- In last year's first creative financing post, I wrote this:
It's never really mentioned, because it's never really important, but most rookie scale contracts contain performance incentives. So widespread is it, in fact, that every first rounder signed this season has them except for Tyreke Evans, Jonny Flynn, Austin Daye, Eric Maynor, Darren Collison and Wayne Ellington. (Yes, even Blake Griffin has them.)
Twelve months later, this factoid became far more important than we knew, purely because of the Xavier Henry saga.
Of the 30 first round draft picks in this past draft, 28 have signed. Rookie first rounders often sign without fanfare, and sometimes without as much as a press release, since there's not really anything to announce. With only the rarest of exceptions, first rounders were drafted to be signed straight away, so it doesn't really need breaking when, say, John Wall signed his rookie contract. (Google "Washington signs John Wall." This is the only website you will find.) Sometimes it goes unannounced before it is even announced; Wizards draftee Kevin Seraphin signed his rookie deal about a week before it was announced, in a scoop I wish I'd tried a bit harder to publicise. But regardless of how quietly these signings happen, they happen. And with Cavaliers draft pick Christian Eyenga (30th overall pick in 2009) also signing a rookie scale contract, 29 rookie contracts in total were signed this summer.
The only two players from the 2010 draft that have not signed theirs are the two picks that the Grizzlies didn't sell; Xavier Henry (#12) and Greivis Vasquez (#26).
Nothing is said about why Vasquez hasn't signed, although the fact that he just had his ankle scoped may well factor. Henry, however, is the subject of a broo-haha. A rum-do. A fracas. A rumpus. Henry - or perhaps more specifically, Henry's agent Arn Tellem - are offended at the Grizzlies suggestion that Henry sign a rookie contract that includes performance-related incentives. He sat out of summer league play due to the drama, ensuring that the beef has been taken public, and the Grizzlies have thus been made to look like a cheap, reprehensible franchise.
However, as we learnt in the above quote from last year's post, the inclusion of said incentives is standard practice. So what's the problem?
Of the aforementioned 29 players signed so far, all but Wesley Johnson, DeMarcus Cousins, Greg Monroe, Gordon Hayward, Avery Bradley, Craig Brackins, Quincy Pondexter and Lazar Hayward have performance incentives in their contracts. This means that the top three picks all have them, as do most of the ones below them. So when I say it is standard practice to have performance incentives in rookie scale contracts, I am not just yanking your crank. It really is.
After negotiations for player's first NBA contracts started getting insanely insane - punctuated by Glenn Robinson's 10 year, $84 million deal after being drafted 1st overall in 1994 - the NBA brought in the rookie scale. First rounders are now extremely limited in the contracts they can sign; in a more rigidified version of MLB's slot system, the amount of years and money that first rounders can sign for is all predetermined. Players can sign for 80% of that amount, 120% of that amount, or anywhere in between......but for nothing more and for nothing less.
It is customary for players to sign for 120% of the scale. In all the years I have done this [not including this year; more on that later], I only known of four players that haven't; Sergio Rodriguez (signed for 100%), George Hill (signed for 120% for the first two years, then 80% for the final two), Donte Greene (signed an incentive laden contract that he hasn't yet got up to 120%) and Ian Mahinmi (all over the show). More specifically, as mentioned above, it is customary for players to sign for a guaranteed 100% of the scale, whilst earning the last 20% in incentives.
There is absolutely no rule about that, other than to declare 120% as being the maximum allowable amount. There is no stipulation that a player must get that much; they just always do so due to precedent. As I said, only four players have ever signed for less than the maximum 120%, even if several hundred have been eligible to do so. It is evident, therefore, that the precedent is strong, and that the protocol is set. Regardless of whether incentives are used, 120% is the standard operating procedure.
But what do those incentives entail?
In last year's second creative financing post, I included a brief breakdown of the incentives Ty Lawson had in his contract with the Denver Nuggets.
To earn the full 120% of his rookie contract that he signed for, Lawson has got to make five promotional appearances for the Nuggets, play in summer league, play in another two week summer skills and conditioning program, and play 900 minutes next season.
Incentives in rookie contracts usually come in two forms; promotional incentives and performance incentives. Promotional incentives - such as that which appears in Lawson's contract above - are irrelevant to a player's salary cap number. If they make the appearances, they get the money, and if they don't, then they don't. Whichever it is, it doesn't change the cap number. That is not however the case with performance incentives.
Lawson's incentives are pretty standard practice, although his minutes per season requirement is pretty harsh. (He made it comfortably, but many others wouldn't.) It is incredibly normal for rookies to sign rookie scale contracts featuring incentives requiring both summer league participation and appearances at summertime conditioning programs. Those are almost always included; any additional performance bonuses on top of that, such as Lawson's minutes played requirement, are both rarer and more varied.
Quite what incentives Memphis are demanding that Henry and Tellem accept is not clear. It seems inevitable that Memphis IS breaking protocol, when you consider the following factors;
1) Arn Tellem has signed players to rookie contracts that start at 100% and use incentives to get to 120% in previous years; he did this only last season with Gerald Henderson, and in 2008 with both Danilo Gallinari and Anthony Randolph. He knows the rules and has played by them before.
2) Memphis signed Hasheem Thabeet and DeMarre Carroll to the standard contract of 100% + 20% in likely performance incentives, as recently as last year. They know the protocol, too, and historically have always played by it.
(There exists the third option; that Tellem and Henry are overplaying their hand to deliberately force a trade away from Memphis. I do not buy that one, however, and will thus give it no further consideration.)
It therefore seems like an inevitable and accurate conclusion that the game got switched, and that Memphis is making a greater-than-usual demand on Henry's incentives. Maybe they're asking he plays 1,200 minutes, or averages 26 points per game, or shoots greater than 68% from the field, or some combination thereof, in order to get the full 120%. We the public don't know that.
However, while what Memphis is doing might be different from the norm, it is not necessarily wrong. In this current economic climate, NBA franchises are imploring to us that they're losing too much money and need to redraft the entire collective bargaining agreement, while also continuing to throw the gross national product of Micronesia at a whole host of players that don't deserve it. (Memphis are as guilty of this as anyone, with their wildly excessive max contract to Rudy Gay.) While complaining with one arse that their expenditure outweighs their income, owners are using their second arse to wildly overpay the underdeserving, greatly increasing that expenditure level while under pressure from nothing but their own aspirations. We're looking at an impending lockout a mere 11 months after learning that Johan Petro got an 8 figure contract. Joe Johnson got the fifth highest contract in the history of the sport. Rudy Gay got the max. Chewbacca lives on Endor. It does not make sense.
Rookie scale contracts are not the biggest reason for this double-standard, yet they are a part of it. They represent one more way in which owners are giving players more than they have to. As the examination above has shown, there exists a strong precedent for doing so, yet there is not a rule. If Memphis are looking to buck a trend and start a protocol of their own, whereby a rookie earns their money, then I can't really fault them, even in light of the Gay hypocrisy. If they are offering Henry (and Vasquez) 100% of the scale guaranteed, with the maximum amount available in incentives that are slightly harder to reach than normal, then what, really, is wrong with that?
Not a lot. But this is Memphis, so the world assumes the worst.
(A fifth player joined the less-than-120% club this year; Spurs draft pick and England frontline seamer James Anderson. After about a month of negotiations, San Antonio eventually signed Anderson to a contract that pays a maximum of 120% of the scale in the first year, but only 115% in the second year, and 117% in the third (fourth year salaries are calculated as a percentage of the third), all years of which contained more significant performance incentives than usual. This is the kind of thing Memphis are accused of being doing, if not an even more extreme example. Furthermore, this now means that three of the five players to have received less than the full 120% have been Spurs picks. They've actually gone through with the deed Memphis stand accused of trying, and they've done so on an annual basis. In the cases of Mahinmi and Hill, San Antonio could invoke the "no one else was drafting you that high, so live with it" excuse. Not so with Anderson. San Antonio have better leverage, given their strength as a franchise and the fact they aren't doing it with lottery picks, yet it is the same practice.)
This is not a sweeping, all-encompassing defense of Memphis. I personally believe they handled their draft very badly. Henry was the right pick, and Vasquez was OK, but a team ostensibly designed (if not mandated) to build through the draft decided to sell a first rounder (Dominique Jones, #25) for $3 million, which seems like a hypocrisy and a grave misallocation of assets. (It's an even graver error when that $3 million is instantly invested in Tony Allen, who will earn that much just to play 1,500 minutes at backup shooting guard next year. In a role Dominique Jones could easily have played. For less money. And for four years.) It also further defies belief why the same draft-built team, with no realistic short term goals, decided to trade a first rounder for a player (Ronnie Brewer) whom they then refused to extend a qualifying offer to. Those two moves ensured the loss of two first round picks in ways that not even Ted Stepien could replicate; to claim that this Henry diatribe of mine is nothing but the continuation of an endless campaign to defend every move the Memphis Grizzlies make would be unfair.
The Henry saga, however, is not one such mistake. Unless Memphis really are trying to diddle Henry in an unfair manner, or are setting the bar in his incentives unrealistically high, then what they are doing here is not a mistake. While the player has only the power of the agent (which, in the case of Arn Tellem, is significant), the team holds all the leverage. Henry can either accept the offer, or not play in the NBA. The offer Memphis wants him to accept will see him attain a competitive pay rate with his peers, whilst obtaining the maximum salary that they are able to pay him, as long as he proves to be more useful than a paper condom.
The Spurs use this creative manipulation of the rookie salary scale protocol all the time. In fact, they're worse for it; there were no incentives that George Hill could meet in order to get his 120%. He was getting only 80% regardless (and since 80% of the third year of George Hill's rookie contract actually worked out to less than the minimum salary, he had to be bumped up to that by the league instead.) The Spurs knew what they were doing here, just as they did when they did it to Anderson last week. The only people who didn't know were the fans, and that's because no one sought to tell them.
When San Antonio do it, it's "shrewd." When Memphis do it, it is "cheap," and representative of a moribund franchise that needs contracting. This is the prevailing attitude born out of a desire to disparage the Grizzlies at every juncture, symptomatic of a wider problem of favouritism for certain executives by certain media. For example; Daryl Morey is a vastly superior general manager to David Kahn, but why did the very similar mistake signings of Ryan Hollins and David Andersen, and their subsequent correcting trades, get different levels of press? Because Morey is good and Kahn is bad, thus Morey's mistakes are all minor while Kahn's are all major. There's an element of truth to that logic, yet it is all overblown.
The same is true of the Spurs' and Grizzlies' handling of this year's first round draft picks. If it's wrong when Memphis do it, it's wrong when San Antonio do it. And since it's not wrong when San Antonio do it, it's not wrong when Memphis do it either. It's not going to be wrong when any team does it. Perhaps more of them should.
I appreciate this post is quite hard to read when obstructed by the massive chip on my shoulder.