Finance Uncategorized

Arizona to use creative compensation to keep its coaches

An unidentified donor could help Arizona compensate its coaches. . . with stock.

(Credit: Richard Mackson-USA TODAY Sports)
(Credit: Richard Mackson-USA TODAY Sports)

It’s not uncommon to see a CEO compensated with vesting stock options. Non-monetary compensation protects a company from executives departing without notice and allows the executives to share in the upside of the company if the price of its stock increases. Providing stock as compensation is not common for college coaches. The University of Arizona could change that.

According to a Sports Illustrated report, coaches Rich Rodriguez and Sean Miller, as well as athletic director Greg Byrne, could sign extensions entitling them to stock in a U of A donor’s company. The stock only vests if they stay in their positions for the next eight years.

This provides a huge cash windfall at the end of the contract. It is also a gamble. If the company’s shares were to devalue, the compensation may be less attractive. In any case, it’s a creative way to compensate coaches outside of the typical salary structure.

As athletic department budgets tighten, especially at state universities, schools must think of creative ways to keep talent. Private school budgets have more leeway, but spending taxpayer money on enormous contracts for football and basketball coaches sometimes causes headaches for public institutions. If donors are willing to give up ownership in their companies, it allows an athletic department to stay within its budget and creates a situation where the coach won’t leave for greener (literally and figuratively) pastures.

There are limits to this form of compensation. Nike could never offer an Oregon football coach stock as compensation. Google or Facebook won’t be giving stock options to keep coaches at Stanford, either. Shareholders of public companies would riot before they would allow companies to dilute shareholder value. But this does open the door for private companies, such as limited partnerships and sole proprietorships, to help universities compensate and retain top coaches.

Michael Colangelo is Assistant Director at the USC Sports Business Institute.

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