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Sunday, March 3, 2024

Ohtani Deal Brings ‘Key Man Clause’ To Athlete Contracts

  • Record-setting deal brings investment concept into player compensation.
  • Two-way phenom ties his professional future to team owner, president of baseball operations.
Jayne Kamin-Oncea-USA TODAY Sports

An investment concept common to venture capital has made its way to athlete contracts.

Already unprecedented on multiple levels, including overall size and amount of deferrals, the $700 million Shohei Ohtani deal with the Los Angeles Dodgers also contains a “key man clause,” according to multiple reports. The two-way phenom has the ability to opt out of the contract if lead owner and chair Mark Walter or president of baseball operations Andrew Friedman are no longer with the Dodgers.

The provision means that not only did Ohtani choose the Dodgers in pursuit of his first World Series title, but he has also made a specific decision to align his professional future with Walter and Friedman. 

“Key man clauses” are frequently seen in startups in which investors can back out of a deal, or are prohibited from supplying additional funding, if a company founder or president departs or cannot perform their duties. They also have some precedent among team coaches: Former Tampa Bay Rays manager Joe Maddon had such a clause connected to Friedman when the latter also was with the Rays.

Ohtani will be formally introduced later Wednesday at a press conference at Dodger Stadium, with more than 300 reporters expected to attend including a large contingent of Japanese media.

Agent Rebuke

Since the Ohtani pact beat the prior MLB contract record — Mike Trout’s $426.5 million deal — by more than 60%, initial logic would suggest that agents would be thrilled at the dramatic upward push in player compensation. But arguably the sport’s most powerful player agent has a very different view.

Scott Boras is lamenting that the $680 million in deferrals in the Ohtani deal have the net result of leaving the top end of MLB’s annual player salary scale essentially unchanged. Ohtani’s $43.8 million in average annual present-day value in his deal barely beats the league’s prior record of $43.3 million held by Max Scherzer and Justin Verlander.

“The market remains status quo,” Boras told The Athletic. “No average annual value at or above $44 million. Clear evidence of a strategic and managed effort.”

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