All right, let's break this down.
What Happened: The Mariners declined to offer arbitration to Jose Guillen.
What It Means: They won't get a sandwich pick between the first and second rounds of next year's draft as compensation.
Why It Happened: Depending on who you believe, the Mariners either (A) didn't want to risk Guillen accepting, since he's not in their plans, or (B) wanted to distance themselves from Guillen's off-the-field issues, particularly the whole steroid thing.
Why (A) Shouldn't Really Be An Issue: For one thing, it's unlikely that Guillen would want to come back on a one-year contract. He's going to get other offers, and the Royals are probably going to want to sign him to a multi-year deal. The steroid thing is unfortunate, but it's in the past, and it's not going to kill the market value of a 31 year old right fielder coming off a big year in a tough park.
But for another, even in the exceedingly unlikely event that Guillen accepted arbitration, we'd be sitting pretty. An intelligent front office would view that as an opportunity to put Jones in left, keep Guillen in right, and move Sexson somewhere else to make room for Ibanez at first. With one year left to go, Sexson can be traded, and that whole thing would save us a bushel of runs defensively. This would be good. The Mariners should've wanted Guillen to accept an arbitration offer (just like they should've picked up his option, for whatever good that would've done). Even in the absolute worst-case scenario, whatever that might be, they'd still be able to release Guillen in the spring and only be on the hook for 25% of his arbitration salary (pending union grievance). But I doubt it'd ever get that far in the first place.
Guillen accepting arbitration wouldn't have been a problem at all. Only a bad and uncreative front office would view it as such.
Why (B) Shouldn't Really Be An Issue: Let's set aside the fact for a moment that Guillen would most likely decline an offer of arbitration, thus allowing the organization to wipe its hands clean of the matter with a free draft pick.
The whole steroid thing with Guillen is reported to have occurred between 2002-2005. It's in the past. It seems silly for the Mariners to take a ethical stand against Guillen for this when, for one thing, there's no sign that he still uses, and for another, Mike Morse still has a job with the team. Lots of people take PED's. Lots of Mariners have taken PED's. Lots of Mariners probably still take PED's. It's time to come to terms with this, because a team unwilling to negotiate with current or former users is going to find itself in the basement pretty quick.
And if this is a character thing - where the Mariners want to sever all connections with Guillen because he lied to the press about steroid usage last winter, or something - well, that's kind of inconsistent with the rest of their actions, what with, say, Carl Everett's history, or Richie Sexson's DUI charge. That'd just be an arbitrary and inexplicable line to draw. Who's worse: a guy who used steroids and subsequently lied about it, or a guy who had a few drinks and subsequently got behind the wheel? The Mariners don't really have a moral leg to stand on, here.
Why This Matters: It's not a huge deal, really; bad decisions tend to look better when they're viewed in isolation, rather than as part of a group (which they all invariably are). But before you write this off as nothing and say "so we lost one pick, who cares?", between 2003-2005 sandwich picks were used to grab the likes of Travis Buck, Clay Buchholz, Garrett Olson, Luke Hochevar (the first time), JP Howell, Huston Street, Gio Gonzalez, Adam Jones, Jarrod Saltalamacchia, and Matt Murton. The Yankees snagged Joba Chamberlain 41st overall in 2006. Bob Fontaine is really, really good at his job. The organization just robbed him of an opportunity to snag a big-time talent.
Why This Is Funny: By offering Guillen arbitration, the Mariners would ensure themselves of getting either a free draft pick or a good player on a reasonable one-year contract. They declined.
Why You Should Start Drinking Heavily: The winter meetings begin tomorrow.