Creative accounting helps sports teams stay in salary game

Steve Chiotakis Jul 26, 2010

Creative accounting helps sports teams stay in salary game

Steve Chiotakis Jul 26, 2010


Steve Chiotakis: You think there’re a lot of financial games and shenanigans being played on Wall Street? Fortune Magazine’s Allan Sloan says sports teams of all sorts have creative accounting to stay in the game, and he’s with us now to talk about it. Good morning, Allan.

Allan Sloan: Good morning, Steve.

Chiotakis: So we know why athletes are paid so well — they win, they bring in crowds. But is it really worth it to a team to go overboard like some of them do?

Sloan: Well, the teams think it’s worth it. And as a fan, if my team goes overboard keeps a good player, I’m very happy.

Chiotakis: You know, but going overboard I thought was supposed to be paired by these salary caps that are in certain sports. Why isn’t that working?

Sloan: Well, because it’s wonderful. It’s like looking at Wall Street, because you have these salary caps, but the teams figure out ways around the caps. And it turns out there’s a whole kind of specialist called a capologist — I love that name — and the capologists figure out ways to deal with the salary cap and still get what you want.

Chiotakis: For example?

Sloan: For example: We have this guy Kovalchuk, and for 12 years, he’s making I think $95 million, it’s $8 million a year. But the last five years, he gets paid almost nothing, so the number drops to $6 [million].

Chiotakis: So his average salary will be under the cap, I get that. But Allan, come on, this is America and we want our teams to do well. Are there any downsides to all this manipulating?

Sloan: Well there are, if you care about competitive balance and home teams being able to hold players. But hey, I’m from New York. OK, I grew up in Brooklyn, rooting for the New York Yankees, I’m a classic frontrunner. I just want . . . I mean I’m saying this with a big smile because I don’t want to be stoned, but what I care about is if my teams to get the players they need to win, and let the other players and teams take care of themselves.

Chiotakis: So what’st he moral of the story, Allan?

Sloan: That numbers are numbers in sportsland, just like on Wall Street. You don’t necessarily believe what they’re showing you.

Chiotakis: Fortune Magazine’s Allan Sloan joining us from New York. Allan, thanks.

Sloan: You’re welcome, Steve.

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