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Thanks to the new draft rules, Scott Boras (and other agents) have a pretty stark conflict of interest

Jun 8, 2012, 12:33 PM EDT

Boras_1

The other day Scott Boras called the new draft setup “a mockery,” and claimed that the capping of bonus payouts and the slotting for picks — with stiff penalties for teams who violate them — does nothing to distribute talent to those who need it (i.e. the purpose of the draft).

I think he’s probably right about that. Just ask the Cubs who, if they were allowed to, would go after the best talent they could find, overpaying for it if they had to. Now they’re capped and it will take longer to rebuild a farm system in desperate need of rebuilding.  And why? To save owners money on draft bonuses. Money which, in the grand scheme of things is a drop in the bucket compared to what they pay mediocre free agents all the time.

But, as reader Aaron Ashcraft pointed out on Twitter, the finite money paid out by teams creates another problem too. One for Scott Boras and other agents: a potential for a pretty stark conflict of interest.

I’ve talked for years about how Boras often has a conflict of interest due to his representing multiple high-level free agents each winter. When he represented Matt Holliday and Johnny Damon in the same offseason, any effort he made to play up Damon as a left fielder to someone harmed Holliday’s market to some degree and vice-versa. It wasn’t irreconcilable —  after all, if a team wants to sign Boras free agent A and Boras free agent B, they technically can, because there’s no salary cap and I’m sure Boras clients knew what they were getting into to begin with — but it does create a perception problem.

But the draft is more stark. Teams have a finite pool of money to hand out to their draft picks, and every dollar one gets is, by necessity, a dollar not available to another.  As Aaron pointed out to me, Boras represents Astros draftee Lance McCullars and draftee Rio Ruiz. While there are slots involved, the more important number is the overall pool of dough the Astros have left to sign their picks because you can go over slot for individual players as long as you don’t break your draft cap. If Boras makes a push for Houston to pay McCullers a few dollars more, isn’t that necessarily harming Ruiz?

Again, I’m not saying Boras is doing anything wrong here. I’m sure he discloses all of these ins and outs to his clients, has them sign the necessary waiver of conflicts forms and all of the other sorts of things a careful lawyer and agent does.  But this still seems like a problem to me that, at the very least, would make me wary of signing with an agent who typically represents a large number of drafted players.

  1. EK Ohio - Jun 8, 2012 at 12:36 PM

    Did you find that picture of Boras in the ol’ JFK assassination files?

    • WhenMattStairsIsKing - Jun 8, 2012 at 1:20 PM

      Uh yeah, cause JFK assassination jokes never get old….

  2. Nick C - Jun 8, 2012 at 12:43 PM

    I don’t see this as a conflict of interest at all. A team’s draft pool is not Boras’ problem. He is pushing for the most dollars for each of his players. Boras cares not whether the team violates the spending limits. Furthermore, unless ALL of a particular team’s draftees are Boras clients, he is not expicitly taking money out the pocket of one to put it into the pocket of another. He is taking from the non-Boras clients’ portion of the pool.

    I can somewhat see your point regarding free agents though I think that is largely bogus as well. I don’t see a conflict of interest with the free agents either but I do think it may be hard to be a zealous advocate for all your clients if you have too many or if there are too many at a given position.

    • myopinionisrighterthanyours - Jun 8, 2012 at 1:00 PM

      Don’t confuse that because it’s not Boras’ (or any other agent for that matter) fault, that there is not a conflict of interest. However, agents and players alike in all sports find a way to deal with it. This is not new, and I think is being overblown here by Craig, although it is in sharper focus thanks to the new rules. It’s something Florio points out all the time on the sister site dealing with professional football. I’m sure Boras will continue to (over)aggresively pursue everything he can get on his client’s (and his) behalf.

      • Ben - Jun 8, 2012 at 1:13 PM

        It’s a conflict of interest in so far as the cap makes possible a zero sum game.

      • Nick C - Jun 8, 2012 at 1:55 PM

        I still don’t see it. It is not a zero sum game. Boras does not have to deal with the consequences if a team goes over the cap (at least not directly). If you want to claim that is a conflict of interest that he represents more than one player at a particular position with a limited pool of “jobs” at that position I will grudgingly concede that there is a limited conflict of interest there. However, there is a rather large pool of minor league “jobs” for drafted players so I don’t see it regarding drafted players.

      • Ben - Jun 8, 2012 at 2:07 PM

        It’s zero sum because teams are seemingly unwilling to pay the penalties, at least this year in a weak draft class.

    • southcapitolstreet - Jun 8, 2012 at 2:27 PM

      It’s a conflict of interest because every dollar Boras squeezes out of the Astros for Draft Pick A is one less dollar available for Draft Pick B, and vice versa (assuming Boras represents both A and B). It’s not the end of the world, but it’s there.

      • ezthinking - Jun 8, 2012 at 4:06 PM

        False. It may be pick B or it could be the other 8 picks in the first 10 rounds draft pool.

      • ezthinking - Jun 8, 2012 at 4:07 PM

        Actually some teams have far more than just 8 picks in the first 10 rounds. Sorry about that.

    • anxovies - Jun 8, 2012 at 5:54 PM

      That was my thought too. It’s not like where a lawyer represents several people injured in the same auto accident and their total damages exceed the per occurrence limits of the policy. For instance, a team almost always has other options such as bringing up somebody from AAA rather than signing an expensive veteran free agent or just ignoring the cap. Whadda ya gonna do, refuse to play them? Boras is a smart lawyer so he probably has a waiver of the conflict in his contract anyway.

  3. heyblueyoustink - Jun 8, 2012 at 12:44 PM

    I happen to believe Boras was also in cahoots with John Wilkes-Booth

  4. scottp9 - Jun 8, 2012 at 12:51 PM

    This is more of an issue in football because of the hard salary cap, but agents there represent multiple players on the same roster all the time.

  5. brewcrewfan54 - Jun 8, 2012 at 1:08 PM

    Did Scott also mention it reduces hos commission on the contracts when they are smaller?

  6. shawndc04 - Jun 8, 2012 at 1:09 PM

    So Craig, you would punish Boras by reducing his clientele because of a system established by owners that effectively hamstrings other owners? That system is not Boras’ doing, and as long as he makes clear to his clients that he is advocating for more than one, some at the same position, and some with the same team, and they accept that type of representation, there is not a real problem, nor one of perception. It is perfectly rational, given Boras’ record, for a guy to conclude that he will get the best deal despite multiple representation. If Theo wants to go over slot and over his bonus pool, then pay the penalty, a la the luxury tax.

    • Craig Calcaterra - Jun 8, 2012 at 1:11 PM

      No, I would not punish him, nor did I say he’s doing anything wrong. There are many levels of conflict of interest, and not all conflicts = bad acts or things that must be proscribed.

      It’s merely an observation that, in this case, in these circumstances, Boras has something that could impeded his zealousness and that players who sign with him need to be aware of that. And I’m sure that a disclosure of that potential conflict is present in any agreements the players sign with him.

      • jefe1568 - Jun 8, 2012 at 2:01 PM

        It would be surprising if drafted players didn’t know which other top prospects their agent had for their draft class. Word spreads quickly and the info generally isn’t too hard to obtain.

        I wouldn’t be so sure that Scott has them physically sign anything. You don’t want to bind amateur athletes to contracts with baseball agents to avoid the possibility of the NCAA ever catching wind of this. This another area where the NCAA’s rules defy logic. An amateur is allowed to retain legal counsel to review the contract but can’t have an agent contact the team and negotiate on their behalf. It’s very silly when you consider the NCAA knows that it would take a fool to negotiate a multi-million dollar bonus as an 18 year old without the help of an agent.

  7. hisgirlgotburrelled - Jun 8, 2012 at 1:17 PM

    Capping rookie salaries is a trend in sports that I think was a great move by the MLB and NFL. Boras has only himself, along with the other agents, to blame for it. Rookies were being paid huge bonuses before ever playing professionally. Less money to rookies puts more money in the much more deserving veteran’s pockets. Boras wants more money for rookies and more for veterans. If he was so concerned about distributing talent, and parody in the MLB, then why does he keep increasing the price for every player he represents. I understand his business is to make money, but don’t come out saying that talent isn’t distributed evenly when you’re the one responsible for the higher player salaries. And I’m sure he never advised a player to not sign with a team because they drafted them high but couldn’t pay his bonus demads. Wouldn’t signing a high pick by a team that had a bad season the year before be the definition of distributing talent?

    • churchoftheperpetuallyoutraged - Jun 8, 2012 at 1:33 PM

      rookies were being paid huge bonuses before ever playing professionally.

      Please answer this question. How much did the highest spending team commit to the draft last year [2011] in total dollar figures. There’s no way you know the answer and still think rookies are paid “huge” bonuses. Never mind some of the ridiculous contracts that have been handed out recently, that are double, sometimes triple, what teams spend on the draft.

      • alang3131982 - Jun 8, 2012 at 2:09 PM

        Agree completely, church.

        Furthermore, if you put Strasburg or Harper on the open market, they’d get even MORE money. Look what Cespedes got. A bonus cant be huge if, in a system free of these rules, a player would have gotten more…

      • hisgirlgotburrelled - Jun 8, 2012 at 2:35 PM

        There’s no way i’d know the exact answer becaue that was a ridiculous question. You don’t need to look up “exact” numbers to have an opinion that high draft picks are being paid excessive amounts of money before touching a professional field. Second of all, the reference to bonuses was with the NFL, being that the NFL deals heavily in bonuses and has a new rookie wage scale. I think that 4 years $15.1 million is too much money for a rookie. I’m glad to see rookie contracts being kept in check… And what does the size of veteran contracts being double that of a draft pool have to do with anything? The point is that, even if it’s just $1 million, that money should go to a veteran contract rather than a rookie.

      • Kevin S. - Jun 8, 2012 at 3:31 PM

        Sure you need to look up the exact numbers. Because it’s been studied, and the ROI on the draft is leaps and bounds above that of free agency. Allowing teams who are smart enough to see this and gain a competitive advantage is good. All the draft cap does is protect owners too stupid to see the value of spending on amateur talent.

      • ptfu - Jun 8, 2012 at 3:37 PM

        The only significant money that draft picks make is their initial rookie deal. After that, clubs hold all the leverage for a long time. This is thanks to the rules on arbitration years and renewing contracts at league minimum. You get the initial big rookie deal, then 6 years of controlled costs (the last ~2 can be significant), and only then do they hit free agency and get true market value. Some teams are locking up young players earlier but that is still the exception and not the rule. Look up minor league salaries/per diems and you will be amused.

        So while the initial rookie contracts may appear excessive, the pay rate more than evens itself out over the following years. And if the player never gets the big free agent deal then the rookie money may be most of what the player earns in baseball.

        Contract size is also symbolic. If you pay a kid big bucks then you are also sending him a message about how good you expect him to become. If he wants much more then he knows he has to reach and excel in the majors.

      • lanflfan - Jun 8, 2012 at 3:38 PM

        In general, rookie salaries are way too high. I understand this is a business, but nobody outside of sports backs up several armored cars full of guaranteed money to attract an employee before they even do one second of work. Capping the amount of money you give to rookies is a great way to keep high revenue teams from backing up those trucks to sign high risk prospects, while low revenue teams can’t do the same. It’s about a level economic playing field for all.

        I’m so sorry bora$ will see a few less million in commissions from the new draft rules. My heart is really breaking for him over thi$.

      • churchoftheperpetuallyoutraged - Jun 8, 2012 at 3:42 PM

        There’s no way i’d know the exact answer becaue that was a ridiculous question.

        There’s an easy way to know, try this:

        http://www.lmgtfy.com/?q=2011+mlb+draft+expenditures+by+team

        I think that 4 years $15.1 million is too much money for a rookie. I’m glad to see rookie contracts being kept in check

        Glad you think that’s too much. Now get ready for the answer to the question i posed. According to this link*, the Pirates spent the most amount of money last year in the draft. Their entire draft cost them about $18M TOTAL. The record for most spent ever is $19.1M by the Nationals in ’09. That’s for anywhere between 35-45 players.

        Now throw in Kevin S’s comment about how the RoI on draft picks is magnitudes greater than the cost, and realize that these players make a pittance compared to what they would on the open market. Sure guys like Strasburg, Harper and Cole made nice deals, and every few years you get a Teixeira or Porcello that command a $5M+ bonus. But these are the exceptions, not the rules.

        *http://www.baseballamerica.com/blog/draft/2011/08/teams-spend-236-million-on-11-draft/

      • seanmk - Jun 8, 2012 at 3:50 PM

        You can not complain about high dollar figures to rookies and claim ignorance at the same time.

        lanflfan paying rookie less also drives potential athletes that would play baseball to play another sport since they will get more money. high revenue teams don’t even really use their financial advantage in the draft. The new rules hurt small market teams more.

        Also i don’t understand why we are focusing solely on scott boras, this affects all agents.

      • lanflfan - Jun 10, 2012 at 12:41 PM

        Those stating that less rookie money will “push athletes to other sports” are ignoring two big things:

        1. Other sports are facing the same issues, and acting on them;
        2. Few young athletes are skilled enough to play another professional sport at the highest level.

  8. WhenMattStairsIsKing - Jun 8, 2012 at 1:24 PM

    Pedro Gomez never denied suggesting each draft pick sign for $5, and the rest of the pool be spent on Pop Rocks and Mr. Pibb.

    • anxovies - Jun 8, 2012 at 6:01 PM

      I thought it was Manny that suggested that. No, too rational for him.

  9. joecool16280 - Jun 8, 2012 at 1:44 PM

    “stark”

  10. pghburgher - Jun 8, 2012 at 2:08 PM

    Scott Boras does’nt care at all about distribution of talent. Him saying that is what is a mockery. The system is bad The Pirates spent alot of money the last few years on prospects maybe even overpaid thats what caused this. Now small markets can’t compete for high end free agents and can’t attempt to purchase potential either. Baseball has there favorites and always will. Scott Boras doesnt care about anything but money and never will.

  11. sabathiawouldbegoodattheeighthtoo - Jun 8, 2012 at 2:16 PM

    Hard slotting and all of this goes away.

  12. bluesoxbaseball - Jun 8, 2012 at 2:41 PM

    I read an article a couple years ago that cited the ethics rules for lawyers and made a convincing argument that the conflict of interest Boras has representing multiple clients is not only real, but cannot be waived. Not all conflicts of interest can be waived. I’ll try to see if I can find the link to the article.

  13. bluesoxbaseball - Jun 8, 2012 at 3:10 PM

    Here is the link to the article from The Hardball Times by Jack Marshall.

    http://www.hardballtimes.com/main/article/the-truth-about-scott-boras/

    • ezthinking - Jun 8, 2012 at 3:52 PM

      Well the article is flatly wrong as his example of the school district is flatly wrong. It is unethical to guarantee success and there cannot be certainty to clean out the school. He recognizes it in his crappy example. If case two finishes ahead of case one, there may or may not be a loss to case one. The example of representing multiple $20 million players is also crap as not every team, let alone the Yankees, as a choice between Manny, Teix and CC. Therefore, no certain conflict.

      With the draft cap or slots, the there is an almost finite amount of money (teams can go above the limit, just with penalties). But even if it was a finite cap, an agent representing two clients, the above-slot money for one does not necessarily reduce the other. It may reduce the other 8, but not necessarily a specific identifiable player. Both of Boras’ players might sign above their slot or they may go to school or go abroad, or sign below slot. Therefore, there is not a certain conflict.

      Also, Marshall’s act of accusing Boras of unethical conduct and not filing a complaint is a violation of the rules of professional conduct.

  14. thehypercritic - Jun 8, 2012 at 5:04 PM

    Craig,

    I generally agree with you, but to write the purpose of the draft is to distribute talent to teams who need it is so baldly wrong that my jaw dropped.

    That could be done on the free market like every industry without an anti-trust exemption.

    The purpose of the draft is to control costs and artificially deflate the compensation of skilled labor.

    • waltmd - Jun 8, 2012 at 5:57 PM

      thehypercritic is spot-on. The draft has NEVER been about funneling the best amateur talent to the weakest teams. That’s a fairy tale baseball has been telling itself since 1965.

      The draft is about limiting the negotiating power of top baseball players. Go back and read about Rick Reichardt, and the bonus he got from the Angels in 1964. Then see how long it took a drafted player to match that amount.

  15. rcali - Jun 8, 2012 at 5:47 PM

    Considering how much of a long shot these “top” picks are, especially the high school picks, the contracts are still way too big to start with.

    • thehypercritic - Jun 8, 2012 at 6:28 PM

      They are WELL below market value.

      Look at what international prospects get when all 30 teams can compete equally for the talent.

    • thehypercritic - Jun 8, 2012 at 6:29 PM

      They are WELL below market value.

      Look at what international prospects get when all 30 teams can compete equally for the talent.

      The contracts that are way too much are those of the fringey veterans, last men out of the pen making millions — not players who can’t negotiate or pick an employer for years after an initial contract and who the team believes may be their Mike Trout or Bryce Harper.

  16. anxovies - Jun 8, 2012 at 6:07 PM

    Why is everybody rapping on Boras for making money? Maybe they should notify their bosses that they will take a pay cut so the company can make more profit.

  17. phillyphever - Jun 8, 2012 at 8:54 PM

    You sure he isn’t upset that he’s not getting the same commission he once got?

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