The Labor Market for College Coaches 35

Chapter 5 The Labor Market for College Coaches

There is no question we are overpaid.

– Lute Olsen, basketball coach at the University of Arizona

You don’t lose your job as a coach because you don’t meet educational objectives. You lose your job because you don’t win.

– Floyd Keith, executive director of the Black Coaches Association

Fifty thousand people don’t come to watch an English class.

– Paul “Bear” Bryant, football coach at the University of Alabama

[T]he determination of a coach’s value to a school has fundamentally defied normal business analysis … the bottom line right now is that there is no real way to objectively look at [coach’s salaries and compensation].”

– Rick Horrow, sports consultant

How much do you think MLB managers would be paid if every major league team was exempt from taxes, was supported by million-dollar operating subsidies from both a university and a state budget and the players’ salaries were constrained by law to be no higher that $40,000 annually …

– Andrew Zimbalist, sports economist

5.1 Introduction

Why do some college coaches earn so much money? In this chapter we ask two related questions: why is the average salary is so high and why are some salaries much higher than others? You will learn how coaching compensation is determined and what the value of a coach is to a school. As you will soon see, the answer to the question is not so simple. This chapter will not make you an expert on compensation for college coaches, but it will give you some insight into the issue.

Two important and obvious influences are the market structure of the NCAA and coaching productivity (e.g., winning percentage). As you already know, the NCAA cartel generates significant monopsonistic and monopolistic rents. Some of these rents are captured by the coaches. Also, as in any sport, coaches who win more games usually earn more money than those who do not. But other factors must be considered as well, notably winner-take-all labor markets, risk aversion, the winner’s curse, ratcheting, and old boy networks. Let’s explore how all of these elements combine to determine a coach’s compensation.

5.2 Trends in Compensation

In January 2004, the Louisiana State University Tigers defeated the Oklahoma Sooners in the Sugar Bowl to share a Bowl Championship Series (BCS) national championship with the University of Southern California. LSU’s head coach, Nick Saban, was earning $1.2 million annually but his contract specified that if LSU won a BCS championship he was to be paid $1 more than the highest paid college coach. Coincidentally, that coach was his Sugar Bowl adversary, Oklahoma coach Bob Stoops, who was earning $2.4 million. Shortly after the Sugar Bowl, Saban received a seven-year contract extension valued at $18.45 million. Despite the substantial pay increase, Saban left LSU to take the head coaching job with the NFL’s Miami Dolphins. Bob Stoops is still Oklahoma’s coach and his contract was renegotiated to include a $3 million bonus if he remains through the 2008 season (“Three million reasons,” 2005). His yearly compensation is now nearly $3.5 million.

Saban and Stoops are not the only college coaches who earn big salaries. Table 5.1 provides reported compensation information for DI-A football coaches earning more than $1.5 million in 2006, including their salary (base, deferred, housing allowance, etc.), other income (including shoe and apparel contracts, TV and radio shows, and camps), and the maximum possible bonus for meeting performance targets (conference championship, bowl appearances, coaching awards, academic and/or player conduct goals). These big compensation packages are not a recent development in college sports. In 1982, Texas A&M offered a salary of $375,000 (the equivalent of $760,738 in 2005) to Jackie Sherrill to be the Aggies’ football coach (Frank and Cook, 1995, p. 79). Table 5.2 lists the compensation for head basketball coaches at selected DI institutions.

Table 5.1 Annual Compensation for Football Coaches at DI Institutions in 2006 (in thousands)

Coach	School	Total Income	Salary	Other Income	Max bonus
Bob Stoops	Oklahoma	$3,450	$950	$2,500	$745
Kirk Ferentz	Iowa	2,840	2,840	0	1,000
Pete Carroll	USC	2,782	2,782	0	0
Mack Brown	Texas	2,664	1.084	1,580	325
Tommy Tuberville	Auburn	2,231	235	1,996	716
Phillip Fulmer	Tennessee	2,050	325	1,725	250
Jim Tressel	Ohio State	2,013	890	1,123	375
Dennis Franchione	Texas A&M	2,012	512	1,508	350
Frank Beamer	Virginia Tech	2,008	1,893	115	408
Larry Coker	Miami	1,800	N/A	N/A	N/A
Al Groh	Virginia	1,785	252	1,533	940
Mike Shula	Alabama	1,767	412	1,355	875
Bobby Petrino	Louisville	1,743	810	941	767
Mark Richt	Georgia	1,713	270	1,443	400
Bobby Bowden	Florida State	1,692	352	1,340	273
Ralph Friedgen	Maryland	1,692	253	1,439	550
Bill Callahan	Nebraska	1,690	1,690	0	114
Mike Leach	Texas Tech	1,600	300	1,300	375
John Smith	Michigan State	1,546	646	900	375
Urban Meyer	Florida	1,525	492	1,033	454
Jeff Tedford	California	1,505	167	1,338	350
Mark Mangino	Kansas	1,501	220	1,228	425

Note: Private institutions are not required to report financial information, including salaries. This is why coaches such as Joe Paterno at Penn State and Charlie Weis at Notre Dame do not appear in this table.

Source: Upton & Wieberg (2006)

Table 5.2 Annual Compensation for Basketball Coaches at DI Institutions in 2006 (estimated, in thousands). Italics for women’s basketball coaches

Coach School Compensation

Mike Krzyzewski Duke $3,000

Tubby Smith Kentucky 1,900

Billy Donovan Florida 1,700

Tom Izzo Michigan State 1,600

Jim Calhoun Connecticut 1,520

Roy Williams North Carolina 1,400

Rick Barnes Texas 1,300

John Calipari Memphis 1,200

Pat Summitt Tennessee 1,125

Tom Crean Marquette 1,100

Bruce Pearl Tennessee 1,100

Bill Self Kansas 1,000

Kelvin Sampson Oklahoma 1,000

Mark Gottfried Alabama 1,000

Geno Auriemma Connecticut 975

Sources: Various, including Adams (2006).

Two clarifications before we proceed. Economists recognize that looking at a person’s wage or salary can be misleading if it excludes other valuable benefits like health and life insurance, retirement, and vacation pay. Throughout this chapter, unless otherwise noted, we will use the term compensation rather than salary because compensation includes not just salary but all benefits, including such perquisites as membership at a private golf club.

Also, it is important to understand that most coaches receive income from more than one source. Typically, a coach receives a base salary from the university and supplementary income. Some of the additional income may come from the university but it is also supplied by outside sources, typically boosters and businesses. This supplementary income is often significantly larger than the base salary. For example, when Bob Stoops was paid $2.4 million annually, only $285,304 was paid by the university (including a base salary of $200,000). Purdue football coach Joe Tiller earns more than $1 million a year of which just $280,437 is paid by the university (his base salary of $218,000 was once characterized by Purdue’s athletic director as “irrelevant”).

In terms of supplementary income, it is common for coaches to receive media deals such as television and radio shows, opportunities for speaking engagements and motivational seminars, an expense account for entertainment, use of one or more vehicles, use of private aircraft, a clothing allowance, complementary tickets, a percentage of ticket revenues, summer camps (sports skills clinics for kids), performance bonus clauses (e.g., if the team qualifies for post-season championships), as well as discounts at clothing stores, restaurants, and other businesses near campus. The university may also provide the coach with a university-owned residence, assist in the financing of a house, or provide a housing allowance.¹

Many coaches sign exclusive commercial endorsement contracts with companies like Nike or Adidas or Reebok, from which they receive cash, stock, and apparel. University of Connecticut basketball coaches Jim Calhoun and Geno Auriemma earn base salaries of $1.5 million and $975,000 respectively, but also have endorsement deals worth an estimated $250,000-500,000 with Nike.² Coach K reportedly earns $1.5 million from Nike, a sum that is about the same as his salary and benefits from Duke. We discuss these commercial ties in more detail in Chapters 6 and 7.

Finally, if a coach is fired he may get a golden parachute — a severance payment. Such payments are increasingly common. The University of Cincinnati paid $3 million to recently fired basketball coach Bob Huggins, and the University of Colorado paid a similar amount to Gary Barnett, who resigned in December 2005 from a scandal-ridden football program. University of Tennessee basketball coach Buzz Peterson got $1.4 million after his team failed to qualify for the 2005 NCAA men’s tournament and Pete Gillen picked up $2 million from the University of Virginia for the same reason. If the head football coaches at Auburn, Iowa, Texas, and West Virginia are fired their contracts specify that they will each receive payouts in the range of $2.7 to $3.5 million.

Table 5.3 shows average salaries for coaches in different DI sports; football and men’s basketball coaches are clearly at the top of the pyramid compared to their peers. As we indicated in Chapter 2, because our focus is on the so-called “revenue sports,” our main interest is the compensation received by individuals like Bob Stoops or Jim Calhoun, not the coaches of the “non-revenue” sports. Not every head coach is paid the big bucks of course. Also, in many sports there are several assistant coaches. Pay for these assistants varies widely across sports as well (Table 5.4 shows average assistant coaching salaries in different DI-A sports).

Table 5.3 Average Salaries for Head Coaches by Sport at Selected DI Institutions in 2003

Sport Men’s Teams Women’s Teams

Baseball $67,500 N/A

Basketball 211,600 $118,300

Fencing 16,900 19,600

Field Hockey N/A 47,300

Football 285,500 N/A

Golf 33,000 32,700

Gymnastics 64,800 61,500

Ice Hockey 119,100 59,000

Lacrosse 54,900 41,700

Rifle 8,400 10,900

Rowing 43,800 43,500

Skiing 27,500 26,400

Soccer 48,500 46,200

Softball N/A 46,400

Squash 26,300 26,300

Swimming & Diving 37,100 37,700

Synchronized Swimming N/A 37,600

Tennis 31,800 30,900

Track & Field 34,600 35,800

Volleyball 55,600 53,400

Water Polo 33,200 31,200

Wrestling 55,800 N/A

Others 24,800 23,900

Source: Bray (2004, p. 20)

Table 5.4 Average Salaries for Assistant Coaches by Sport at Selected DI Institutions in 2003

Sport Men’s Teams Women’s Teams

Baseball $26,105 N/A

Basketball 51,900 $42,964

Fencing 6,857 7,231

Field Hockey N/A 17,750

Football 62,267 N/A

Golf 12,091 13,300

Gymnastics 24,667 31,312

Ice Hockey 45,850 28,706

Lacrosse 20,647 16,188

Rifle 7,400 13,000

Rowing 17,294 19,737

Skiing 12,000 11,421

Soccer 15,438 19,625

Softball N/A 20,625

Squash 14,700 14,700

Swimming & Diving 12,739 13,571

Synchronized Swimming N/A 23,500

Tennis 13,000 11,636

Track & Field 14,208 14,708

Volleyball 24,467 25,800

Water Polo 17,272 14,182

Wrestling 24,351 N/A

Others 4,852 13,667

Average $40,866 $23,492

Source: Bray (2004, p. 21)

It is common for a college coach to be the most highly paid employee on campus, earning more than the president, other administrators, and tenured full professors. For example, Bob Stoops’ last contract paid him about 25 times the amount earned by a full professor at Oklahoma. Phil Fulmer’s $2.5 million package at the University of Tennessee is estimated to exceed the total salaries for all faculty in the university’s History and English departments. The University of Georgia’s Mark Richt earns at least $2 million while the average professor there gets $92,000. Table 5.5 shows that of the ten highest paid employees at the University of Arkansas, six are involved in athletics.

Table 5.5 Salaries for Top 10 Employees at the University of Arkansas, 2005-2006

Salary + Other

Name Title Compensation

Houston Nutt Head Football Coach $1,039,644

Stanley Heath III Head Men’s Basketball Coach 752,343

Reggie Herring Football Defensive Coordinator 300,000

Vijay Varadan Distinguished Professor 287,000

David Van Horn Baseball Coach 285,000

Susanne Gardner Head Women’s Basketball Coach 278,000

Frank Broyles Athletic Director 276,280

John White, Jr. Chancellor 265,000

Dan Worrell Dean, Business 254,000

Ashok Saxena Dean, Engineering 247,072

Source: Moritz (n.d.)

Again, these trends are not recent. In 1985 the University of Wyoming hired Dennis Erickson to coach the football team at a salary of $80,000, more than Wyoming’s governor, attorney general, and state Supreme Court justices (Sperber, 1990, pp. 175-176).³

At many institutions coaches are considered to be members of the faculty or campus administrators. Why then should they be paid more than the highest paid faculty member or administrator? Is the coach more important than an award winning, and world-renowned chemistry professor? Is the coach worth more than the president of the university?

Assistant coaches at many DI institutions are also well compensated, especially if they are in the football or basketball program. For example, at Kansas in 2002, the nine assistant football coaches earned an average of about $104,000 a year, almost $20,000 more than the average full professor received (Mayer, 2002). Georgia pays its nine assistant football coaches an average of $138,271, a total of $1.25 million annually. And the assistants to Bob Stoops, Oklahoma’s three million dollar man, earn between $170,000 and $255,000.