Monthly Archives: October 2014

It’s Amateur Night at… not the NCAA

Photo: USA Today FTW via AP Photo/The Augusta Chronicle, Jon-Michael Sullivan

With Todd Gurley and Jameis Winston investigations underway, much attention is being (re)directed to the NCAA’s amateurism claims.

Setting the tone for the current debate is Judge Claudia Wilken’s recent ruling in the O’Bannon case against the NCAA, where she found the NCAA in violation of antitrust law by preventing football and men’s basketball players from being paid for use of their names, images and likenesses.

Who are you calling an amateur?

In a culture where the tables have turned and more and more children proclaim their goals of being basketball and football players instead of doctors and fire fighters when they grow up, I don’t believe there’s anyone so naïve to think that being a student is the top priority of a student-athlete. In fact, the whole system would emphasize just the opposite. Down to the high school level (and even before then, I’d be willing to bet) coaches, teachers and administrators often collude to create the most advantageous circumstances to further the advancement of their athletes. Whether this means inflating grades or granting unheard of extensions for assignments, overlooking necessary disciplinary action or softening sanctions, athletes receive special treatment in order to remain eligible to remain in the game. I’ve even known parents to transfer their students from private to public school or across school districts if it meant more playing time and more exposure for their athlete.

This pattern of behavior makes clear early on the prioritization of athletics over academics, a pattern only to be exacerbated at the collegiate level where rigorous travel and training take precedence over class schedules, and athletes may or may not be steered toward particular classes and professors to help them maintain academic eligibility. Athletic opportunities govern families’ choices about when, where and for how long young athletes pursue an education, because these days, collegiate athletic programs function more like a D-League than anything else. And let’s not overlook the fact that near quarter of a million-dollar educations suddenly have zero dollars attached for the student who shows promise on the athletic field. That’s not generosity, that’s business. Especially when guys like Todd Gurley are easily raking in several times more than their share of tuition dollars.

Back to business.

Let’s be real. The athletes driving these DI and DII revenue sports are only considered “amateurs” because they are not allowed to share in the profits they generate, not because they’re only in it for the love of the game. We’ve seen this to be the case with the countless athletes past and present (and some unknown I’m sure) who have gotten themselves and their schools in trouble for accepting money from alumni or agents for one reason or another. At the end of the day, these athletes work extremely hard to prove themselves from the very beginning of their little league careers for a shot in the pros. That’s the point—to get to the big money—and for good reason. The story of the athlete who comes from a socioeconomically disadvantaged background and has dreams of “making it” and supporting his or her family is not uncommon. But the turning point shouldn’t necessarily be years down the road on draft day if the players are actually generating revenue before then… just without the ability to realize those gains.

Train up a child…

If a young athlete’s whole life is dedicated to training and improvement on the playing field, shouldn’t they also be instructed how to manage the success they’re working toward along the way? We hear it all the time: “Multi-million dollar athlete goes broke.” They even made a movie about it. But why? Because they clearly lacked fiscal prudence. Next question: How can they know if they’re never taught?

There can be no expectation of responsibility when a 19 or 20-something year old, fresh out of a year or two of college, is handed tens of millions of dollars with no guidance as to what to do with it, especially when the lifestyles of everyone else in the locker room suggest big houses, fast cars and flashy wardrobes are the only way to say “I made it.” (Though those may be the least of their vices…)

The point is this: If we teach our athletes how to manage their money (and otherwise function like responsible adults) early on, they’ll have a much better chance at success later in life, whether as a professional athlete or corporate professional. In fact, the O’Bannon ruling creates an opportunity to do just that.

Judge Wilken’s injunction made it permissible for schools to pay their athletes more than $5,000 per year in exchange for the use of their names, images and likenesses for revenue-generating endeavors. That’s at least $20,000 to manage. How will they do it?

To further support their student-athletes, universities can follow the lead of schools like the University of Illinois that facilitate a life skills program designed to develop the student-athlete as a whole. Programs like these can include financial education components that will help students learn essential principles for spending and investing their money wisely now and in the future. What’s great is that in its Statement of Policy regarding agents and advisors, Illinois has prohibited communications between agents and financial advisors and student-athletes, unless authorized by the university’s life skills coordinator. This supports an environment in which athletes can learn about agency/representation, financial management, etc. and be shielded from some of the risk of exploitation or misguidance (notwithstanding any deliberate action from either side).

The future of the amateur athlete is uncertain, at least as far as the NCAA regulation is concerned. With the O’Bannon ruling, it seems that collegiate athletes are ever so slowly gaining momentum toward reclaiming economic ownership of their personal brands, but further developments are unpredictable and certainly remain to be seen.

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Dear NFL, Put Your Money Where Your Mouth Is: A Nonprofit Developer’s Critique

Bet you didn’t think one of the most profitable businesses in the country wasn’t actually a “business,” did you? The NFL is actually a nonprofit organization receiving tax exemption under code 501(c)6. What kinds of organizations fall under that classification, you ask?

“Section 501(c)(6) of the Internal Revenue Code provides for the exemption of business leagues, chambers of commerce, real estate boards, boards of trade and professional football leagues, which are not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual…A business league is an association of persons having some common business interest, the purpose of which is to promote such common interest and not to engage in a regular business of a kind ordinarily carried on for profit.”  –IRS, revised 4/24/14

Wait… what? Professional football leagues, specifically? Well that’s interesting. More interesting is how Roger Goodell’s $44 million in compensation somehow is not considered “net earnings which inures to the benefit of any individual.” Even more interesting is that, last I checked, operating a television network and licensing apparel are “ordinarily carried on for profit.” And could someone please explain how the League is able to pass the stadium construction tax burden to fans, who already pay taxes, when it earns nearly $10 billion annually? Perhaps this is why their DC and New York law firms earn the big bucks (more than $16 million last year, per the NFL’s 990).

Petitions keep popping up on Change.org to revoke the NFL’s tax-exempt status. New Jersey Senator Cory Booker has introduced legislation to declassify the NFL and other professional sports leagues as tax-exempt organizations. His bill, called the Securing Assistance for Victim Empowerment (SAVE) Act, is undoubtedly a direct response to the NFL’s poor handling of domestic violence cases over the past several months; it seeks to raise $100 million over 10 years for domestic violence assistance programs.

Senator Cory Booker (D-N.J.) -- NFL Commissioner Roger Goodell | Getty via Huffington Post
Senator Cory Booker (D-N.J.) — NFL Commissioner Roger Goodell | Getty via Huffington Post

Now to that end, I’d have to disagree with Sen. Booker’s approach. First and foremost, the NFL’s tax exempt status should not be revoked on account of Ray Rice or any of the other players currently decimating the League’s brand image by way of domestic violence. It simply is not sound governance to go about restructuring entire corporations (exempt or not) because of employees’ behavior (egregious as it is). Though domestic violence prevention is and should be a national priority, quite frankly it makes zero sense–from either a regulation standpoint or an economic one–to start snatching tax exemptions and awarding dollars to the cause du jour. There are too many causes that could argue and prove their rightful entitlement to a piece of the pie, from battered women and abused children to drug and alcohol rehabilitation and… the list is endless. The League’s nonprofit status should be reevaluated according to the purposes for which an organization is awarded tax exemption in the first place and whether its business activities align with those standards. Period.

That being said, if tax exemption is going to be revoked, it should be for reasons that the NFL has a) suspiciously maintained tax-exempt status even when other pro sports leagues have not (including the NBA and MLB); b) generated significant revenue conducting ordinarily taxable business–with a goal of $25 billion in revenue by 2027–,the distribution of which is not in alignment with the standards held up for other nonprofit organizations; and c) done a disservice to the local communities in which it operates by passing tax burdens to citizens for facility construction and renovation.

Personally, I believe NFL communities would benefit most from the League maintaining its nonprofit status and actually acting like a nonprofit. First, the League should abide by the same comparable compensation standards to which other exempt organizations are held. Instead of awarding $40 million bonuses to say, a commissioner, those funds should be invested in the communities the NFL calls home. Many NFL teams play in some of the most economically disadvantaged cities in the country, with high rates of at-risk youth, crime, poverty, unemployment, lacking education resources, and other pressing issues. Its earnings, then, should be invested in community-based programs to address these social issues that impact the daily lives of fans and stakeholders nationwide.

Photo:  fanfood.com
Photo: fanfood.com

I’d also like to see significant investment in player education on topics ranging from financial management to domestic violence. As we can see, the Rookie Symposium isn’t enough; the young men entering the League need much more guidance than any 3-day seminar can provide. Veteran and retired players can be integral to showing the rookies the ropes around the locker room, but subject matter experts are needed to provide ongoing support to players and their families at every stage of their careers. The League should invest in the overall development of its greatest assets, its players; from teaching them how to invest wisely, showing them better ways to give back and offering family support (in confidence) for critical issues like domestic violence and depression, to name a few. Greater emphasis should also be placed on professional development to help players cultivate their personal brands and prepare them for careers off the gridiron. These guys and their families give so much week after week, season after season; the League has a responsibility to give them the tools they need to succeed in their post-playing careers.

Now, it wouldn’t be fair to suggest that the NFL does nothing to support its local communities. In fact, quite the opposite is true. Its Play60 and breast cancer awareness campaigns have done a great deal to support youth and women, among the other causes the League supports. But imagine the greater impact our communities would realize if the NFL retained its earnings for the purposes of community development, as nonprofits are supposed to do! If “together we make football,” I think football could do a lot more to support “us” across the board, instead of just its top executives. That starts with closing the loopholes and owning the responsibility. So I say, either be a business, or be a nonprofit; name your values and priorities and stick to them. Put your money where your mouth is. We’re waiting…