Chris Reynolds, J.D. & Ryan Brewer, M.B.A. Advisor: Paul M. Pedersen, Ph.D. 2009 Scholarly Conference on College Spo

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. 2009 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 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

10. Analysis of use of buy-out clause as a correlate of program success • Research Hypothesis (H1): • FBS programs whose coaches do nothave buy-out clauses are more successfulthan 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 1998-2008 • Includes strength of schedule 1998-2008 • 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 = 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

14. 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)

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, 2007 9, 2006 8, …, 1999 1.

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

17. Highest Ranked Teams in Sample (last 10 years) Texas Tech Utah FSU Auburn Wisconsin Michigan Tennessee • Texas • Boise State • Ohio State • Georgia • Florida • LSU • Virginia Tech • West Virginia

18. Variance in FBS Program Performance Explained By Coaches’ Compensation Support for H2

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