By Reducing Employee Pay, the Sixers are Taking an Unnecessary Hit in the Goodwill and Optics Department

Monday night, Marc Stein reported that Sixers and Devils at-will employees making more than $50,000 were informed that they would be subject to “temporary salary reductions of up to 20 percent”, a policy that would start on April 15th and continue through June. Stein went on to say that members of the coaching staff and front office were also asked to participate, but cannot be forced to do so.

This caused a huge stir on social media and it’s all over the radio this morning, confirmed by the Sixers in a statement that reads like this:

“As we navigate this evolving COVID-19 environment, we are mindful of the long-term impact the suspension of live events and games will have on our organization and industry. To ensure we can continue to support and operate our businesses during these uncertain times without reducing our workforce, we are asking our full-time, salaried employees to temporarily reduce their pay by up to 20 percent and move to a four-day week. In addition to supporting our people, we are committed to playing an ongoing role in funding efforts to help the most impacted residents in our home cities. In the coming days, we will enter into additional partnerships in Philadelphia, Camden and Newark to assist our neighbors with food and resource distribution during this public health crisis.”

– Scott O’Neil, CEO of HBSE

Howard Eskin was on Twitter around midnight reporting that Michael Rubin was not happy with this strategy, pinning the decision primarily on Josh Harris and Scott O’Neil.

My thoughts, in no real order here:

  1. Sixers owners spent the last two weeks building goodwill with the community, only to flush it down the toilet. Josh Harris and David Blitzer announced that they would pay Prudential Center employees and the game night staffers who work Sixers games at The Wells Fargo Center. The Sixers also have been in contact with arena workers who may have been exposed to the three individuals who tested positive for Coronavirus. When you come out and do something like this, it results in significant negative ramifications and wipes away the good things you already did. It just seems contradictory in that regard.
  2. No other sports team has instituted a policy like this, or at least that hasn’t been made public. It’s bad optics for the Sixers to be the first out of the gate.
  3. In lieu of furloughs, you can find other things for people to do. During the NHL lockout season, Anthony was sent to New York to report on the Phantoms and bounced around Canada doing stories on junior players.
  4. The ownership group, collectively, should have more than enough money to cover these employees’ salaries, though the $2 billion dollar valuation of the franchise isn’t really something worth clinging to. That’s just the estimated value of the organization; it’s not liquid. There’s a little more nuance required when we say, “well these guys are billionaires!

I took a look at the Sixers’ front office directory and there are more than 150 people listed there. We have no idea who earns more than $50k and less than $50k, or what their specific earnings are, but if we did an exercise picking a totally arbitrary number, say 100 people making $100,000 a year, the math would look something like this:

  • $100,000 / 26 pay periods = $3,846 per paycheck, pre-tax
  • temporary reduction of up to 20% is $3,846 X 0.20 = $769
  • $769 X 100 employees = $76,900 savings every two weeks
  • $76,900 savings every two weeks from April 15th to July 1st (five pay periods) is $76,900 X 5 = $384,500

A totally arbitrary number, but it’s not a lot. A drop in the bucket in the grand scheme of NBA finances.

Reducing pay and asking employees to furlough is not some new or crazy idea here, it just looks bad optically because sports franchises – particularly in the NBA – have been in boom times lately, with growth fueled by hefty TV contracts, globalization, increased ticket prices, and nascent sports betting industry. Sometimes you can’t put a price on goodwill. Or at least you shouldn’t try.

EDIT:

Here’s an article from NJ.Com quoting a Devils spokesman, who says the salary threshold is different

All of Harris’ salaried, full-time employees making at least $100,000 have been notified that their pay will be temporarily cut beginning in April due to the NHL and NBA seasons being stopped because of the coronavirus pandemic. Also, those employees will move to four-day work weeks.

Employees making $125,000 or more may lose up to 20 percent of their pay.

A report by ESPN.com stated Harris employee making $50,000 or more would be affected, but a Devils’ spokesman contacted NJ Advance Media to report “the floor is now $100K, not $50K.”

“The floor is now $100k”

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6 Responses

  1. So the hot dog vendor and the arena garbage collector will continue to be paid while the games aren’t being played but the staff accountant who makes 60k will be taking a pay cut of up to 20%? That totally makes sense.

  2. Is Sonny Hill on the payroll? If so, what the hell is his job? Will they cut the Legendary Sonny Hill’s pay?

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