February 28, 2004
Beating Eric Gagne
On Wednesday, Feb. 18 in Phoenix, the Dodgers did what their opponents almost never did during the 2003 season--they knocked Eric Gagne around. It didn't happen on the field, of course, but rather in a salary arbitration hearing, where unholy stuff is considerably less valuable than it is on the diamond.
Gagne wasn't eligible for arbitration until after the 2003 season. During the time leading up to his first arbitration hearing, he earned a renewal-rights-tastic $550,000 after a 2002 season in which he pitched 82.1 innings, allowed 55 hits, struck out 114 against 16 walks, and saved 52 out of 56 games. In short, he was what might be called "pretty good", or, for our less restrained readers, "unbelievably sick and devastating". In 2003, it's safe to say he earned his $550,000, putting up this statistical line for the year:
G IP H R ER HR BB K W L S BSv ERA 77 82.1 37 12 11 2 20 137 2 3 55 0 1.20
No, it's not Pedro Martinez pitching to Cesar Izturis wearing an eyepatch. That rather cartoonish line netted Gagne the Cy Young award from the BBWAA, and he thought it would also net him a salary well above the $5 million he will receive after losing his arbitration case.
What are the criteria for determining a salary arbitration award? From the Collective Bargaining Agreement:
(12) Criteria (a) The criteria will be the quality of the Player's contribution to his Club during the past season (including but not limited to his overall performance, special qualities of leadership and public appeal), the length and consistency of his career contribution, the record of the Player's past compensation, comparative baseball salaries (see paragraph (13) below for confidential salary data), the existence of any physical or mental defects on the part of the Player, and the recent performance record of the Club including but not limited to its League standing and attendance as an indication of public acceptance (subject to the exclusion stated in subparagraph (b)(i) below).
Any evidence may be submitted which is relevant to the above criteria, and the arbitration panel shall assign such weight to the evidence as shall appear appropriate under the circumstances. The arbitration panel shall, except for a Player with five or more years of Major League service, give particular attention, for comparative salary purposes, to the contracts of Players with Major League service not exceeding one annual service group above the Player's annual service group.
This shall not limit the ability of a Player or his representative, because of special accomplishment, to argue the equal relevance of salaries of Players without regard to service, and the arbitration panel shall give whatever weight to such argument as is deemed appropriate.
So what happened? The Dodgers offered a number of $5 million, and Gagne's rep, Scott Boras, offered $8 million. How come the lower number was so compelling? Sadly, the current CBA lacks a clause allowing unfettered access to the process to self-important analysts, so we have to posit a little, and ask around some front offices to hear possible explanations.
One NL exec had this to say: "Boras overreached." Not that there's a whole lot of ambiguity in that statement, but after prodding, the exec clarified the statement: "Gagne's in his first year of eligibility, and there's a bunch of comparable guys. They're not as good, but they're a clear baseline from which it'd be easy to convince the panel to work."
This is true. Keith Foulke made an average of $5 million over the last two years. Billy Koch made about the same money. Antonio Alfonseca made $4 million. Nominally, these guys are all closers. Gagne is clearly the class of the bunch, but now you're talking about a question of degree, if you let the discussion and negotiation take place within the venue of those comparables.
And that's really the issue. Framing the debate or negotiating scope is more than half the battle. From the outside, it appears that the Dodgers' arbitration rep was able to frame the debate in terms of young closers who weren't yet eligible for free agency. It's a heck of a lot more comfortable for the Dodgers to maneuver in that neighborhood and to make Boras explain why his client is so much better than that cohort than it is to let Boras frame the debate. Because it's obvious how an advocate of Gagne should go about doing that.
In order to get past the point of making those comparisons, Team Gagne needed to push hard on the "Special Accomplishment" clause above. And that discussion could have started with the Cy Young award. Associate Gagne with Cy Young winners, not young closers of a comparable service time. In salary arbitration, you are carefully constrained in terms of whom you can compare your client to, particularly in terms of service time; the "special accomplishment" clause is really the only potential way out of that particular constraint. Team Gagne could have made this kind of a case, using the BBWAA award as a link. I don't know how effective it would be:
Pitcher 2003 Salary Pitcher 2003 Salary -------------------------- ------------------------------ Pedro Martinez $15,500,000 Billy Koch $4,250,000 Greg Maddux $14,750,000 Keith Foulke $6,000,000 Roger Clemens $10,000,000 Jason Isringhausen $7,250,000 Tom Glavine $11,000,000 Antonio Alfonseca $4,000,000
In many ways, the arbitration process is kind of a final grappling hook into an antiquated way of doing business. It's kind of like one of the very old-line union contracts, where seniority matters more than achievement. Of course, the CBA is set up to award seniority in terms of salary, so it's not surprising that the arb process is part of that. But in the specific case of Gagne, the arbitrators should have been pounded over the head with what differentiates Gagne from guys like Koch, Foulke, and Isringhausen, all of whom admittedly have more service time.
So, am I suggesting that the Cy Young be presented as the "special accomplishment" achieved by Gagne that means he should be able to compare himself to players far outside his service cohort? Nope. The arbitration process lends itself to simple arguments that are easy to grab onto and understand. You don't have much time to make nuanced arguments, and the more complexity you have, the easier it is to either run out of time, or lose the impact of your message. The one thing that Team Gagne could point to is this:
55 Save Opportunities, 55 Saves.
That's it. That's the special accomplishment. Saves mean wins. Wins mean money at the margin. Those other closers blew saves. They cost wins. They cost money. Eric Gagne was presented with 55 wins to finish off, and he was 100% effective in doing so. Those other closers? 76 out of 92. There's no gray area of perception or popularity here, like there is in a vote. There's a direct cause and effect relationship of revenue. Saves lead to wins. Wins lead to money. This isn't a sabermetric debating society, it's an argument about who gets the money in a zero-sum game, and it's not the time to educate.
One thing that people need to understand is that in general, arbitration statistically favors management. I'm not talking just about MLB, but about employment arbitration in general. It just does. And there's going to be some fallout from the poor showing by the players in arb cases. The re-upping of the specific arbitrators (Stephen Goldberg, Dan Brent and Elliott Shriftman) is something that the MLBPA might not support, and there may be an entirely new slate of arbitrators for next year, as the MLBPA might want to send a message.
Gagne's specific case is fairly interesting. New Dodger GM Paul DePodesta understands the importance (and lack thereof) of saves as well as anyone, but he's also smart enough to remember the Einstein quote that "A sufficient quantitative change is, in fact, a qualitative change", so he might shell out the big bucks to keep Gagne on board long term. Over the last two years, Gagne's pitched 164.2 innings. In that time, he's allowed 92 hits, 36 walks, 29 earned runs, and struck out 251 batters. And I know we're not big fans of saves, but he has saved 107 games against four blown. Yeah, it's in Dodger Stadium, but his road ERA last year was 0.76, and even if you make adjustments eight ways from Sunday for park, league, and difficulty of competition, Gagne's still bloody vicious on the mound. It'll be interesting to see what the DePodesta regime does with the situation.
The salary arbitration process is still a lot like going through a vicious divorce proceeding so you can stay married. Based on his public pronouncements, Gagne's not happy with his treatment by the Dodgers, but considering the Dodgers have a new owner and new leadership in the front office, what does that really mean? Teams that have given more than they should to avoid going to a hearing in the hopes of buying a hometown discount later haven't reported a huge volume of success on that front. Maybe the process is so inherently adversarial that this is the most honest way to go about it. Certainly many clubs see it as a way to buy into an inflated market, because players can compare themselves contractually to contracts negotiated in a different time. No chance Jim Mecir would sign a deal for $3.25 million if he were a free agent this off-season, even if he were still posting tremendous numbers and fully healthy, so why give a young reliever a shot to tether his wagon to that horse?
But since we weren't there, it's just speculation, really. At the end of the day, Gagne really has no direct comps, because guys just don't pitch like that. I do know that the MLBPA isn't going to want to have the status quo in place on this issue the next time it comes up in negotiation. After all, if experience is going to be worth less and less of a premium as clubs grow wiser about paying for future value rather than past performance, the players are going to want to start capitalizing on precisely that future value. People are funny about distorted markets--they want them to be distorted in their favor.