If we've gained anything this offseason, it's that we can now be 100% absopositutelutely sure that the free agent compensation system used by MLB is flawed. Here's my idea on how to fix the system. It's not too far from the current system, I think it just fixes a few illogical steps in the process and makes it more fair.
Rank all free agents based on WAR (or something like that, I'm not great with all the new metrics for player value, but I thought WAR was a good one, anyways it doesn't matter too much). The FAs are then broken up into type A, B, and no comp, similarly to how they are done now, except they'd be based on WAR over the past 3 years instead of whatever stats are used now.
When a Type A FA signs with a team, if that team has a top 15 draft pick, it's still protected, but if that team's pick is not protected, their pick goes into a pool for compensation. Teams still don't have to surrender a pick for signing Type B Free Agents, but sandwich picks would still be given for both Type A and B. After all the free agents sign, or right before the Rule 4 Draft, the picks from the pool are distributed based on the rankings of the free agents. Here's an example that I hope will illustrate my point.
Without looking up WAR (I know, very lazy) say these free agents rank as follows:
1. Mark Teixeira, 2. CC Sabathia, 3. Brian Fuentes
There would obviously be many more in between, but I'm just simplifying it for the sake of this illustration.
Yankees sign Teixeira and Sabathia, Angels sign Fuentes. Yankees surrender their 1st and 2nd Round Picks, and Angels surrender 1st round pick. In the current system, the Brewers receive the Yankees 2nd rounder and a sandwich pick, the Angels receive the Yankees 1st rounder and a sandwich pick, and the Rockies receive the Angels 1st rounder. Now, how is it fair that, although the Brewers lost a better FA than the Rockies, they receive a lesser pick? I feel that teams should be compensated based on how much they lost, as they obviously don't have any impact on where they sign.
In my system, the picks would be distributed as follows. All the picks surrended would be in a pool, and they would be given out based on the rankings of the players lost by each team. So the Angels would get NYY 1st rounder (+ #1 sandwich pick), Brewers would get LAA 1st rounder (+ #2 sandwich pick), and Rockies get NYY 2nd rounder (+ #3 sandwich pick).
The major downfall with this is that the Yankees (or any team who signs multiple Type A's) have a diminishing draft pick cost to sign the next Type A, but I'm not sure how that could be avoided. Overall, however, I think this system would do a much better job of equitably distributing draft pick compensation. Now let's hope Bud Selig is reading this...what else is he getting paid $18 MM to do?