The problem is that the best way to keep a GM job when you know you’re in danger of losing it is to produce results in the short term, sometimes in the very short term. This idea of trading a dollar in the future for 10 cents in the present often manifests itself in moves like trading prospects or young players for “proven” veterans, signing well-known free agents whose name value exceeds their on-field value, and backloading deals to maximize disposable payroll in the current year without regard to the payroll consequences for future years.
Keith kindly asked me to comment on some potential ways that owners might try to limit this type of behavior.
Solving this problem is not easy, and it’s one that plagues owners of all kinds of businesses. Professor J.C. Bradbury of Kennesaw State University, the author of the upcoming book “The Baseball Economist” and the man behind the Sabernomics blog, points out how difficult it is to overcome the moral hazard issues inherent in the GM role:
“Whether it’s through tying bonuses to stock options or hiring outside auditors, it’s something that owners can only hope to mitigate, not solve. I wouldn’t be surprised if owners began to give bonuses that are good even if you’re fired. If you sign a free agent or draft a certain player who reaches a certain level, you get a share of that, whether you are with the team or not. This would encourage the GM to focus on the long-term.”
Some teams could choose to give their GMs ownership stakes, as Oakland has done with Billy Beane, but doing so also represents a much more firm commitment to the GM than most teams are willing to make.
Because it’s an Insider article I don’t want to quote too much, but Law discusses the specific clauses of several contracts that may be influenced by the win-now-or-be-fired attitude of some GMs.