"Put Me in Coach!": Recognizing NBA Players' Need for Legal Protection as Stakeholders in the League and Increased Participation in Governance.

Author:Davis, Bria L.
Position::National Basketball Ass'n
 
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  1. INTRODUCTION II. BACKGROUND A. Understanding the NBA's Organizational Structure 1. Corporate Governance Overview 2. Entity Classification 3. De Facto Unregulated Existence B. History and Context for the National Basketball Players Association 1. Historical Development of the NBPA 2. The NBPA in Today's Context and Why It Has Not Sufficiently Been Able to Address the Issue III. ANALYSIS A. Why the NBA, Why Now? Outlining Several Interests at Stake B. Justifications 1. Exploitation Still a Cause for Concern: Expendability, Capital Investment, and Player Safety Justifications 2. Board Diversity a. History of Race in Sports b. Racial Breakdown of NBA Ownership 3. The NBPA is Not Enough and Agents Are Not Jacks of All Trades IV. RECOMMENDATION A. Constitutional Restructuring B. Constituency Directors C. Legislative Action: The Employee-Stakeholder Model and German Co-Determination V. CONCLUSION I. INTRODUCTION

    The current cultural, economic, and societal influence sports have in our nation is unprecedented. This is especially true of the National Basketball Association (NBA). Current television broadcasting rights have nearly tripled, franchise valuations have soared, and for several seasons, average player salaries were near five million dollars. (1) To top it off, the league debuted corporate sponsorship logos on uniforms for the first time this past season (2016-17). (2) These are undeniably "fat times for the NBA. More money is pulsing through the system and into players' and teams' pockets than ever before." (3) There has never been a time that the league was "more avidly and widely followed, domestically and globally, using whatever metric you prefer." (4) As the league undergoes so much transformation, there are many important decisions--corporate, personnel, economic, and otherwise--to be made about how to sustain and expand the enterprise. It is unclear just how far this prolific growth will span. What is clear, however, is that the players themselves are not legally entitled to provide input in these processes, despite the fact that the decisions made impact them profoundly and, arguably, primarily.

    The corporate decisions that owners and other key actors in governance make not only impact the players in their role as employees of the league, but also interests they have as stakeholders in the league. This is a classification that the NBA has yet to recognize, but as this Note argues, is necessary and equally as important as the players' employee classification. As employees, players hold interests in matters such as compensation, safe and healthy working conditions, and benefits. However, as stakeholders, players possess interests--comparable to the interests held by shareholders (5)--in the league's operations, sponsor and partnership decisions, disciplinary actions of team owners, and other terms of governance generally. (6) Though there are areas where the interests of the player as both an employee and stakeholder converge, there are also remarkable distinctions that necessitate the separate recognition of each classification and which this Note will further address.

    The divergence of interests that arise as result of the classification issue, and the fact that the players are not legally entitled to a seat at the decision-making table, are only exacerbated by the fact that the NBA exists (by way of its governance structure) in a de facto unregulated vacuum as far as traditional corporate, antitrust, labor, and employment law is concerned. This combination of factors is troubling from a legal standpoint because it permits a lack of accountability for key governance actors (either to one another or the players) for which legal recourse could be sought if necessary. There is no external oversight or regulation which the league is really being checked by, leaving the players in a position where they possess significant and cognizable interests, but no remedy to seek if those interests are infringed upon.

    As the league's popularity and value have skyrocketed, so has the list of interests that players have in the league's governance and the need for legal safeguarding of them. In response to this parallel relationship, several measures aimed at player protection developed. The National Basketball Players Association (NBPA), a union, was created to advocate for players as employees addressing issues of collective bargaining, benefits, and other employment related concerns; while agents have assumed responsibility for handling several interest areas players have outside of their employment context. However, neither agents nor the NBPA have been able to adequately address players' interest in the sound league governance.

    This Note discusses NBA players as stakeholders in the league whose interests under this classification can best be advocated for through legal entitlement to increased participation in league governance and how the NBA's current governance structure acts as an obstacle to fulfilling this goal. It will also address the effects that failure to recognize players under this stakeholder classification has generated. Part II explores the NBA's governance structure, the legal concerns it produces for players as stakeholders, and how the NBPA's historical development and purpose render it an inappropriate entity to address the issue at hand. Part III analyzes the justifications for classifying players as stakeholders and discusses why allowing increased participation in governance is an adequate and timely remedy for the proffered issues. Part IV recommends three methods of implementation the NBA can use in order to recognize players as stakeholders with legal entitlement to increased participation in governance.

  2. BACKGROUND

    1. Understanding the NBA's Organizational Structure

      1. Corporate Governance Overview

        If a foundational understanding of corporate governance does not exist, the gravity of not having legal entitlement to input in corporate decisions is lost. Corporate governance "refers to the system for setting policy at the highest level, establishing and monitoring management processes and establishing risk control." (9) It "includes arrangements for deciding on the composition of the board, the groups or persons to whom it is accountable and the criteria to be applied when assessing the board's performance." (10) It also involves the various ways that ownership and control are separated, a dynamic that at times "raises significant issues" about the best ways to operate a business while also protecting those with ownership interests from "opportunistic behavior and poor management." (11) These definitions demonstrate the enormous amount of power those vested with structuring and governing an entity possess. Traditional corporate theory emphasizes shareholder profit maximization as the primary goal to be achieved by the corporation. (12) Under this system of governance, (13) "employees have either limited or no rights of participation as stakeholders as the corporation's sole aim is maximizing shareholder profit." (14) Supporters of the traditional corporate model typically subscribe to the viewpoint that increased focus on the interests of employees or non-shareholding stakeholders could lead to lower profits for the enterprise. (15) However, "a broader view has long been advocated for by some because the governance of these large economic units have an impact on other interests who do not supply [monetary] capital to the business, e.g., stakeholders including labor[ers] (who invests human capital)." (16)

        In the context of large publicly held corporations, these two viewpoints tend to exist in direct opposition to one another. Focusing on addressing the interests of one group must occur at the expense of the other's interests. The size of the corporation and the amount of separation between the employee/stakeholder and shareholder is wide. Because of this, employee/stakeholder's interests and daily experience in the corporation varies greatly from the shareholder's. This gap makes it difficult to assess and generate an efficient way to meet the needs of both parties. One can imagine how a major corporation--with multiple subsidiaries and operating sites--would have a difficult time worrying about maximizing shareholder profits while simultaneously considering how their employees or other stakeholders believe the company should be run. In this scenario, it is easy to understand why suggesting that employees/stakeholders have an increased role in governance might seem if not implausible, at least inefficient.

        However, in the context of professional sports, such a suggestion is not so farfetched. Perhaps, in fact, the NBA is the perfect context in which the both models of governance can coexist and function symbiotically to increase the league's profitability. This is because the nature of the enterprise very closely aligns the players' interests in the league with those of the shareholders. Additionally, the obstacles that size and number of employees/stakeholders presents for large publicly held corporations do not exist for the NBA--there are a finite number of players that can be on a team at any given time. (17)

        Part III elaborates on the unique nature of professional sports, as opposed to other business entities, and discusses the specific interests players hold that support analogizing them to shareholders.

      2. Entity Classification

        The majority of the issue at hand can be attributed to the NBA's organizational structure and the questions it raises. The first question is: what type of business entity is the NBA? Generating an answer to this question is beyond the scope of this Note, primarily because it requires a lengthy analysis and ends only with suppositions rather than a concrete answer. However, this Part conveys that the current governance structure is problematic, as evidenced by the difficulty in entity classification, and thus could benefit from reorganization.

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