Are Football Coaches Overpaid? Evidence from Their Employment Contracts

Abstract

The commentators and the media pay particular attention to the compensation of high profile individuals. Whether these are corporate CEOs, or college football coaches, many critics question whether their levels of remuneration are appropriate. In contrast, corporate governance scholarship has asserted that as long as the compensation is tied to shareholder interests, it is the employment contract and incentives therein which should be the source of scrutiny, not the absolute level of pay itself. We employ this logic to study the compensation contracts of Division I FBS college football coaches during the period 2005-2013. Our analysis finds many commonalities between the structure and incentives of the employment contracts of CEOs and these football coaches. These contracts’ features are consistent with what economic theory would predict. As such we find no evidence that the structure of college football coach contracts is misaligned, or that they are overpaid.