September 4, 2015


Roger Goodell and the Agency Risk (David Phillips, 9/04/15, Future of Capitalism)

Most institutions face an agency risk, that is, the risk that top leadership will exercise its power in its own interest rather than the interest of the owners or membership. [...]

The NFL has announced that it will appeal U.S. District Judge Richard Berman's decision lifting the Goodell-imposed suspension of Brady. Yet it is against the interest of the NFL to appeal. The longer "deflategate" goes on, the more the NFL suffers. Excessive commentary is devoted to that subject rather than to the actual subject of football. What happened in the game? What are the predictions for various games? Who has played well, and who has played poorly? Focus on deflategate keeps the emphasis, however, on the faults of football, not on those characteristics of the game that has made it America's most watched sport. And this analysis holds regardless of whether Brady was aware of the alleged tampering with the balls or whether the NFL has valid grounds to overturn Berman's decision. It is contrary to the NFL's self-interest to continue the focus on this alleged scandal.

Why then is the NFL - really Goodell -- appealing Judge Berman's decision? Berman's decision emphasized a variety of procedural errors in the way the NFL decided that Brady should be suspended for four games. Much of what Berman stated can be encapsulated in the notion that Goodell, who played roles in the prosecution, application of the penalty and appeal of that penalty -- that is, he was both prosecutor, executioner and "independent" arbiter of a decision he participated in -- abused his authority. An appeal by the NFL would be a further abuse of authority, this time to the detriment of the NFL. It is Goodell who has a personal interest in appealing Berman's decision, acting to the detriment of his employer, the NFL and its constituents (owners, players, fans, etc.). In other words, Goodell's decision to appeal presents the agency risk, an agent acting contrary to the broader interest of the parties for whom he is an agent.

Posted by at September 4, 2015 1:55 PM

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