What’s a “mutual option” anyway?

Ned Colletti wants to come back to L.A. next year:

A day removed from acquiring the final pieces of the team the Dodgers could field in October, General Manager Ned Colletti briefly turned his attention to free agency on Tuesday.

His own.

The decision of whether Colletti will remain with the club is half Colletti’s, as his contract includes a mutual option for 2010.

Unless I’m totally misunderstanding the mechanics of all of this, isn’t it just as accurate to say that you or I have a mutual option to be the GM of the Dodgers next year? The Dodgers have to agree to hire us, you or I have to agree to take the job. Isn’t that the basis of almost everyone’s employment?

As for Colletti, eh. His first act as Dodgers’ GM (Pierre, Jones, Schmidt) was pretty disastrous, but he’s done a decent enough job working on the (relative) cheap since the middle of last year. There are worse things in the world than having a guy who does good work when given boundaries, self-imposed or otherwise. Dodgers fans have much stronger feelings about him, I’d imagine.

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Comments

  1. ecp said...

    Yeah, it’s pretty much the basis of almost everyone’s employment.  More to the point, though, is that it’s the basis of everyone’s UNemployment – or lack thereof.  Probably the main objective of mutual options is to contractually establish a salary rate for a given year or year in the future, thereby (supposedly) avoiding market fluctuations.

  2. Craig Calcaterra said...

    ECP—yeah, almost immediately after I posted that I thought “well, the terms are established, it’s just the desire that’s in the air.” So, OK, mutual options make some sense.

    Still, your “supposedly” is well-taken, because if the guy is either so bad or so good that the market would call for a radical departure in his salary one way or the other, the party who stands to benefit will simply decline and reopen negotiations.

  3. Grant said...

    Doesn’t Time Wakefield have a perpetual mutual option? Which is basically saying he can choose to retire or the team can choose to keep him at the same salary every year. Which could happen even if it was just a team option, I imagine.

    If Wakefield is a bad example, I have definitely heard of mutual options for players in the past, and they certainly never made sense.

  4. Steve Stein said...

    I’m no lawyer, but I don’t think this means what you think it means.

    Doesn’t a “mutual option” mean that if the Dodgers want Colletti to stay on, he is contractually obligated to stay on?  And if Colletti wants to stay on, the Dodgers must keep him?

  5. Tommy Bennett said...

    Craig,

    You are correct that the terms are fixed, and the real reason that is so important is because the marginal transaction costs are thus essentially zero. That, in turn, makes the option that much more likely to be executed by both parties.

  6. ecp said...

    @Steve Stein
    No, that’s not correct.  Either of those scenarios would be a club option or a GM option.  A mutual option requires an agreement on both sides.

  7. Brian said...

    Another wrinkle of the mutual option is that the team usually has to pay a certain amount as a buyout if they decline the option.  I thikn this is the way that Jon Garland’s contract is structured, where his buyout is bigger if the team declines the option than if Garland declines the option.

  8. Grant said...

    Ah, yeah, good point Brian. I think you may have hit the key point. If Colletti’s contract is structured that way, anyway.

  9. Chris H. said...

    How is .297/.322/.357 “solid?”  An OPS of .679 is, uh, not at all good.

    For the money he’s making, yeah, I’d call that disastrous.

  10. Slugger O'Toole said...

    Pierre is at almost 2 WAR for this season after being completely useless last season (.1 WAR) while that doesn’t make him worth his full salary, the difference is not as bad as it seems off-hand. OPS is not a great measure of overall value since it does not account for any defensive contributions or baserunning. Pierre is not a great player by any means, but he has more value than people here seem to think. He is a decent 4th outfielder, pinch runner and defensive replacement for Manny, all things a contending team needs. The real concern is his slipping defensive ability. If he fields like he has most of his career his contact is a slight overpay, if he fields like he has most of his time in LA he is a liability. I think it would be wrong to completely slam Coletti for that move right now. It wasn’t a stroke of brilliance, but except for his dreadful ‘08 season the dodgers are getting close to market value on that contract. For a team with Loney, Kemp, Either, Kershaw and Billingsley all on team friendly deals, the slight loss of value on Pierre isn’t a disaster thus far.

  11. Andrew J. said...

    At first I thought ThePitch was being sarcastic, but I’m not so sure.

    Anyway, that .679 OPS for $44 million is horrible.

    For comparison, here are some guys whose career OPSes were higher than .679:

    Tony Graffanino (.729)
    Joe Orsulak (.698)
    Mark Lewis (.692)

    Yes, I know none of those guys could run like Pierre. But do his steals really make him “pretty solid” and worth $44 million over 5 years, while those guys were utility players? And by the way, a 74% success rate is actually not all that great…

  12. james elmendorf said...

    I’m no expert, but usually mutual options work like this. In 2009, Player X earns $10 million for Team Y. For him to return, both Player X and Team Y must want him to return.  If Player X decides to opt for free agency, he gets nothing. However, if Player X decides to stay and Team Y declines the option, Team Y still must pay a buy-out or bonus of some sort.

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