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National Hockey League Collective Bargaining Agreement Case Solution

Solution Id Length Case Author Case Publisher
1068 1223 Words (5 Pages) Michael Sider, Jeremy Yip, Phil Ward, Steve Dempsey Ivey Publishing : 905C01
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The CBA agreement between NHL team owners and the NHL Players Association is expiring in about six months period. Team owners have raised their concerns regarding increasing salaries of players, which is consuming almost three – fourth of the total revenue. Bob Goodenow, Executive Director of NHLPA, has a good time to come up with few proposals to present to NHL team owners. Though the primary goal would be to protect the interest of players by maintaining the current mechanism of salary; however, the secondary objective would be to address concerns of team owners in a way, which is of benefit to both parties. More importantly, he should avoid a situation of lock-out as it would hurt all parties including fans. Three options in an incrementally unfavorable manner have been presented from rolling back salaries to applying a salary cap. Goodenow should press for the first option; however, in case of rejection, which is probable, he should move on towards other options.

Following questions are answered in this case study solution

  1. Executive Summary

  2. Problem Statement

  3. Analysis

  4. Alternatives

  5. Recommendation and Implementation

Case Analysis for National Hockey League Collective Bargaining Agreement

Problem Statement

In the year 1994 – 95, National Hockey League (NHL) and National Hockey League Players’ Association (NHLPA) got into an agreement regarded as the Collective Bargaining Agreement (CBA). The Collective Bargaining Agreement was about to expire in almost a six months period on Sep 15, 2004. The NHL team owners were of the opinion that players’ salaries were increasing rapidly and were consuming more than three – fourth of the total team revenue, which is not justified as players’ salaries account for much less in other leading national sports league; therefore, team owners were looking for a new agreement where there would be a salary cap and salaries would also be in proportionate to the team revenue. These conditions were not acceptable to NHLPA and within six months period, they had to come up with a counter-proposal to not only address team owners’ concerns but also to safeguard players’ interest.

Analysis

In this section, the perspective of both players and team owners will be considered, in order to understand the situation correctly. First of all, the players’ perspective will be discussed, which is a comparatively weaker side under the present circumstances. Currently, players are sold under a free – market policy, which allows resourceful clubs to buy talented players at a higher price. If a salary cap policy is used, then there would be a drastic decrease in the salaries of players. Apart from this, against the argument of NHL team owners’ that many teams are incurring heavy financial losses, NHLPA is of the opinion that a major reason of financial loss is not the salary, but poor decision making from team management. On the other hand, team owners are of a completely different perspective. Based on an independent report and public display of teams’ financial statements, it is evident that approximately 76% of the total revenue is used for paying salaries. Under a free market policy, salaries for players are increasing rapidly as major teams are always in an attempt to sign up for the best available player. Another disadvantage of this strategy is that teams with limited financial resources will never be in a position to compete with top teams because of their inability to spend heavily on players’ salary. 

As apparent from the current situation that both media and the general public have majorly taken sides with NHL team owners, and if the matter is evaluated rationally, then it is evident that NHL team owners are at a disadvantage under the current agreement; therefore, they have every right to ask for a new agreement under new terms, which favors both players and owners.

 Alternatives

Though there can be various possible options to resolve this matter depending upon the degree of favorability to either side; however, a couple of most appropriate and feasible options, which addresses concerns of both sides, are laid out in this section. Since, the response is attempted from NHLPA’s perspective; therefore, a slight favor of players’ interest would be the priority. The first option is to roll back players’ current salaries by 7.5%, and continue with the free-market policy. This option would address the concern of NHL team owners as it would bring the salaries’ percentage down to 68.5% from current 76%. But while proposing this option, NHLPA’s spokesperson should make their concerns clear to NHL team owners and media regarding financial loss stemming from poor decision making, in order to bring light to the matter.

The second available option is in response to NHL team owners’ appeal of setting a salary cap. The NHL Players Association should propose setting a hard salary cap at the median range of teams’ current salary expenses. The team lying in the middle of the observation table should be selected as a guiding figure for the first year. In addition to this, the salary cap should increase by 5%, or by the rate with which team revenue has increased.

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