Torre and the evil empire

It’s disappointing that I feel obligated to comment on the Joe Torre contract insult situation. You might ask, don’t the Yanks get enough attention as it is? Certainly, but Yankees spending can seem so ridiculous at times it’s an easy target. Sorry friend, already off topic. Anyways, let’s take all the politics and personal feelings out of this. An incentive rich, one year, $5 million contract for Torre with possible $1 million bonuses for reaching each the Division, League Championship, and World Series. Incentive clauses that were similar to other contracts Torre has agreed upon. It is a $2.5 million pay cut from last season, yet Torre would still be the highest paid manager in the game by $1.5 million with this new contract. For the 2007 season Torre was the highest paid manager by $4 million over Lou Pinella and is four standard deviations above the mean salary. Take a look at the distribution of managerial salaries for the 2007 season. Torre is all alone in the tail of the distribution. The new offer is still generous for what is considered heavily incentive based. Without the bonuses the contract offer is nearly 2.5 standard deviations above the 2007 average. This is not an insult contract from the Yankees. Torre would still be the highest paid manager by a significant amount and the contract is probably over valued given his true marginal value product. If he does decide to manage somewhere else, it is unlikely he’ll find a similar offer.