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What Golf Can Teach the Rest of Us (Part Two)

By Jeffrey Standen

In Part One I discussed how golf teaches us how to fund legal education and college athletics. (And they say golf is a waste of time.) In Part Two, we'll see how golf can fix sport's most pervasive problem. No, I'm not talking about drugs and groupies; I'm talking about money. The current financial structure of sports (professional and collegiate) stinks. Teams profit from winning; athletes profit from individual stardom, even if it comes at the expense of winning. (Makes me wonder how Allen Iverson, Mr. Individual Stardom, will do on the Pistons.) Individual contracts pull players away from team goals. They also put players on different "time frames" from the team and from other players on the team. This different time frame gives the players all potentially opposing reservation prices, causing some players (those trying to get the next big contract) to play harder than others (those who just got the big contract).

What a problem! All solvable by reference to golf, the most radical, non-structured sport in the world.

How to Compensate Everybody
Golfers are independent contractors. They get paid when they win, or come reasonably close to winning. Thus their incentives are perfectly aligned with those of the fans: every week, every pro you see on television is doing his or her best to do his or her best. They are all trying to win, or at least trying as long as winning remains a possibility. Golf is the one sport fans are assured of seeing players go all-out. (Ever see those sweat stains soaking through the belly region of the pro golfers polyester shirt, right above his white belt? That's the proof that these athletes are giving their all.)

Other athletes try too. Indeed, it's a credit to them that they do exhibit such professionalism when lots of financial incentives direct them not to bother. They want to win, of course. But they don't get paid to win. Sure, a star performer who contributes mightily to his team's good results will be in place for a raise when it's time for the next contract. But that incentive is attenuated and discounted. A more immediate incentive would be to pay the athlete to win, right now, as soon as the game is over. Or in a team sport, pay the team. Why don't any of the great American sports leagues structure their compensation practices this way, you know, to actually make winning games a priority? If the "entertainment" the league is offering fans is competitive basketball or what have you, then the league should have every incentive to pay the winning players some kind of bonus for doing its part to produce the very product the league is trying to sell.

Yet amazingly, not only do the professional leagues not provide bonus money for winning teams, they actually prohibit its payment! Indeed, any small hint of such a payoff, however modest, will draw the ire of the league. Why would a sports league want to make sure none of its athletes is provided a financial incentive to win a game? Because the leagues are deathly afraid of gambling, and any financial benefit that hinges on the outcome of a game looks an awful lot like a bet. Leagues are so afraid of bets that they will carefully police individual player contracts for bonuses that might be tied to game outcomes, rather than to (selfish) individual statistics, like innings pitched or at-bats.

The fear of the fix is misplaced. What sports competition could be easier to throw than a golf tournament? One mistimed swing equals one lost tournament, and no one would ever be the wiser. And yet golf welcomes the bet, even setting its tournaments up like a bet (with players putting up entrance fees and playing for the pool), and even tacitly allowing players to bet big sums of money during practice rounds. Now granted, there are reasons no one would want to induce a golfer to throw a tournament (too many players, so no concentration of benefits: in other words, even if you could get John Daly to lose on purpose, that doesn't mean you'll win your bet as there are so many other competitors). A football contest involves just two possible outcomes, so if one side is induced to shirk than a bet on the opposing team will be a winner. But at bottom, if a quarterback is going to throw the contest (or shave points), under which compensation regime would he be more likely to do it: under a regime where the outcome of the game is of no moment to his financial future, or under a regime where the quarterback has a clear financial stake in his team winning? Exactly. Giving players a stake in winning will actually help deter the problem about which the professional sports leagues are worried.

Everyone's better off having a stake in the firm's success (stock options, ESOP's, profit sharing). It's a wonder why our professional leagues for the most part ignore this widespread approach and refuse to take advantage of the lessons that golf teaches. Back to Part One: giving law schools (or other institutions of higher learning) a direct financial stake in the future career of their graduates would give us institutions a better set of incentives as well.

Full post as published by The Sports Law Professor on November 06, 2008 (boomark / email).