,000,000 to sign him now. The problem is that there are very few teams with both the money, the need, and the salary flexibility as Spring Training is starting to commit to 9-figure salary additions. Some of those are the same teams Boras is talking to about Harper, and it is very likely that no team has the resources or desire to sign both. When, as is widely expected, Harper agrees to his mega-contract with Philadelphia nest week, Boras will have directly harmed his other client, Keuchel’s, financial interests. Has Boras received an informed waiver from Keuchel and other clients regarding Zero Sum Conflicts? I very much doubt it, and I also doubt that an informed consent would be truly informed if Boras was the one doing the explaining.
I guarantee, however, that if I were the one explaining the conflict, no waivers would get signed.
Do you know what happened? Keuchel never found a big free agent contract. He ended up sitting out half the season before signing a short term, relatively low salaried contract.
In the Strasberg-Rendon conflict, both players ended up doing well. The pitcher got the coveted Nationals deal, at $245 million for seven years. Rendon subsequently signed for with the L.A. Angels for exactly the same number of years and dollars. Two points about that, however: 1) the fact that a conflict of interest ends up not harming the victims of it doesn’t render the conflict null and void, or excuse the conflicted party. That’s just moral luck at work, and 2) all things being equal, a deal with the World Champion Nationals is more attractive than a deal with the losing Angels, who had their worst season in two decades. They are also reputed to be cursed…
…but that’s another story, at least until Rendon perishes suddenly, like Angels pitcher Tyler Skaggs did last season, or is the victim of a mistaken identity drive-by shooting, like young star Lymon Bostock in his first season of a free agent contract with the team.
Why don’t players, their union and baseball do something about this? One reason is that enough players are getting paid astounding sums that they are happy to look the other way. Another is that they are misinformed. In another baseball wonk website, Sheryl Ring wrote a misleading but authoritative post called, How an Agent with Multiple Players Avoids Conflict of Interest. Even the title is misleading, because such agents don’t avoid the conflicts at all. They just ignore them.
Ring’s explanation of why it’s not a conflict for agents like Boras to represent a ridiculous number of clients, meaning that he can’t possibly give diligent and competent representation to all of them? “Since sports agents are fiduciaries, you could also argue that taking on more than one client is an inherent conflict of interest, because every minute dedicated to one player’s case is a minute not dedicated to another’s, to whom a fiduciary duty is owed. But that can’t be right either, because Scott Boras, for instance, has lots of clients. Most agents have multiple clients.” Oh! Everybody does it, so it’s ethical! Got it.
She justifies agents operating with these conflicts because she seems to think waivers are a panacea. She writes,
“A conflict waiver — that is, a waiver of a conflict of interest — is a document which (a) discloses a potential conflict to a beneficiary, (b) discloses why it’s a potential conflict, and (c) grants the beneficiary’s permission to the fiduciary to maintain the representation.”.
She also seems to think that so called “Chinese Walls” are relevant to the issue, which they are not, and why that is true is too complicated to go into. Leave it to say that she doesn’t understand conflicts after studying the issue, but believes that players can give an informed waiver. They can’t, in most cases, because they are neither educated nor experienced enough to comprehend what a lot of lawyers fail to grasp (trust me, I know.) Moreover, zero sum conflicts are usually not waivable. Even when a conflict is waivable, the sports agent’s interest in getting the waiver requires that the player have separate legal counsel to advise him regarding the waiver. Do you think Scott Boras made sure that an independent counsel advised Anthony Rendon that Boras shouldn’t represent him?