Wednesday, 29 July 2009

A Matter of Trust

Billy Joel, who has banners hanging in Madison Square Garden for sold-out shows with 12, wrote a song in 1986 called "A Matter of Trust". In it, he explains why a relationship is nothing more than a lie when it comes to matters of trust. After the meeting conducted by the NHL's Board of Governors in regards to the new applications for ownership of the Phoenix Coyotes, it appears that the only issue separating Canadian billionaire Jim Balsillie from owning the Phoenix Coyotes is trust. It has nothing to do with his wealth, his application, his team, or his dream of placing a team in Hamilton. Instead, from everything that Gary Bettman said today, it appears that the NHL Board of Governors made is clear that they don't trust Jim Balsillie, and that his application, while sound financially, doesn't meet the standards of character than the NHL is searching for in an owner.

The NHL Board of Governors met today in a special meeting to consider the three applications in front of the NHL for the Coyotes' ownership. The applications were from Mr. Balsillie, Mr. Jerry Reinsdorf of Chicago, and a group led by Mr. Anthony Leblanc of Thunder Bay, Ontario. The goal was to find an application that satisfied the criteria outlined by the NHL's constitution and bylaws and by the bankruptcy findings as set out by Judge Redfield T. Baum.

The findings of the NHL Board of Governors were as follows:

  • The application submitted by Jerry Reinsdorf for $148 million, which included keeping the franchise in Phoenix, Arizona, was unanimously approved by the NHL Board of Governors.
  • The application by Jim Balsillie for $212.5 million, which included a proposal for moving the franchise to Hamilton, Ontario, was unanimously rejected by the NHL Board of Governors.
  • The application by Anthony Leblanc, which included a proposal for having the Coyotes play in various cities across North America, was deemed "incomplete" by the NHL, but Mr. Leblanc's group was encouraged to continue on the application process.
Now, there may be some serious backlash towards the NHL for shooting down the Balsillie application when it would mean a better cash windfall in terms of the sale. However, Gary Bettman made it very clear that all three applications were based upon some very vital criteria.

"The criteria set forth in the constitution and bylaws relates to financial wherewithal, character, integrity and the view whether or not the other owners would deem you a good partner," Bettman told a group of reporters.

Clearly, Jim Balsillie's "financial wherewithal" is not in question as he is the CEO of Research-In-Motion which owns the Blackberry and its related technologies. With the Blackberry earning more and more of the cellular and smartphone markets, Balsillie's financial backing is rock solid.

However, the last three criteria points raise a major concern if you're an owner. Character, integrity, and good partner are major issues when you're working in a partnership.

In circumventing the rules twice to try to gain ownership in the NHL, Balsillie's character and integrity should be called into question. Why does he feel the need to do things differently than the other 29 owners who followed the rules? If you're going to enter into a business partnership with him, would you feel comfortable if he feels he's above the rules?

PSE spokesman Bill Walker offered a rebuttal statement to the NHL's findings: "We do not think that Jim Balsillie's qualification to be an NHL owner is an issue in this case given his 2006 approval as an NHL owner".

The problem is that Balsillie didn't try to skirt very clear rules about becoming an NHL owner in 2006. The problem is that Balsillie didn't enter into an agreement with an NHL owner to pull the rug out from under the Board of Governors' feet in 2006. The problem is that Jim Balsillie's business tactics seem to have changed since 2006. His qualification to be an owner in terms of the financial side have not changed - he's still got the cash to be an owner. The problem is that the way he has approached the opportunity gets sleazier each time.

As a businessman, you would expect Jim Balsillie to understand business ethics when it comes to a large-scale, global company like the NHL. You would hope that he would understand that there is a process in the transfer of ownership in a business like the NHL, and expect that he would respect that process. It's not like trading hockey cards; rather, there is a long process of due diligence that needs to be conducted on both sides of the ledger.

It's time for PSE Sports and Jim Balsillie to stop crying over spilled milk as in the picture above. Just as in hockey, you win some and you lose some. When you lose, you go back to the drawing board and come up with a new plan to find a way to win. Sometimes, however, you have to do things a certain way. And you have to trust your teammates - in this case, the other 29 owners.

But if they don't trust you, why should they want you on their team?

Until next time, keep your sticks on the ice!


Anonymous said...

If you remember back to 2006, the NHL BoG unanimously approved Balsille to purchase the Penguins. Then, after the BoG approval, Bettman stepped in and added an addendum to the deal that stated that Balsille could not move the team at all. Balsille originally was going to give the City of Pittsburgh three years to come up with a new arena deal. If no deal arose, then Balsille would move the team. Bettman couldn't stand the idea of his poster boy and wet dream, Sidney Crosby, playing in Canada because Bettman then would have one hell of an impossible time getting a good American TV deal. Balsille obviously felt like he was wronged by Bettman in 2006 when a deal was in place and BoG approval was in place too. He knew Bettman would stonewall him again when he went after the Nashville Predators so he changed his tactics, for better or worse. And of course Bettman did some dirty, behind-the-scenes dealing to keep the Predators out of Balsille's hands and out of Canada, which has led to Balsille's stealthly tactics with the Coyotes. You may not agreed with Balsille's ways, but Bettman has been the one here who has not been conducting business in a straight and truthful manner. Balsille desperately wants another team for Canada while Bettman desperately wants to keep his US Sunbelt vision alive and kicking, thus leading to unusual tactics by both sides. In my eyes, Bettman and his BoG have blackballed Balsille and are unfairly and illegally keeping him out of the NHL's old-boy's club. Balsille, in my eyes, has a good legal case here for an anti-trust lawsuit.

Teebz said...

Alright, Dave... here comes the kicker.

1. Bettman doesn't control the rules in the NHL. He's the spokesman for the BoG. Balsillie wanted to move the Penguins, and the BoG's didn't want him to. He was made a suitable owner until he started advertising that fact. Balsillie's arena deal was nothing but a ploy since he advertised moving the team FIRST.

2. What, exactly, has Bettman changed? The NHL constitution and bylaws haven't changed in the last three years. Balsillie has been told time and again that he needs to follow the process. Which he has not done. So when the BoG vote his applications down, it's not Bettman doing it; rather, the other owners doing it. Bettman is just their spokesman.

3. Nashville's minority owners refused to sell their shares, so he couldn't move that team. And, again, the BoG voted his ownership application down. It's not Bettman.

4. In order for the NHL to get a decent national US TV deal, they need a franchise in Phoenix. Why? Because it is home to a fairly large population base. When TV execs make deals, they ask what markets you have. If you don't have Phoenix, you're basically looking at no Southwest TV deal, meaning LA, Anaheim, Dallas, and San Jose would be hard-pressed to be shown nationally. This is a major reason why they are working to stay in Phoenix. If they ever strike a deal with ESPN again, Phoenix is vitally important.

5. Moving the team to Hamilton causes everyone except Balsillie to lose. If they gave up those expansion fees so that Balsillie could move, the BoG would be up in arms. This is as much a financial deal for the NHL as it is for Balsillie.

6. Both the Toronto Maple Leafs and Buffalo Sabres have said that they'll block the move. MLSE has even stated that they will sue the NHL and the other 29 teams if they allow Balsillie to move into their territory. Again, no one wants egg on their face.

Do I need to go on why Balsillie needs to shut up and go away?

Anonymous said...

Well written article, I'm tired of all these homer fans always complaining about Bettman wanting to stop a team from moving to Canada. The fact of the matter is it doesn't make economic sense to put a team in Hamilton (or Southern Ontario), and no ticket sales don't mean squat anymore, you need corporate support, TV deals merchandising revenue, etc. Putting another team in Southern Ontario will kill the Sabres, and eat away at the Leafs & Senators TV revenue (and the Sens need that money). Balsillie thought he could bludgeon through the process but he of all people should know the business world doesn't work that way. He needs to fade away and re-think his application process and ditch his Southern Ontario pipe dream in favour of something more favourable to the BoG, such as moving a team to Winnipeg.

Anonymous said...

"The criteria set forth in the constitution and bylaws relates to financial wherewithal, character, integrity and the view whether or not the other owners would deem you a good partner," Bettman told a group of reporters.

Yeah, because we all know Jim Balsille can't hold a candle to guys like John Spano, John Rigas, Sanjay Kumar, Boots DelBiaggio, Henry Samueli or Bruce McNall.

Teebz said...

You bring up a good point, Latrell, but all of those guys followed the correct process in applying for a team. None of them tried to strong-arm their way into ownership. Granted, they are all sleazy in their business dealings in terms of the financial side, but their integrity was intact before they were found to be frauds.

The NHL BoG is a partnership amongst 30 people. It is only as strong as its weakest link, and if they allow anyone to wriggle their way in without following the process, then it becomes anarchy.

Anarchy is the opposite of trust.

kidkawartha said...

"The criteria set forth in the constitution and bylaws relates to financial wherewithal, character, integrity and the view whether or not the other owners would deem you a good partner," Bettman told a group of reporters.

Outside of the post being very rational and sober, that quote is one of worst forms of "inner-circle" speak I've seen in a while. Balsille may as well be a black man trying to get into Southern politics in the '30s. And I have to say, I'm actually hoping for an anti-trust case here, and not against Bettman as simply a sad spokesman, but against the BoG. Even as a Leaf's fan (we stand to lose the most from a team in Hamilton, I think), this denying by any means necessary a new Canadian team is getting ridiculous. I mean, what kind of business group would deny any reasonable opportunity to expand or strengthen their product?

Teebz said...

@Kidkawartha: the same kind of people who want that $200 million expansion fee for a southern Ontario team.

The same kind of people who uphold the NHL's constitution. I believe any red-blooded Canadian or American would tell you that is more important than money.

The same kind of people who want a national US TV deal on a major network. Having a team in Hamilton doesn't get you that.

The same kind of people who don't compare this to a racial problem in the United States. It is a cut-and-dry business decision, and one I endorse whole-heartedly.

Anti-trust all you like, but Balsillie's done with Phoenix unless Redfield Baum sends the franchise to auction.