Making Sense of the Compensation Situation

With the free agent season looming, the Giants need to review all their options. For years, signing free agents have cost the Giants top draft picks, and they have been mocked for it. This year, with 11 possible free agents, they were in a position for a windfall of picks. But with the new CBA, will they get them?

HOW COMPENSATION WORKS: The underlying concept under Free Agent Compensation is that teams should be compensated for losing players they truly wanted back.  While compensation has undergone many changes, this principle still is the focus of the system.

A team won’t get compensation for any player that leaves.  First, a player has to be highly enough ranked to net compensation.  Then, he has to leave the team in a manner that earns them compensation.

Rankings: All players in the major leagues, free agents or not, are analyzed by the Elias Sports Bureau based on their performance over the previous two seasons, and then are given a score between 1-100.  Next, they are ranked by their position types within in leagues.  There are five groups in each league.  First Basemen, Outfielders, and Designated Hitters are ranked in one group.  Second Basemen, Third Basemen and Shortstop are ranked in another.  Catchers are only ranked against each other, and Starting Pitchers and Relief Pitchers also have their own groups.

Within each positional group, they are divided into percentages.  Free Agents in the Top 20% of each group is given a ‘Type A’ ranking.  Free Agents who are part of the next 30% of players are then given a ‘Type B’ ranking.  (After 2006, the Type B ranking will become just the 21st through 40th percentile).

            • Type A players would net their former team a draft pick from their signing team, as well as a draft pick in the compensation round, sandwiched between the regular first and second rounds of the draft.

            • Type B players now just net their former team a pick in the compensation round, behind all the picks given in compensation for Type A players.

Getting Compensation: For a departing free agent to earn their former team compensation, they have to leave in one of two manners.

            • They have to sign with another team before December 1st, which is known as the ‘Arbitration Deadline’, the date by which a team must offer its free agents arbitration if they so choose.

            • If a team offers its free agent arbitration, they will then receive compensation so long as the free agent signs with another team.

Before 2006, if a team did not offer arbitration to their free agents, or if the free agent declined it, they would not be able to negotiate with each other until the following May 1st, effectively meaning that a player’s former team only had until the deadline to decide if they wanted a player back.  Now, there are no limitations on negotiating, so even if a team declines to offer arbitration, or if a player declines an offer, they can still negotiate a new deal.

Caveats and Compensation Priority: If a team signs a free agent and must lose a pick, there are limitations.  If that team has a first round pick in the top half of the round (Picks 1 through 15), they cannot lose that pick.  In that case, they would then surrender their 2nd round pick.

If a team signs more than one free agent that requires surrendering a pick, then the higher pick goes to the former team of the player with a higher Ranking score.  Since all players are graded on a 1-100 point scale, they can be scored against each other.

The sandwich round is ordered by Elias score, but compensation for Type A players are given priority.  All of the compensation picks for Type A players are first, and the picks are in the order of the player’s score.  After all the Type A picks have been distributed, then the Type B picks are given out, again in order of the scores of the players being compensated for.  So if an Outfielder has a Score of 63 and is ranked Type A, he’ll get a higher pick for his former team than a Catcher with a score of 65, but who is limited to a Type B ranking.


Type A:
Moises Alou (Score of 86.444)
Ray Durham (82.251)
Jason Schmidt (78.431)
Barry Bonds (70.000)

Type B:
Shea Hillenbrand (54.783)
Pedro Feliz (54.658)
Mike Stanton (52.725)

No Compensation:
Steve Kline (46.479)
Steve Finley (40.889)
Todd Greene (38.095)
Jamey Wright (37.255)

The Implications: 4 Type A players put the Giants in a nice spot.  They could get a grand total of 8 compensation picks, with 4 guaranteed to be in the #31-70 range of the draft.  That would be in addition to the #10 pick, which is the Giants own pick that is protected.  The truth is that the Giants probably won’t get compensation for all of them, but if they get picks for two, that might cover any picks they might lose for the free agents they may sign this year.

The better news is how high Alou and Durham ranked.  Only pitcher Andy Pettitte is ranked higher than Moises Alou among free agents.  What that means is if the Giants get a pick for Alou, it would be no lower than #32 overall in the draft, and could be #31 (the highest pick in the Compensation round) if Pettitte doesn’t net any compensation picks.  Alou and the Giants have both expressed that Alou will play somewhere else in 2007.  The only question is if the Giants would offer arbitration to get a pick, should Alou not sign before then.

Behind Alou, Durham ranked #4 among free agents, behind Pettitte, Alou, and pitcher Barry Zito.  The lowest pick that Durham could net the Giants would be #34 overall, and could be higher.

Bonds and Schmidt are ranked much further down the list.  Any picks they would net could vary highly depending on which free agents ranked ahead of them net compensation.

The 3 Type B’s are also a nice consolation.  All three have reasonable chances to be resigned by the Giants, but by the same token, would all also likely to be offered arbitration.  So if they do decide to test the market and leave, those would be extra picks for the Giants (probably in the #50-70 range overall).

The Results: Where the Giants will end up on the draft board will not be known for a long time.  Many of the picks placements won’t be finalized until February.  But keep an eye on December 1st, and the picture will become much clearer.  But don’t be surprised to see the Giants net anywhere from 3-5 extra draft picks this year.  And in a draft deep with hitters and high school talent, that could be a very good thing.

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