Former Major League Baseball Commissioner Fay Vincent shed some light on a topic we've previously discussed on these pages in a guest editorial that appeared in the Wall Street Journal.
Vincent proposed that the Cardinals ought to offer Albert Pujols an ownership stake in the club as an enticement to get him to stay in St. Louis. An unusual arrangement these days, many of us have wondered if such a move were allowed under baseball rules. But Vincent verified that it, in fact, is.
"If modern stars are smart they will soon begin to emulate highly paid business executives and improve greatly their compensation by adopting more sophisticated tax planning, Vincent wrote. "In the business and entertainment worlds, top executives and talent do not work exclusively for salaries. They want and get a piece of the action. They want to create and own assets, defer income and control their tax exposure."
In short, Pujols could put himself in a better long-term financial position by taking a stake in the Cardinals than he could by being compensated in cash money. He'd pay much less to the government for the capital gain than he would lose in payroll taxes in the short term while receiving an asset that would continue to generate revenue in the future.
The deal would be good for the Redbirds in that the team would save cash to spend on other players, making it more competitive for rest of Albert's playing career. It would also tie Pujols to the team, presumably for the rest of his life, making him an ambassador of the club in much the way Stan Musial has been since he retired in 1963.
Vincent said he thinks similar moves could help low budget teams like the Pirates and Marlins be more competitive with the Yankees and Red Sox of the world in the future. But I fail to see that when New York or Boston could pass out one percent shares of the team that were worth more than a tenth of an ownership stake in the Pirates or Marlins.
But in a case where you have a player so tied to a team as Pujols is to the Cardinals and their fans, I think such a deal makes perfect sense.
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