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College football coaches’ employment contracts and compensation garner public
attention and scrutiny in much the same way as those of corporate CEOs. In both
cases, the public perception is that they must be overpaid and pampered. Economic
theory claims that for coaches and CEOs to be overpaid, they must be receiving
compensation in excess of the value they create for their organizations. However,
both receive pay-for-performance compensation, which structurally aligns their
compensation with value creation. This means we need to examine the underlying
structure of the contract that gives rise to the observed compensation to determine
whether they are appropriately compensated.
We compare the employment contracts of Division I Football Bowl Subdivision
(FBS) college football coaches with those of corporate CEOs during the period 2005
to 2013. We find that coaches are not overpaid, and their contracts are fairly drawn.
We also show that CEO and coach contracts exhibit many common features. These
contract features are consistent with what economic theory would predict.
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