Transcript Coaching contracts in the FBS: A legal analysis and financial

Coaching contracts in the FBS:
A legal analysis and financial
valuation of the termination and
liquidation damages portion of head
football coaching contracts
Chris Reynolds, J.D. & Ryan Brewer, M.B.A.
Advisor: Paul M. Pedersen, Ph.D.
2009 Scholarly Conference on College Sport
Coaching Contracts
• Popularity of college football
• Influence of coaches and
increase in salaries
• Increased media attention given to contracts
– Barnhart (2008), Corry & Fenech (2008)
• Scholarly research related to coaching contracts
Contractual Agreement Between
Coach/Institution
• Grounded in contract law
• Expresses a compensation promise for
services performed by one party to another
• Conveys promise as well as the consequences
for either party breaching any promise
asserted in the document
(Restatement of the Law, Second: Contracts, 1981)
Purpose of Study
• Because of the popularity of
football, the impact of football
coaches, and the media attention
devoted to coaching contracts, this study sought…
– To examine coaching contracts in college football to…
• [Part A] Determine the elements of the (a)typical
• [Part B] Analyze one element in particular (buy-out)
• [Part C] Examine effectiveness of buy-out clauses
• Sample (n=75)
• Exploratory analysis of coaching contracts
– Schools participating in Football Bowl Subdivision (FBS)
Part A: Elements/Components
• Determine components of football coaching contracts
• Typically, the major purpose of content analysis is to
identify patterns in text (Krippendorff, 2004)
• Thematic analysis of text – The
identification of themes or major ideas
in a document (Cotton & Wolohan, 2007)
• Eight general themes/elements/components
emerged from analysis of 75 contracts
Eight Elements
• 1) Contract Term
• 2) Duties and Responsibilities
• 3) Compensation Package
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Guaranteed Base Compensation
Outside Activities/Income (Supplemental Income)
Fringe Benefits
Bonuses
• Academic Achievements
• Bowl Participation
• Golden Handcuffs Clause
Eight Elements (cont.)
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1) Contract Term
2) Duties and Responsibilities
3) Compensation Package
4) Severability
5) Governing Law and Jurisdiction
6) Waiver
7) Notice
8) Termination and Liquidation Damages
• Commonly known as “Buy-out Clause”
• Penalties for leaving early; Coaches’ penalties
Part B: Buy-out Clause
• 75 contracts examined
– 58 included buy-out clauses (77.3%)
– 17 did not include buy-out clauses that would
compensate the coach if he left the institution
prior to the expiration of his employment contact
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Texas, Kansas, Maryland, Texas Tech
Alabama, Kentucky, Troy
Iowa, Illinois, Florida State
Virginia Tech, Rutgers,
Fresno State, New Mexico St.
Toledo, Miami, Marshall
Buy-out Clause (cont.)
• Typical Clause
– An amount equivalent to one year’s salary
• Atypical Clauses
– Marshall - MAC - Mark Snyder
• $700,000
– Louisville - Big East - Steve Kragthrope
• $2,000,000
– Utah - Mountain West - Kyle Wittingham
• $600,000 if new position is in the MWC
• $250,000 otherwise
Analysis of use of buy-out clause as a
correlate of program success
• Research Hypothesis (H1):
– FBS programs whose coaches do not have buy-out
clauses are more successful than programs where
coaches contracts include buy-out clauses
• Statistical analysis
– Group 1: n=17 (no buy-out clause)
– Group 2: n=58 (buy-out clause)
Analytical Basis
• Power Rankings
– Used to identify “program success”
– Includes W-L records 1998-2008
– Includes strength of schedule 1998-2008
• Buy-out Versus no Buy-out
– Value of buy-out not considered
Results
• Group 1 (no buy-out):
– Mean group rank across time: 45.1
• Rankings beginning 1-year from date of
contract to present
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N:
Mean :
Standard Deviation:
% Power Teams:
17
45.1
27.0
58.8%
• Group 2 (buy-out):
– Mean group rank across time: 61.5
• Rankings were taken from end-of-season (‘98-’08)
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N:
Mean:
Standard Deviation:
% Power Teams:
58
61.5
23.7
46.6%
Results
• T-Test
– Significant difference between means at the
p = 0.07899 level.
– Strong “pilot” evidence for ∆ (H1)
• Implications
– Use of buy-outs in future coaching contracts
– Use of other forms of motivation to stay
Analysis of use of buy-out clause as a
correlate of program success
• Research hypothesis (H2)
– Guaranteed compensation contracted to a
football coach (most recent coach’s labor
contract) predicts historical program
winning percentage
• Statistical analysis
– OLS linear regression
• One exogenous variable (guaranteed compensation)
• One response variable (historical performance factor)
Some definitions….
• Guaranteed compensation (x) includes all money
the coach will earn by “just showing up.” It does
not include dollar value equivalents for country
club memberships and other intangible benefits.
• Historical performance factor (y) combines the
effect of Ws & Ls and strength of schedule,
weighting the most recent year (2008) 10, 2007
9, 2006 8, …, 1999 1.
Highest Paid Coaches in Sample
(most current coaches’ contracts)
As a % of Budget
As a direct measure of dollars
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George O'Leary
Mark Snyder
Jim Leavitt
Robb Akey
Rickey Bustle
Les Miles
B. Petrino
Nick Saban
Butch Jones
Greg Schiano
Charlie Weiss
Les Miles
Nick Saban
Rich Rodriguez
J. Tressel
Urban Meyer
Kirk Ferentz
M. Brown
B. Petrino
T. Tuberville
Highest Ranked Teams in Sample
(last 10 years)
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Texas
Boise State
Ohio State
Georgia
Florida
LSU
Virginia Tech
West Virginia
9. Texas Tech
10. Utah
11. FSU
12. Auburn
13. Wisconsin
14. Michigan
15. Tennessee
Variance in FBS Program Performance Explained By
Coaches’ Compensation
Multiple
Summary
R
R-Square
Adjusted
StErr of
R-Square
Estimate
19.3405631
0.6435
0.4141
0.4060
Degrees of
Sum of
Mean of
Freedom
Squares
Squares
Explained
1
19037.3
19037.26
Unexplained
72
26932.1
374.06
Coefficient
Standard
t-Value
ANOVA Table
Regression Table
Constant
Annual
Compensation
(NOTE 7)
Support
for H2
F-Ratio
p-Value
50.9
< 0.0001
p-Value
Error
Confidence Interval 95%
Lower
Upper
79.97
3.96
20.2095
< 0.0001
72.1
87.85
-0.00002
0.0000023
-7.1340
< 0.0001
-0.00002
-0.00001
Conclusion
• Study found…
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Eight elements of coaching contracts
Buy-out clause included in 77%
Buy-outs appear to reduce team power
Compensation explains team power
• Recommendations for future study
– Applications to Title IX
– Reverse model: winning  compensation
• Audience questions and comments