No-Trade Clauses

In the comments of my previous post, one reader asked me to explain why a team would ever give a player a no-trade clause. While a player with a no-trade clause is certainly more difficult to trade than a player without a no-trade clause, there are plenty of valid reasons to "give" them to some players...

1) A no-trade clause does not mean that player cannot be traded. Often, players will consent to be traded even if they have a no-trade clause. In 2008 alone, Scott Rolen, Johan Santana, Manny Ramirez, Ken Griffey Jr., and Greg Maddux were all traded in spite of their no-trade powers. Some of these players threatened to veto deals to particular clubs, or specified a few "acceptable" teams, but the fact remains they were traded. The definition of a trade means the acquiring team values a certain player more than the team currently with a player. It seems that players like to be where they are most wanted, and will often change their mind and agree to a trade they previously said they would veto. Additionally, teams are often able to provide incentives to a player to waive his no-trade clause. An extra option year may be picked up, or an extension to the player's contract offered. No-trade clauses make it marginally more difficult to move players, but does not make it impossible.

2) The no-trade clause may be important to a player, and he will insist on having one included in his contract. Many baseball players have families. They have friends. They have a life outside of baseball. No-trade clauses protect players against disruptions in their lives outside of baseball. They ensure that they cannot be arbitrarily assigned to some club on the other side of the country without their consent. In the specific case of the Padres, some players may (I am not sure if this actually exists) have taken a "San Diego discount." The insertion of a no-trade clause, or other contract mechanism such as an escalation in salary in the case of a trade, guarantees their "discount" is only applicable to San Diego.

Obviously players value no-trade clauses, but they are also costly (albeit in a non-monetary fashion) for teams. Theoretically, the full cost of the no-trade clause is recognized by teams, and some sort of acceptable concession is made on the part of the player. Say a player is worth $10 million per year, and values a no-trade clause at $1 million per year. The team believes their true cost of a no-trade clause is only $0.5 million per year because there is a high probability they will be able to trade the player anyway. Because the no-trade clause is valued asymetrically, the player can be paid anywhere between $9 million and $9.5 million and both parties will be better off because of it. The club will pay, including the cost of the no-trade clause, less than the $10 million the player is worth, and the player will get more than the $10 million he is worth.

3) The "10 and 5 rule" lessens the impact of contractually guaranteed no-trade clauses. The collective bargaining agreement gives any player who has been in MLB for 10 years, including 5 years on his current team full no-trade powers. In many cases, players who ink a contract with a no-trade clause are really only getting 1 or 2 additional years of no-trade protection above what they would already have received.

I am sure I am omitting some of the reasons teams may give no-trade clauses, but the overiding reason they exist is "reason number 2." No-trade clauses can be a win-win, making both the team and the player better off due to the asymetry of their valuations of the no-trade clause. Sometimes no-trade clauses come back to bite a team in the rear-end, but so do many contracts without no-trade clauses. The no-trade clause is not what "kills" the team, but rather a mistake in the initial player evaluation.