Sports / Basketball

Conflicts of Interest and the NBA’s Collective Bargaining Agreement

Note: this article is a follow-up to an article I wrote about the Collective Bargaining Agreement negotiations between the NBA and the Players Association, which can be read here.

This past January, the National Basketball Association (NBA) and the National Basketball Players Association (NBPA) peacefully ratified a new collective bargaining agreement, to the great relief of any fan who remembers the 2011 lockout. The balanced terms of the new agreement and the apparent ease with which it was reached both suggest that the spirit of mutual respect and cooperation between Michele Roberts and Adam Silver is genuine. If neither side opts out of the new CBA early, the thirteen years between the ratification of this deal and its expiration will be one of the longest stretches without a labor stoppage in recent NBA memory.

This “spirit of mutual respect and cooperation” was facilitated by the $24 billion media rights deal with ESPN, which took effect this season. The financial climate that surrounded these negotiations could not have been more different from the climate of the 2011 negotiations, which took place as the league underwent a $300 million decline in revenue. It seems that the league’s profitability, rather than raising the stakes of the negotiation, actually relieved the greatest source of tension from the 2011 negotiations: the fact that there simply was not enough money to go around. Under the terms of the new CBA, the division of Basketball Related Income (BRI) remained the sameapproximately fifty percent to the players and fifty percent to the owners. Roberts and Silver would both agree that it is much easier to play nice with $5.87 billion to share between their respective constituencies.

The new CBA is, by most accounts, a fair deal that does a more-than-adequate job of balancing the interests of the league with those of the players, suggesting that the dynamic of the negotiation was largely positive and cooperative. Both Silver and Roberts sought the best possible deal for their constituents and understood that to act in shared interest would help avoid a costly lockout.

Chris Paul, a Los Angeles Clippers point guard and president of the Players Association, told reporters, “I’m excited. I’m happy for the league. I’m happy for our fans, owners, everyone who’s involved. It’s a great thing…I think everyone negotiated in good faith. The conversations were great. Everything was cordial…My hat goes off to Adam [Silver] and his team, and the same thing on our side.”

When asked about the deal, most players have expressed varying degrees of positivity. On one end of the spectrum, Trevor Booker of the Brooklyn Nets reflected on the deal with an exclamatory “Yippee!” On the other, Oklahoma City Thunder’s Russell Westbrook inhabited a more simple and understated mindset, telling reporters, “That’s good. Better than last time.” Outside of the spectrum altogether lies Draymond Green of the Golden State Warriors, whose outspoken displeasure with the agreement and emotional, yet vague, Twitter presence has puzzled many fans and analysts alike.

Looking beyond the dynamic between the league and the Players Association, the terms of the new CBA do reveal a vast diversity of interests within the NBPA itselfinterests which often conflict. The best possible CBA for LeBron James, for instance, may contain terms that damage the interests of rookies, “benchwarmers,” or the high school players who will be the next big superstars in five to ten years. The interests of the league’s superstars, rookies, and future players often conflict in apparently irreconcilable waysand yet, they are all represented by the same union. Thus, it falls on Michele Roberts to find balance among the interests of each player, and to synthesize this diversity into one cohesive vision of the NBPA.

These conflicting interests within the NBPA are most visibly reflected in the terms of the CBA that dictate the amount teams must spend on certain contracts subject to the salary cap. The NBA has a soft salary cap of $94.134 million, which means that under most circumstances, no team can spend more than $94.134 million on player contracts each season. Because there is a strong correlation between the amount that a team spends on player salaries and the relative success of the team, the salary cap is designed to maintain a competitive balance within the league by limiting the degree to which some teams can outspend others in order to acquire better players.

Every dollar that a player earns within the salary cap is a dollar taken away from another teammate. This puts the financial interests of superstar players, who want to be paid their market value, at odds with those of their less talented teammates. That is why the CBA sets a maximum contract size, which varies depending on the player’s years of experience. For example, a player who has been in the league for fewer than six years can be paid up to twenty-five percent of the salary cap, while a veteran player who has played in the NBA for ten or more years can make up to thirty-five percent of the salary cap.

Rules that determine how teams must spend within the salary cap have historically hurt superstar players. At their true market value, players like LeBron James are worth much more than thirty-five percent of the salary cap. The salary cap and related provisions artificially devalue superstar players, but the implementation of policies like maximum contracts enables teams to pay their non-superstar players higher salaries.

The new CBA contains provisions that create ways for superstar players to subvert the maximum contract limit. One of these provisions is the new “Designated Veteran Player Extension,” under which certain players are eligible for a six-year contractinstead of the usual fiveif they re-sign with the same team. In order to qualify for this extension, the player must have made an All-NBA team, been named NBA Defensive Player of the Year, or been named NBA MVP. The “Veteran Rule” was not included in the new CBA with the explicit intent of enabling superstar players to sign bigger contracts, and it also does not change the percentage of the salary cap a superstar player can earn within one season. It does, however, have the effect of promoting the interests of superstars over those of lower-tier players. Only superstars are eligible for such an extension, and those who are stand to make an absurd amount of money. Steph Curry, for example, could sign a six-year contract worth $209 million with the Golden State Warriors after this season.

Another provision that targets superstar veterans changes the “Over 36 Rule” of the old CBA to “Over 38.” Under the old CBA, teams were not allowed to offer five-year contracts to players who would turn thirty-six over the course of that contract in order to protect teams from losing money on older players who would most likely see a significant decline in their playing ability as they approach their late thirties or retire before the expiration of their contract. Under the terms of the new CBA, the age limit of eligibility for five-year contracts is extended to thirty-eight. This modification directly targets superstar players, because they tend to be the only players that remain in the league past the age of thirty-two. Indeed, LeBron James and Chris Paul, who both hold important leadership positions within the NBPA, will both turn thirty-sixbut not thirty-eightby the end of their next five-year contracts. This extension gives these older superstars one more five-year contract at the maximum salary than they would have been eligible for under the old CBA.

The very existence of a maximum contract devalues the league’s best players. As long as maximum contracts have been tied to the salary cap, superstar players have been paid far less than they are worth. The pay structure outlined in the CBA, when analyzed through this lens, greatly hurts the interests of the superstars, and protects those of lower-tier players. Perhaps, then, the new policies that disproportionately benefit superstar players can be viewed as a form of deferred compensation. Provisions such as the Over 38 Rule and the Designated Veteran Player Extension allow LeBron James and other superstars to earn back some of the gap between what they have been worth and what they have earned. These policies mitigate the effects of rules that have historically damaged the league’s best players.

These changes, however, in attempting to rectify past offenses against one subset of players, inflict new harm on others. Younger players may find themselves underpaid by a team whose limited cap space is promised to an older superstar. Consider, for example, the Over 38 Rule. Yes, this rule corrects the artificial devaluation of the league’s best players. It also, however, creates another five-year period during which thirty-five percent of the team’s salary cap is tied to a player who is past his prime, limiting the team’s capacity to invest in a deeper bench or younger talent. Other players may lose money from the salary cap to the superstars who benefit from these provisions, but not be eligible for any “deferred compensation” themselves.

The extent to which the new CBA benefits superstar veterans has not gone unnoticed. Golden State forward Draymond Green spoke out against the new CBA in a series of vague tweets, including, “Deal.?.?. Smh” and “Stand for something… or fall for anything.” Green’s Twitter activity on December 14 was followed by more substantial statements in various interviews and articles. Green told San Jose’s Mercury News, “It’s not about me. I am by no means mad about my salary…We’re all blessed. But when you sit and look at the circumstances about how much money is involved in this league, in terms of that, I’m upset. It’s not about, like I said, where my status is at as an All-Star. You’ll be taken care of. As a superstar in this league, you’ll be taken care of. It’s not about us, it’s more so about the guys who aren’t on that level…When we go in these negotiations, guys are overlooked.”

Green, unsurprisingly, holds a contrarian view that is not shared by many others. The managers and playerssuperstars and benchwarmers alikewho have been asked about the new CBA have been largely pleased with the changes. Although Green is correct in observing that the new CBA does nothing to close the pay gap that exists between mid-level players and superstars, there are new provisions that are designed to benefit rookies and players receiving minimum contracts, both of whom are going to make much more under the terms of the new CBA than they did under the old one. But on a more abstract level, Green has shed light on tensions that exist among the conflicting interests of different players, all of whom are represented by the same union. Furthermore, this union is under the leadership of the league’s elite: Chris Paul and LeBron Jamesboth among the most talented and highest-paid players in the leagueare president and vice president respectively.

The salary cap structure outlined in the NBA’s collective bargaining agreement creates conditions under which the interests of some players are incompatible with the interests of others. These players, however, are all represented by the same Players Association. Therefore, it falls on Michele Roberts to balance these conflicts of interest. As the executive director of the NBPA, Roberts has pledged to pursue the best interest of every player. Instead, in every decision she makes on behalf of her constituents, Roberts must choose from among the many obligations she has to different subsets of players. She must then synthesize these conflicting interests into one unified position to bring to the negotiation. Ultimately, so much more lies behind the NBPA’s final position than initially meets the eye. Inevitably, some lose their voices before the CBA negotiations even begin.