Free Agent Compensation
Over the last few weeks, we’ve heard a lot of talk about free agent compensation draft picks, especially as they pertain to Raul Ibanez. The Mariners (correctly) decided that they wouldn’t take less than two good prospects for him at the deadline, since they’ll receive two high compensation picks if he leaves as a free agent this winter. They could get two good prospects by not trading him, so there’s no reason to trade him for less than that. By in large, the media has caught on, and we rarely see any more references to a player being traded or “lost for nothing” during the winter. Most people get it – free agent compensation picks are valuable.
However, they don’t make any sense. Seriously, when you stop and think about how the system works and the results it provides, everyone loses. They’re bad for everyone, and it’s pretty remarkable that they still exist. Let’s look at what they’re supposed to do and what they actually do.
Goal #1: Promote parity by allowing teams to recoup talent lost when big market teams steal their players
This clearly doesn’t happen. Go through the list of who gets compensation picks every year, and it’s not the Marlins, Rays, and Royals. It’s the Yankees, Red Sox, and Dodgers, plus other similar big payroll teams. There’s a couple of reasons for this:
1. Type A and Type B free agents are generally good players. Good players make a lot of money, so they are more likely to be on teams with big payrolls. When their contracts expire and they sign with a new team, they’re generally just going from one big payroll team to another, and so the big boys who certainly don’t need extra picks for competitive balance reasons end up with an advantage in the draft anyway.
2. The system requires you to take a financial risk in order to get the draft pick. Teams on strict budgets can’t always afford to take the risk that a player will accept arbitration and eat up a big chunk of their payroll, but it’s just not a big deal to the Yankees if Damaso Marte makes a couple million more than they were counting on. The big payroll teams are more able to take the risk, and thus, more likely to get the reward.
Goal #2: Provide a disincentive for teams to sign free agents away from other clubs, making it more likely for players to stay with their original franchise.
Again, it clearly doesn’t work this way. If you lose a Type A free agent (and you offer them arbitration), you get two high draft picks. If you sign a Type A free agent that another team had offered arbitration to, you lose one high draft pick. In many cases, you actually get rewarded for letting your player leave and bringing in someone else’s exact equal. For instance, if the Mariners were to have to decide between re-signing Raul Ibanez this winter or offering the exact same contract to say, Pat Burrell, then they’d gain an extra pick from signing Burrell and letting Ibanez leave. In fact, we’ve seen teams essentially swap free agents at the same position and both teams have come out with +1 draft picks – the Orioles and Rangers did this in 1994 with Rafael Palmeiro and Will Clark.
Those are basically the two overriding goals of free agent compensation, at least in theory. The current system fails spectacularly at both, and just for good measure, has even more flaws as a byproduct of the system.
Some players are less marketable, and have to sign for less money, after being classified as Type A free agents when they shouldn’t really have been. This is especially true of relief pitchers – rack up the saves and you’ll climb the Elias rankings pretty quickly, even if you’re not particularly good. Most teams have figured out that surrendering a draft pick to sign a mediocre reliever who just happened to notch a lot of 9th inning finishes isn’t a good idea, and they’ll shy away from signing undeserving Type A players who get offered arbitration. For a subset of major league players, they’d be better off getting a worse ranking in the Elias system, because if they become Type As, it will cost them money.
It also, as we saw with Ibanez, keeps non-contending teams from trading quality players at the deadline, making the stretch run and post-season less interesting. Instead of playing for a winning team and potentially getting to play in October, Ibanez has to play out the string for a horrible team because it was in the best interests of the organization not to trade him because they’ll get more for him if he leaves as a free agent.
Overall, it’s hard to find a redeeming quality about the system as currently structured. It doesn’t help small market teams – it does just the opposite, in fact. It doesn’t convince teams to keep their home grown stars, but again, rewards a team for letting their guys walk and replacing them with an equal player from another franchise. It dissuades teams from making deadline trades to help contenders strengthen their clubs, and in some cases, it costs players a chance at a better contract.
If this system does anything right, I have yet to find it. It fails on so many levels and helps no one, but because it has to be collectively bargained (due to how it affects player salaries, which is a big union issue), it’s unlikely to go away anytime soon. So we’re stuck with a failing system that does the opposite of what it’s supposed to do and adds a few lemons on top of that.
Owners, Players Union, I know this isn’t a sexy issue, but when you guys sit down to renegotiate the CBA, can you do us a favor and just rip up the current free agent compensation system? Thanks.