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Coaching contracts in the FBS: A legal analysis and financial valuation of the termination and liquidation damages portion of head football coaching contracts.

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Presentation on theme: "Coaching contracts in the FBS: A legal analysis and financial valuation of the termination and liquidation damages portion of head football coaching contracts."— Presentation transcript:

1 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 Scholarly Conference on College Sport

2 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

3 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)

4 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)

5 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

6 Eight Elements 1) Contract Term 2) Duties and Responsibilities 3) Compensation Package – Guaranteed Base Compensation – Outside Activities/Income (Supplemental Income) – Fringe Benefits – Bonuses Academic Achievements Bowl Participation Golden Handcuffs Clause

7 Eight Elements (cont.) 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

8 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 Texas, Kansas, Maryland, Texas Tech Alabama, Kentucky, Troy Iowa, Illinois, Florida State Virginia Tech, Rutgers, Fresno State, New Mexico St. Toledo, Miami, Marshall

9 Buy-out Clause (cont.) Typical Clause – An amount equivalent to one years 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

10 Analysis of use of buy-out clause as a correlate of program success Research Hypothesis (H 1 ): – 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)

11 Analytical Basis Power Rankings – Used to identify program success – Includes W-L records – Includes strength of schedule Buy-out Versus no Buy-out – Value of buy-out not considered

12 Results Group 1 (no buy-out): – Mean group rank across time: 45.1 Rankings beginning 1-year from date of contract to present – N :17 – Mean :45.1 – Standard Deviation:27.0 – % Power Teams:58.8% Group 2 (buy-out): – Mean group rank across time: 61.5 Rankings were taken from end-of-season (98-08) – N:58 – Mean:61.5 – Standard Deviation:23.7 – % Power Teams:46.6%

13 Results T-Test – Significant difference between means at the p = level. – Strong pilot evidence for (H 1 ) Implications – Use of buy-outs in future coaching contracts – Use of other forms of motivation to stay

14 Analysis of use of buy-out clause as a correlate of program success Research hypothesis (H 2 ) – Guaranteed compensation contracted to a football coach (most recent coachs labor contract) predicts historical program winning percentage Statistical analysis – OLS linear regression One exogenous variable (guaranteed compensation) One response variable (historical performance factor)

15 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, , , …,

16 Highest Paid Coaches in Sample (most current coaches contracts) As a % of Budget 1.George O'Leary 2.Mark Snyder 3.Jim Leavitt 4.Robb Akey 5.Rickey Bustle 6.Les Miles 7.B. Petrino 8.Nick Saban 9.Butch Jones 10.Greg Schiano As a direct measure of dollars 1.Charlie Weiss 2.Les Miles 3.Nick Saban 4.Rich Rodriguez 5.J. Tressel 6.Urban Meyer 7.Kirk Ferentz 8.M. Brown 9.B. Petrino 10.T. Tuberville

17 Highest Ranked Teams in Sample (last 10 years) 1.Texas 2.Boise State 3.Ohio State 4.Georgia 5.Florida 6.LSU 7.Virginia Tech 8.West Virginia 9.Texas Tech 10.Utah 11.FSU 12.Auburn 13.Wisconsin 14.Michigan 15.Tennessee

18 Multiple R-Square AdjustedStErr of SummaryRR-SquareEstimate Degrees ofSum ofMean of F-Ratiop-Value ANOVA TableFreedomSquares Explained < Unexplained Coefficient Standard t-Valuep-Value Confidence Interval 95% Regression TableErrorLowerUpper Constant < Annual Compensation (NOTE 7) < Variance in FBS Program Performance Explained By Coaches Compensation Support for H 2

19 Conclusion Study found… – 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


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