Are College Presidents Like Football Coaches? Evidence From Their Employment Contracts

58 Pages Posted: 3 Apr 2016 Last revised: 25 Aug 2017

See all articles by Randall S. Thomas

Randall S. Thomas

Vanderbilt University - Law School; European Corporate Governance Institute (ECGI)

R. Van Horn

Vanderbilt University - Strategy and Business Economics

Date Written: February 8, 2016

Abstract

College presidents and football coaches are frequently criticized for their high compensation. In this paper, we argue that these criticisms are unmerited, as the markets for both college presidents and football coaches exhibit properties consistent with a competitive labor market. Both parties’ compensation varies in sensible ways related to the size of the programs they manage, as well as their potential for value creation. Successful college presidents and football coaches can greatly increase the value of their schools well beyond the amount they receive in compensation. If these higher education executives’ compensation is the result of a competitive labor market, and they do not capture compensation in excess of the incremental value they create, the overall welfare of their universities is increased.

To shed light on these issues, we engaged in a comprehensive examination and comparison of college president and football coach compensation levels and employment contracts across FBS Division I universities. We found a number of noteworthy results. First, we see large differences in job tenure of these two groups: university presidents stay in their jobs significantly longer than football coaches. Second, we observe that football coaches are paid significantly more and their pay is rising at a much faster rate than college presidents. Third, larger schools pay these top executives much more than their smaller counterparts, especially for football coaches. Furthermore, Power Five conference schools pay their coaches far more than the other football conferences. Finally, we note significant differences in the structure of the college presidents’ employment contracts compared to football coaches’ contracts.

For each of these major findings, we provide a detailed analysis of why they existand how they can be explained by economic theory.

Keywords: Football coaches, college presidents, competitive labor market, job tenure, employment contracts, compensation, severance payments

JEL Classification: G34, K22, K41

Suggested Citation

Thomas, Randall S. and Van Horn, Ray, Are College Presidents Like Football Coaches? Evidence From Their Employment Contracts (February 8, 2016). Arizona Law Review, Vol. 58, p. 901, 2016; Vanderbilt Law and Economics Research Paper No. 16-4. Available at SSRN: https://ssrn.com/abstract=2730878 or http://dx.doi.org/10.2139/ssrn.2730878

Randall S. Thomas (Contact Author)

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Ray Van Horn

Vanderbilt University - Strategy and Business Economics ( email )

Nashville, TN 37240
United States

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