Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Toronto Blue Jays closer B.J. Ryan celebrates his save against the Baltimore Orioles' at the end of the ninth inning of their American League baseball game in Toronto on Thursday Sept. 18, 2008. THE CANADIAN PRESS/J.P. Moczulski
Toronto Blue Jays closer B.J. Ryan celebrates his save against the Baltimore Orioles' at the end of the ninth inning of their American League baseball game in Toronto on Thursday Sept. 18, 2008. THE CANADIAN PRESS/J.P. Moczulski

Big names, big severance

When a falling star crashes into the bottom line Add to ...

The disappointing performance of a major league pitcher isn't usually fodder for a company's financial results.

But buried in Tuesday's report from Rogers Communications Inc. were two lines about former Blue Jay B.J. Ryan that caught the eye of analysts for its impact on the cable giant's next quarterly statement.

More Related to this Story

Joseph MacKay of Desjardins Securities noted that Rogers, which owns the Blue Jays, will take a $15-million (U.S.) charge in its third quarter after releasing Mr. Ryan from his contract earlier this month.

Mr. Ryan's troubles on the field after battling a strained shoulder have translated into a financial hit for Rogers, illustrating how the problems of a marquee figure can affect a company.

Keith McIntyre, president of K.Mac & Associates, a sports marketing consultancy in Burlington, Ont., said teams take a risk when signing promising players to long-term contracts. It's a business move, aimed at building a fan base and a franchise in order to encourage ticket sales and licensing.

But it can backfire when a player hits a slump.

"Now you're locked in and you don't have the room, budget-wise, to bring in other players," Mr. McIntyre explained.

"And then you have to go through your farm system, who are being brought up earlier than need be to create a resemblance of a winning team."

Mr. Ryan is signed to the Jays until the end of 2010 and will collect all of his remaining salary, even after inking a minor-league deal with the Chicago Cubs.

Such a payout is not unusual in the major leagues, and mirrors the pattern of severance packages received by corporate chief executive officers.

Earlier this week, Torstar announced it would take a $12.8-million charge related to former CEO Robert Prichard's termination from the company.

Companies can try to protect themselves against the risks of signing big names to big contracts, thanks to specialty insurance options.

A handful of insurers in Canada offer policies offering "death and disgrace" coverage, said Louis Gosselin, president of L. J. Gosselin & Associates in Toronto.

Such policies cover the value of a contract in case the star spokesperson dies or their performance or public image is hobbled in some way.

"These people are pretty highly visible," Mr. Gosselin noted.

Such policies can protect companies in the event their spokesperson is caught in a criminal act or "any offence against public taste or decency" that could reflect badly on the campaign or marketed products, he said.

Some companies have been burned by their association with celebrities who misbehave.

American Olympian Michael Phelps and British model Kate Moss were swiftly dropped from their respective contracts with Kellogg's and H&M after newspapers published photos and claims they were using drugs turned up in tabloids, although both managed to hold on to other sponsors.

***

PERSONAL DOWNTURNS THAT HIT A CORPORATE BOTTOM LINE

B.J. RYAN

The release of Blue Jays pitcher B.J. Ryan from his contract earlier this month turned up in Rogers' second-quarter results and garnered a mention in a Desjardins Securities report. Analyst Joseph MacKay noted that Rogers will face a $15-million (U.S.) charge next quarter as it pays out the remainder of Mr. Ryan's contract.

STEVE JOBS

Investors fretted about how Apple would fare without the steady hand of company co-founder and CEO Steve Jobs when he took a medical leave. Mr. Jobs reportedly had a liver transplant in June and has recently been seen back at work on the Apple campus in California.

TOM CRUISE

Once one of the biggest movie stars in the world - he boasts his films have earned more than $6-billion worldwide - Mr. Cruise's reputation took a hit after he publicly championed Scientology and jumped on the couch on Oprah. Viacom tycoon Sumner Redstone ended Paramount's deal with Mr. Cruise's film production company, but Mr. Cruise bounced back quickly, taking his star status to United Artists.

KATE MOSS

Clothing retailer H&M dropped the British supermodel after a tabloid published photographs and claims she was using cocaine, but the catwalk queen didn't miss a step. Within months she had inked new deals with other retailers and the scandal barely scratched her image.

MICHAEL PHELPS

Pot activists boycotted Kellogg's and the company's stock dipped after it dropped spokesman Michael Phelps when photos of the American Olympic star using a bong surfaced. The gold medallist had appeared on boxes of Frosted Flakes before the cereal giant terminated his contract.

Jennifer MacMillan

Follow us on Twitter: @GlobeBusiness

 

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories