Why Mike Ashley Likes Incentive Based Contracts


News today that Mike Ashley’s company Sports Direct is continuing to beat expectations on the financial side of things.

Mike Ashley – Newcastle owner on incentive plan at Sports Direct

The group has about 470 stores in the UK and have reported that sales rose 10.2% to £408.6M in the quarter to January 22nd.

Mike Ashley holds the position of Founder and Deputy Executive Chairman, and the company was founded by Mike Ashley in 1982 as a single store in Maidenhead trading under the name of Mike Ashley Sports .

The results have been boosted by strong trading on the Internet, and they are close to meeting a target of £225M for the financial year to April.

Apparently there is an incentive program in place and while Mike Ashley receives no wages, he is now on track to receive six million shares as a bonus payment in 2018, which are currently worth around £16M.

The bonus Ashley receives – it’s a variation of stock options – has increased by £4M in recent months, due to the rise in the stock price of the company.

For the most recent quarter gross profits increased 10.2% to £184.4M and the results are better than expected.

And it seems that Mike is keen to pay employees at Newcastle United by an incentive plan, and indeed manager Alan Pardew is said to be on a fairly low wage, but has different incentives depending on how Newcastle perform this season.

And that’s the deal top striker Demba Ba is on at Newcastle, and he was signed to a fairly low wage because of his dodgy knee, but has incentives based on appearances and goals, but with 16 goals in 22 appearances, Ba must be doing okay at Newcastle.

But that will not stop Newcastle from offering him a new deal which at least will have a higher basic wage, and the club will also remove that release clause that is said to be in his contract.

The release clause is low for a player who is currently 3rd top of the Premier League scoring charts behind only Robin van Persie and Wayne Rooney.

The Newcastle club could keep the release clause in, but raise the amount from the £7M that Harry Redknapp told the world it was in January. Maybe to £40M. 😀

There’s nothing wrong with incentive based contracts, and of course it’s good for the company because if the company does well they earn more money and can afford to pay out incentives.

We expect that Mike Ashley has also introduced incentives to the non-playing staff at Newcastle, which will depend on how well Newcastle are doing.

But these incentive based contracts could also be why players sometimes balk at the contracts on Tyneside, because if the club doesn’t do well, then they will not earn top dollar either.

It’s got its advantages and disadvantages with employees, but they are generally good for the company.

But if Newcastle can finish in the top seven this season in the Premier League, then at least Alan Pardew should do well financially, although of course we didn’t do well in the two local Cup competitions.

Comments welcome.



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29 comments so far

  • Jail for Ashley

    Feb 15, 2012 at 9:47 AM

    Comment #1

    120 hours community service plus a stern talking to about the centre back situatuion is probably good enough for ashley

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  • Indian Magpie

    Feb 15, 2012 at 9:48 AM

    Comment #2

    if he brings average players, then why would a top player who may be let down by an average player will sign an incentive based contract.

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  • Indian Magpie

    Feb 15, 2012 at 9:49 AM

    Comment #3

    not again

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  • LewSpi

    Feb 15, 2012 at 9:51 AM

    Comment #4

    Repost

    @10 previous thread

    I completely agree, just give HBA a free-roaming role, so many dynamics in that team. The one thing we’ve lacked this season is team goals (despite Demba being a hero), our biggest league win so far is 3-0 against ManUre.
    Last season we had:
    Villa 6-0
    Sunderland 5-1
    West Ham 5-0
    Arsenal 4-4
    Wolves 4-1

    We haven’t scored more than 3 once in the league this year, and I think it’s down to the formation, we play with wingers, as we did last season, but if you play wingers you need to cross the ball, and our wingers can’t cross (whereas Barton could). You need to cross the ball because 442 doesn’t create the triangles required to play it on the floor, ala Arsenal. This leaves us flat and uncreative. Using the formation @10 would improve things considerably IMO.

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  • drongo

    Feb 15, 2012 at 9:59 AM

    Comment #5

    @ lewspi – Guthrie can cross the ball, so can raylor

    Id say theres a fair chance we could see either of them in the RM spot in a 442

    Dont think Guthrie will like that too much – CH used him there and he got a bit fed up

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  • Troleibusiukas_LTU

    Feb 15, 2012 at 10:11 AM

    Comment #6

    totally agree with you LewSpi, HBA free-roaming role is woth a risk on the balance of creating chances and loosing the possesion. We haven’t been creating much chances this season.. And 3 – man CM (WITH TIOTE! ) would really be more than enough to correct the attacking erros, control the ball and help defense. Pardew had said that HBA could play more attacking role with less defensive work if we sound defensively first, well Tiote, Guthrie and Cabaye gives that.

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  • LewSpi

    Feb 15, 2012 at 10:12 AM

    Comment #7

    No you’re right, we do have one or two players who can cross the ball, the trouble is that they haven’t been our first choice. Hes played Obertan or HBA. I just think the alternative formation which was suggested much better suits our team, Pardew just has to have the bollocks to drop either Jonas or Sinpson.

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  • drongo

    Feb 15, 2012 at 10:16 AM

    Comment #8

    Yep – he seems to like obertan as the get out clause – leave him high up the pitch when defending and he should be able to start a counter attack – only problem is he either keeps running into the stands or stops and stands still so taking all the impetus out of the attack.

    Id love us to go 4-3-3 with our 1st choice 3 CMs on the pitch Raylor at RB, Santon at LB

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  • jesperfuglsang

    Feb 15, 2012 at 10:19 AM

    Comment #9

    Guthrie ‘can’ play RM, he did it last season, but it didnt work out so well.

    HBA ‘can’ also play RM, but that is not working out either.

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  • drongo

    Feb 15, 2012 at 10:24 AM

    Comment #10

    yeah guthrie being at RM would be much the same as barton being there – works if you have a 6’4 hooligan to aim for. ..

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  • LewSpi

    Feb 15, 2012 at 10:24 AM

    Comment #11

    I think it’s clear we need an new fullback, either side as Santon can play either side. We need someone who can hold his own, who doesn’t need the constant protection of someone ahead of him, someone who is comfortable going forward as well as defending.

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  • jayphoto

    Feb 15, 2012 at 10:37 AM

    Comment #12

    Guthrie is simply awful playing right midfield! his game revolves around seeing a lot of the ball, he also has poor pace! Cabaye on the other hand played right midfield for lille on occasion! Personally id like a diamond of tiote, guthrie, cabaye with Ben arfa in front, bit like chelsea used to do!

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  • drongo

    Feb 15, 2012 at 10:38 AM

    Comment #13

    agreed a real athletic RB would sort us right out – someone in the mold of Richards

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  • drongo

    Feb 15, 2012 at 10:41 AM

    Comment #14

    Jay – a diamind midfield with HBA at the top is pretty much 433 anyway

    Although Chelsea used to do it with fat Fwank who did actually help out in the middle too

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  • GoalsBringSmiles

    Feb 15, 2012 at 10:43 AM

    Comment #15

    why is our football club now being referred to as ‘the company’?

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  • catchy in norway

    Feb 15, 2012 at 10:45 AM

    Comment #16

    lewspi

    we have dissagreed so many times but now i see your coming round to my thinking

    all iv ever wanted is for pardew to play players in positions that we can get end product out of them

    im not a prem manager in any shape or form, but it dosnt take a blind man to notice we get very little out of jonas and obertan as far as goals created and goals scored, jonas does track back, but that should be his second job out there

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  • hrocks

    Feb 15, 2012 at 10:51 AM

    Comment #17

    incentive based contracts are great for the club but will the players accept them compaired to what othey clubs are offering.

    the end of the season is now massive to us if we want to push on. finishing in europe will allow us to move for better players

    we have a great spine in the team but our depth is missing. we knew this before a ball was kicked so no point in complaining.

    we went down with a squad which was to good to be religated. No it wasnt. too many players who had no fight. we shed some in the championship and then last summer we lost good players who didnt want to be here.

    If colo, simpson and guthrie cannot agree they go. simple as that. We evolve as a team. If we can hold the nucleus of this squad and improve it then in 2 – 3 years we should have a very strong squad.

    personally i dont care if the players we sign are 20m or frees. As long as they are an improvement on what we have. i feel we currently need players for every position which will be impossible to do in 1 window. could well see 6 or 7 both in and out in the summer

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  • GoalsBringSmiles

    Feb 15, 2012 at 11:18 AM

    Comment #18

    hrocks,

    you make some good points-some I agree with others I don’t. we certainly lack in depth particularly and most crucially at CB-we have now had a full year to replace our backup Sol Campbell.

    In my opinion the time has been right to invest in deepening our squad on several occasions so for me nothing is different this summer and i will prepare for the worst-top players leaving due to more competitive and better termed contracts (i.e. non-incentive based). I of course hope I am wrong but the proof is in the pudding and the way he has dealt with transfers in the past!! Some may point to the signing of Cisse as a signal of MA’s intentions to bolster our squad that ‘step further’ but in reality Cisse’s transfer fee could be the sponsor money from Virgin. Unfortunately I am worn to such a level of distrust in Ashley that I can not see him turning a leaf on his transfer policy thus far and he will continue to incentivise in order to minimises expenditure-which is a good thing only IF the club remains competitive.

    The parts i disagree with hrock are that the players who left last summer didn’t want to be here…this is the spin that Ashley put on their exuts but I think it had more to do with the incentive based wages than wanting to play for NUFC or not. Also I believe the single biggest contribution to our relegation was the decisions made by the owner in changing managers throughout the season following his disastrous PR stunt in appointing and then undermining KK.

    ‘If colo, simpson and guthrie cannot agree they go. simple as that. We evolve as a team. If we can hold the nucleus of this squad and improve it then in 2 – 3 years we should have a very strong squad.’

    As for this hrock, I think it’s contradictory. You mention earlier that you feel incentive based wages are not competitive yet you seem to suggest it’s ok to allow the likes of Colo and Simpson to leave as our squad will ‘evolve’? How can we maintain any kind of nucleus in the team when we offer non-competitive wages and have to sell in order to buy?

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  • Irie-Magpie

    Feb 15, 2012 at 11:28 AM

    Comment #19

    @Hrocks 16,
    Always well thought out intelligent posts, and i can’t agree more.

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  • cupiddstunt

    Feb 15, 2012 at 12:52 PM

    Comment #20

    GoalsBringSmiles @ # 18

    Trust somebody to put a twist on the Cisse signing to make it look pessimistic.

    As for the incentive deals I think any player who has any amount of belief in himself would be fine with incentive based wages, incentives make everyone pull for one another and that’s what we see on the park regular.

    Players that want to coast wouldn’t be overly happy with incentive based as the rest of the squad would be on their backs when they were not pulling their weight.

    My only worry is as we get closer to the top of the table it becomes harder to make that next step so it will need some really clever thinking around the incentives to keep the players believing they can profit from it.

    On the sell to buy thing I don’t really remember the club putting out that statement, is it a clearly stated fact or just a bit of arsehole conjecture that you pessimists come out with, I have heard it numerous times but it only ever comes from the same handful of whinging moaning pessimists.

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  • cupiddstunt

    Feb 15, 2012 at 12:56 PM

    Comment #21

    Also forgot as said by Cisse himself and his agent NUFC had agreed a fee with his club and terms with himself in the summer but his club reneged on the deal at the last minute.

    Now I do believe that was before the Virgin sponsorship deal was confirmed so how was that sell to buy?????

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  • toonincheek

    Feb 15, 2012 at 1:05 PM

    Comment #22

    cupidstunt – Agree – 100%.

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  • John

    Feb 15, 2012 at 1:08 PM

    Comment #23

    Id say he is having a good think about colo at the moment weighting up everthing, age, form, contract lenght and salary not to be sniffed at with a 30 year old look how much Alan Smith dropped off when he hit 30 and he still collected his big wage packet every week, nolan is in a lower league nowadays and not hitting the same form anymore, joey has been average aswel so it has to be a concern when older players get that final contract, they tend to get mighty comfy and their form dips picking up niggles and injuries alot easier Mark Viduka, even the famous Michael Owen so id sugguest to MA take ur time with this one and make sure it suits nufc.

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  • wynsleap

    Feb 15, 2012 at 1:50 PM

    Comment #24

    Ed – you say that Newcastle will be offering Ba a new deal and will be changing the release clause in his contract.
    Is this your wishful thinking or do you know something that we don’t know?
    Can’t say I’ve ever seen that confirmed anywhere.
    Beware of making bold statements that are only assumptions. (Although I hope you’re right).

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  • GoalsBringSmiles

    Feb 15, 2012 at 2:37 PM

    Comment #25

    Cupid

    Bore off with your holier-than-thou pessimist comments-each time somebody offers an alternative view to the risque Ashley praise being dished out of late people like yourself and Bulls Son try to twist it to ‘negative’ ‘pessimistic’…use your brain if you can, negativity and pessimism depends upon perspective, you see boy, from where I’m standing my comments are CONSTRUCTIVE and REALISTIC as they are based upon past events which are held as factual.

    For instance, rather than what you maturely labelled ‘arsehole conjecture’ Newcastle United have sold to buy in successive transfer windows under MA with the exception of January 2012 where £9m was spent-a figure coincidentally close to the amount we recently recieved from the new sponsorship deal with Virgin-negative right? I agree very negative, why didn’t we for instance spend that bit more recieved from ticket sales, shirt sales, advertisising and previous player sales in order to consolidate our position in the league and to truly push for European qualification. No, of course not that would break the mould of self-sufficiency wouldn’t it-and this my friend is the model that MA expressed in his 5 year plan for the club, self-sufficiency, which presumably includes changing a stadium name to advertise his own SEPERATE sportswear company for free and then not investing the advertising money back into the club. Not only this but when he has a few more customers they’ll find that rather than give the club money directly in buying their beloved shirts they can go to there local tracky bottom SD shop and find they’re £5 cheaper-clever boy Mikey, nice way to keep the two businesses seperate and undercut the football club and the fans that you own.

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  • GoalsBringSmiles

    Feb 15, 2012 at 2:41 PM

    Comment #26

    Cupid

    it was also well before I’d even heard of Cisse that DL justified changing our stadium name for the sake of £10m per year, in sponsorship money, so irrespective of the company, this one player was the price we paid for an era of footballing pride. Fitting that he was given the number 9 shirt in an attempt to appease the fickle fans.

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  • GoalsBringSmiles

    Feb 15, 2012 at 2:45 PM

    Comment #27

    toonincheek

    nice input to the conversation I’m almost jealous of how grossly inept you are

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  • AndyMac

    Feb 15, 2012 at 7:51 PM

    Comment #28

    Incentive based payments schemes will only work when every other club operates them otherwise why would a player take a deal where he gets paid less up front than at other clubs offering him a contract ?

    Alternatively you bring in players who havent yet sparked the interest of other club’s but take a risk on them making the grade.

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  • AndyMac

    Feb 15, 2012 at 7:56 PM

    Comment #29

    John – for every fat greedy Aussie bastad that plays beyond his sell by date there’ll always be a Beckham, Giggs, Maldini or Seedorf to dispel your viewpoint.

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