Here is a good look at thinking outside the box and benefitting greatly from it. I am guessing the credit for this may need to go to Bobby Bonilla’s agent and not directly to him, but either way this approach has yielded this former MLB player a LOT more money in the long run.
As the story goes, Bonilla was a stand out player during most of his career, and for 1992-1994 seasons he was the highest paid player in the sport. Today’s numbers dwarf this contract, but back then he was getting paid quite a bit more than the next guy in line. He was owed a chunk of his contract at the end with the Mets, and an interesting twist to the plot enters here. The owner of the New York Mets was tangled up in the Bernie Madoff scandal which defrauded millions upon millions of dollars from a lot of people in the biggest Ponzi scheme in modern history. The grand total is somewhere in the neighborhood of $70 BILLION dollars, believe it or not. The Mets owner was part of this scheme, and it is believed at the time that the deferred payments to Bonilla was a better deal than paying a lump sum to buy out the contract and then trade Bonilla.
The deal that ended up getting done seems ridiculous in retrospect, but most bad decisions do. According to the Wikipedia article:
After his subpar 1999 season, the Mets released Bonilla, but still owed him $5.9 million. Bonilla and his agent offered the Mets a deal: Bonilla would defer payment for a decade, and the Mets would pay him an annual paycheck of $1.19 million starting in 2011 and ending in 2035, adding up to a total payout of $29.8 million. Some fans refer to these payments on July 1 as “Bobby Bonilla Day”. Mets owner Fred Wilpon accepted the deal mostly because he was heavily invested with Ponzi scheme operator Bernie Madoff, and the 10 percent returns he thought he was getting on his investments with Madoff outweighed the eight percent interest the Mets would be paying on Bonilla’s initial $5.9 million. As a result, the payout was a subject of inquiry during the Madoff investment scandal investigation when it came to light in 2008. Bonilla also has a second deferred-contract plan with the Mets and Baltimore Orioles that was initiated in 2004 and pays him $500,000 a year for 25 years.
So the takeaway from this can easily be summed up as a tremendous deal for Bonilla and a terrible deal for the Mets. As you can see from the last sentence, Bonilla also struck a similarly structured deal with the Baltimore Orioles. Since 2004, the Orioles have also paid him half a million a year, and as of 2011 the Mets also add another $1.19 million to the pile of cash the former player gets paid. Savvy business deal for Bonilla, and I am sure his agent gets a slice of these payments as well. So instead of a lump sum of $5.9 million dollars many years ago, this is in essence an annual salary of $1.59 million dollars and a grand total of over $42 million. Now THAT is how you set yourself up for the future.
I bring this up as an example that you could repurpose to some degree when it comes to negotiating compensation at a new job. You would be unwise to defer paychecks for ten years of course, but if you went into those negotiations with a different mindset on certain things, you may benefit quite well in the long run. Here is an example, and one piece of advice that I gave to a mentee of mine. He had taken a year off after college and traveled the world for almost a full year. Upon his return, he got a job opportunity back here in Phoenix and he seemed to be stuck on the initial salary they wanted to pay him. He called me for some advice and after explaining some more details of the talks, I surmised that he had a figure in his head that he wanted to get paid, but the company seemed to view him as an untested commodity, and correctly so as I pointed out. He took a year away from the skills he learned to do this job, and he had no previous industry experience. So I came up with an idea that I shared with him.
I suggested that he go back and accept their offer, but with the caveat that he is eligible for review and increase in pay every six months instead of annually. This guaranteed him a job, and a larger income than he had ever had in his life. But it also gave him the chance to prove himself to the company and if he did well, get compensated accordingly. Despite typically only offering yearly increases, they accepted his terms and allowed this exception. Eighteen months in, he was making more money than he was trying to hold out for during his negotiations. Everybody won in this case, unlike the Mets organization.
My point to this blog is this: think big picture. In the case of Bobby Bonilla, he secured his financial well being for a lifetime by deferring payments and playing the long game. I am sure he had other sources of income, likely from things like endorsements and commercials, etc. but he knew that no matter what, he’d have over a million dollars a year flowing into his bank account every July 1st. For my mentee, he negotiated a win-win deal for himself and the company, and it has worked out very well for both parties. Do your best not to get fixated on a specific number that you think you “need” to be paid. If you won a million dollars in the lottery, and spend one dollar, you are no longer a millionaire.
Another thing to consider is that if you are holding out for a specific amount, you need to factor in spreading that amount over 12 months, and 26 paychecks, minus taxes and other deductions. When you look at it in this fashion, the difference of $5,000 a year only equates to $48.07 per paycheck. Is fifty bucks every two weeks worth not getting the job at all? I don’t think so…
Assume you are going to live a long and happy life, and plan accordingly. Don’t blow a job opportunity by holding out for a number that you think you are worth. You haven’t proven anything to your new employer yet, so keep that in mind. On the other hand, don’t sell yourself short and take the first offer that gets handed to you. Work to get a fair market value for yourself, and ideally give yourself the opportunity to earn more if you prove to be quite valuable to the organization. Don’t ask for blind faith and money up front, get fair value and then position yourself to receive more compensation once you settle in and start showing what you can bring to the table.