Corporations, government, Hobby Lobby, and socially responsible investing, part 2

Part 1 of this series looked at Burwell v. Hobby Lobby  and the issue of corporate personhood.

This is Part 2, looking at the poor sports of the corporate world: professional sports teams and leagues. So far this year, we’ve seen an Olympic ghost town created at Sochi, Russia; the NBA order Donald Sterling to sell his team – at a massive profit; the NFL make crazy demands in exchange for granting a city the right to host the Super Bowl; the Washington Redskins lose trademark protection on their logo; and FIFA spend money that Brazil does not have.

What we  have is an industry that promotes competition but that does not want to compete.

In the United States, the professional leagues themselves are non-profit organizations, although the teams themselves are for-profit, with the notable exception of the Green Bay Packers. (In addition, baseball – and only baseball – enjoys an anti-trust exemption.) With or without an anti-trust exemption, the leagues operate de facto monopolies. You can’t just start your own professional team – it has to be approved by the league.

The U.S. leagues limit competition by distributing television funds evenly, controlling salaries, and restricting the free agency of players. In football and basketball, players are required to play in college, giving them a free training program.

The relegation system in the England Football Association is an interesting contrast. There are eight levels of play. The highest is the Premier League. Each season, the bottom three teams in each level have to move down, while the top three teams move up (the exception being the top three teams in the Premier League.) In theory, you could start a team of friends at the local pub and, if you were good enough, end up in the Premier League after eight seasons or so. This also forces team management to concentrate on play. If the U.S. had a similar system, the Chicago Cubs would be playing in the Welles Park Little League by now instead of introducing puerile mascots and fighting over sign height.

Meanwhile, in the U.S., teams extort money from fans by threatening to move. Once a team leaves, it may be impossible to get it back – which is why the nation’s second-largest media market, Los Angeles, has no NFL team. And I’m a Cleveland Browns fan; don’t even get me started on how Art Modell and the NFL treated loyal, long-term fans. Team owners don’t try to make money by running their teams like businesses, offering a product that the fans demand; instead, they look to get money from taxpayers for items that don’t contribute to wins and don’t generate economic growth for local communities.  In Cleveland, Cuyahoga County’s chief executive, Ed FitzGerald, has proposed that local teams receive increased funding for stadium maintenance only if they produce winning records. That way, the fans get more for their tax dollars than wealthy team owners and losing teams.

The reliance on government involvement cuts other ways, too. In recent months, the owner of the Los Angeles Clippers has been told to sell his team because of racist comments he made in a conversation with his girlfriend – and several members of congress want to deny him tax deductions for any fines he must pay – while the Washington Redskins team lost the trademark on its logo. More than a few people have asked why the exercise of free speech can result in such punishments – why should the government interfere with private organizations?

The government can interfere because the organizations in question enjoy benefits from federal, state, and local governments and their taxpayers. The organizations in question have been happy recipients of government entitlements.

Corporations can’t ask for government involvement when it helps them and then criticize government involvement when it does not. We have far too much government involvement in for-profit business, but it is not always in the form of evil taxes and onerous regulation. It is too often in the form of tax breaks, taxpayer subsidies, and anti-trust exemptions.

Professional sports teams have become almost reflexive about demanding money from taxpayers and threatening to move if they don’t get it. In Chicago, the Ricketts Family has threatened to move the Cubs to the suburbs if they do not get concessions to remodel Wrigley Field, conveniently ignoring the fact that about half of all Cubs fans are really Wrigley Field fans. (My family lives near Wrigley Field and has a partial share in a Cubs season ticket package, so we have a stake in this!) It makes no sense.

It’s time for people who talk a good game about competition to get out there and compete.

Next: How all these thoughts about corporate structure tie into socially responsible investing.