Academic journal article International Journal of Sport Finance

Just Win Baby? Determinants of NCAA Football Bowl Subdivision Coaching Compensation

Academic journal article International Journal of Sport Finance

Just Win Baby? Determinants of NCAA Football Bowl Subdivision Coaching Compensation

Article excerpt

Abstract

The paper estimates the key determinants of compensation for head football coaches in the NCAA's Football Bowl Subdivision (the former D-IA) during the years 2006-2010. Coaching compensation is regressed on variables capturing a coach's personal characteristics, productivity, and institutional characteristics. The results yield seven important explanatory variables. Four are coach specific: BCS ranking, recruiting success, lifetime winning percentage, and years of experience. The remaining three are institutional: football revenue, enrollment, and graduation rate. No estimate of a compensation function for a head football coach has appeared previously in the literature.

Keywords: NCAA, coaching compensation, Football Bowl Subdivision

(ProQuest: ... denotes formula omitted.)

Introduction

In 2010, head football coaches Nick Saban (Alabama), Mack Brown (Texas), and Bob Stoops (Oklahoma) earned $5.2, $5.1, and $4.2 million, respectively. Average annual pay for the approximately 120 NCAA Football Bowl Subdivision (hereafter FBS) football coaches was $1.36 million, with roughly one-half of the coaches earning at least one million dollars. High coaching salaries have long been a contentious issue in college athletics (Sperber, 1990; Zimbalist, 1999), yet the last decade has seen increased attention paid to coaching salaries by the general population, the media, and the NCAA itself. Coaching salaries are a frequent topic in the Chronicle of Higher Education (see, for example, Brainard, 2009). Journalist Mark Yost, who writes about college sports for The Wall Street Journal and other news publications, devotes a book chapter to salaries in Varsity Green, his recent critique of the college sports industry. Even Parade magazine, an insert in many Sunday newspapers across the United States, touched on the issue ("Are college coaches overpaid", 2008).

This skepticism is somewhat reminiscent of the vitriol that has been directed toward CEO pay and, more recently, compensation for Wall Street investment bankers. It is further fueled by the increased scrutiny of athletics spending by colleges and universities and how those expenditures are financed (e.g., Berkowitz et al., 2010), particularly during an era of persistence macroeconomic malaise and strained state government budgets. It has even been suggested that the NCAA itself should seek partial exemption from antitrust laws to enable it to regulate coaching salaries and promote the overall fiscal sustainability of college sports (Zimbalist, 2010).

This paper does not seek to resolve this controversy, but rather to investigate the underlying question of what factors determine coaching compensation. Economic theory and the rhetoric of academic institutions suggest that key factors include winning games, attending bowl games, recruiting top athletes, and guiding student-athletes to academic success. We interrogate this question empirically by examining the compensation of football head coaches from 2006 to 2010, from the six elite FBS conferences: the ACC, Big East, Big Ten, Big 12, Pac-10, and SEC. Our results suggest that four coach-specific variables: BCS ranking, recruiting success, lifetime winning percentage, and years of coaching experience; and three institutional variables: football revenue, enrollment, and graduation rates, are important determinants of college football coaching compensation.

The starting point for our investigation is marginal revenue product (MRP). Economic theory predicts that in well-functioning markets with good information, inputs (in this case college football coaches) will receive no more in compensation than their contribution to program revenue (their MRP). As of June 2009, revenues generated by the football programs at Oklahoma, Alabama, and Texas comprised 52, 62, and 63% of total athletic department revenue, respectively. Bowl games and broadcasting rights create significant streams of income for FBS institutions like Texas. …

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