Tuesday, 3 March 2009

Wanna earn $ 20m for doing nothing ?

Executive pay is a hot topic these days. Everybody, President Obama included, is railing at the insane bonuses at Wall Street and calling for curbs on executive pay. While you could argue for, or against, it (and I intend to in a future post), here's a non Wall Street example of pay excess, the pundits might want to train their guns on.

Stephon Marbury is the name of this guy. For those of you who are unfamiliar with basketball and the NBA, Marbury is a 32 year old player. Until three days ago he was a player for the New York Knicks. He was twice an All Star , in 2001 and 2003, (that's a sign that you are one of the best players in the NBA) and was twice voted into the All NBA Third Team. He was good in the early part of the decade, but was not amongst the very best. His best days are clearly behind him.

His ego is however sky high and he's had numerous problems with many teams he has played in. This year, his story reached absurd levels; something every basketball fan is very familiar with. He's had a public ongoing row with his team . His team benched him and he then refused to play for his team - yes, r-e-f-u-s-e-d to play for the team. All year, he hasn't played a single game for the Knicks.

However, his contract was water tight - his salary of $ 20.8m per year was fixed irrespective of what happened. Whether he played or not. Whether he was injured or not. So sitting on his backside, he collected collected some $56000 every day !

Sports contracts with top players are notoriously one sided. Fabulous sums of money. Very large fixed component irrespective of whether they play well or not. They continue to get paid if they are injured. Guaranteed fixed salary contracts and they can't be sacked without being paid in full.

Wall Street bankers seem a timid crowd before this lot !

As for Marbury, the Kicks finally paid him two days ago his full salary for the year to just go away. He joined Boston Celtics, the current reigning champions. They are paying him minimum wages.


Anonymous said...

You wrote about independent directors. Do I see a parallel here? Getting paid and not doing any thing like this guy is probably better than getting paid, not doing any thing and leading to damages to shareholders/other stakeholders!

Ramesh said...

Understand what you mean, but this guy spread poison around the team - he was the worst case scenario imaginable.

Ramesh said...
This comment has been removed by the author.
Sanjay said...

I guess when he was born the stars were in the right place. The current economic crisis has exposed similar stories where top executives have got their promised bonuses despite the companies they ran have filed for Chapter 11 or gone with a begging bowl to the US Governement.

Ramesh said...

@Sanjay - I know - sometimes the stars are too kind. Although in the case of Marbury , I am not so sure - he had to join the Celtics for minimum pay and at the end of the season is out and his career is probably finished because of his stupidity.

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