The Sports Business Journal ($) is reporting that the current executive director of the Major League Baseball Players Association Michael Weiner is taking a salary of $1 million per year. He is continuing a practice started by Don Fehr, who drew a $1 million salary for his services as union head since the early 1990s. While $1 million is a nice gig if you can get it, it’s far below what the heads of other player unions have received. The late Gene Upshaw earned over $6 million per year to lead the NFL players union, and Billy Hunter received $3.4 last year heading the NBA players union.* What I find so amazing about this discrepancy is that Fehr was the most effective of the executives. In comparison to Upshaw, it’s not even close.
And it’s not that baseball players were unaware of Fehr’s worth, which was far in excess of his salary in terms of bargaining on the players’ behalf: Fehr refused pay increases. In real terms, Fehr took annual pay cuts. After accounting for inflation, $1.7 million would be required to keep the purchasing power of $1 million in 1990. Now, Weiner seems to be continuing the practice of working for a reduced wage. Why would Fehr and Wiener take so little?
I believe it has to do with sending a signal of solidarity during work-stoppages. In a bilateral monopoly market—monopsony buyer (league) and monopoly seller (players) of talent—bargaining strength is the way to best your rival. The threat of not playing or the threat of not opening the gates are the main weapons that the owners and players have against each other. And during such times, owners and players are on the edge of cracking. Team owners lose revenue and players forgo wages when regularly scheduled games aren’t played. Owners and players have expenses to cover, and when funds get tight, people start to look for compromise. Players are particularly prone to cave because they typically don’t have another source of income.
The benefits of a labor stoppage to either side are long term, and may not even be realized by the current participants. The union head is like a general who must rally his troops, possibly standing like a stone wall in the face of mortal peril. Fehr, who has a better grasp on labor negotiation strategy than players, cannot act without the support of players. If he can’t convince them that he knows what he’s doing, all could be lost. And owners can sniff out weakness, largely because scared players have a history of blabbing to owners. How can Fehr keep his troops loyal? Taking a below-market salary is a good way to convince players that the stakes are greater than their short-run losses. “Hey, I know you’ve got three mortgages to cover, but this is about the long term. I could earn ten-times my salary working on Wall Street, but I work here because I believe in this cause. Don’t you believe? We’ve got to do what is right.” If you’re earning as much or more than most players can expect to make, it’s hard to find a sympathetic ear among players about sticking to principles.
When Fehr announced his retirement, former union leader Marvin Miller said the following.
“When I was there, there was always a signficant cadre of players who had personal experience in how bad things were before the union — how horrible the conditions were,” Miller said. “That’s a powerful factor in players understanding what the union means. Almost from the beginning of Don’s tenure, he had a membership where not a single player had played one game of baseball without a union. That could be a challenge at times, and he faced it quite successfully.”
Miller was an old union guy and a smooth talker, and he led players who had seen what listening to Miller would bring them. Supposedly, Fehr didn’t have the rhetorical skills that Miller had, so he may have had to use other means to persuade players to stay the course. And the players held firm under his leadership during the 1994-1995 strike when owners desperately wanted a salary cap. Taking less has to be a powerful signal to men who intensely want more.
But then how does taking less now help the union leader in the long-run? I assume that union leaders are no less self-interested than other individuals. The payout comes at the end. In his final year, Fehr received $11.8 million in compensation, which included back expenses and retirement. It’s not clear to me if this figure includes an $11 million gift that the players voted to Fehr as a parting gift or if this was part of his planned retirement package (I believe the payouts are separate). But even this isn’t a huge payout. The real benefit is that Fehr has established himself as a master of his craft. He can hire himself out as a speaker or consultant, or go work anywhere he wants for a big wage. It’s the same reason top macroeconomists lobby to accept a $200,000 salary to chair the Federal Reserve. Rumor has it that Fehr is going to be the next head of the NHL players union, where he won’t need a low salary to establish credibility with the players. He led the best-run union in professional sports for 20 years, he doesn’t have anything to prove to anyone else.
My guess is that Fehr set up a good system to produce a powerful union, and Weiner knows that to be successful he’s going to have to establish his credibility among the players just as Fehr did. If he fails, he’ll be unemployed quickly, possibly earning less than his current salary. If he wants to build a legacy to gain that big payday, he has to establish trust with the players, and taking a low salary is a good place to start.
* Hunter’s salary included a significant one-time payout for unused vacation time, so it’s unclear how representative this is of his normal salary. But, if we assume his salary has remained stable, he’s been receiving over $2 million per year outside of the payout.