Jaw-Dropping Compensation: College Professors vs. College Football Coaches(mjperry.blogspot.com)
mjperry.blogspot.com
Jaw-Dropping Compensation: College Professors vs. College Football Coaches
http://mjperry.blogspot.com/2007/12/jaw-dropping-compensation-college.html?sid13
7 comments
Why are athletics so important? I think they just help colleges attract money, no real intrinsic value.
So true. The alumni that keep colleges alive are pretty generous after winning seasons.
It's also interesting to me how this trickles down to high schoolers. Tons of kids do athletics in high school because it will get them into college (or maybe the NFL) but for the most part people are no longer into it once they are in college.
Most college freshman I know are pretty much done impressing people with athletics. It might get them laid or something, but it has little value beyond staying healthy, doing teamwork, etc. Not that that's bad, but Goldman Sachs doesn't really hire based on athletics.
It's also interesting to me how this trickles down to high schoolers. Tons of kids do athletics in high school because it will get them into college (or maybe the NFL) but for the most part people are no longer into it once they are in college.
Most college freshman I know are pretty much done impressing people with athletics. It might get them laid or something, but it has little value beyond staying healthy, doing teamwork, etc. Not that that's bad, but Goldman Sachs doesn't really hire based on athletics.
Did you get to the end of the article? The author was employing sarcasm. So you are really in agreement with the author.
Before you comment on the "jaw-dropping compensation", Please read this:
http://www.businessweek.com/magazine/content/07_50/b40620387...
"...but says that the going annual rate today for theoreticians of his caliber is $400,000 to $600,000, which includes salary and research support. This is for an assistant professor, the level at which Yale does most of its hiring. The price tag for top experimentalists, who have far more extensive laboratory needs, is $1.5 million to $2 million, according to Shankar, who remains on the Yale faculty."
So there you go. Its all about talent!
http://www.businessweek.com/magazine/content/07_50/b40620387...
"...but says that the going annual rate today for theoreticians of his caliber is $400,000 to $600,000, which includes salary and research support. This is for an assistant professor, the level at which Yale does most of its hiring. The price tag for top experimentalists, who have far more extensive laboratory needs, is $1.5 million to $2 million, according to Shankar, who remains on the Yale faculty."
So there you go. Its all about talent!
It may be all about talent, but that cool half-mil is not all salary.
A large percentage of that money goes to funding for a couple of grad students and postdocs, equipment and supplies (a theoretician still needs fast computers) travel expenses to conferences to present those world-class papers, and so forth. Probably no more than $100-150K of that represents salary for the professor.
Also, is that money start-up funding (a lump sum) or annual support? It's not clear the way it's written, but a top researcher would most likely be expected to secure solid external support from government (National Science Foundation, DARPA, etc), corporate, and other funding sources within a year or so.
A large percentage of that money goes to funding for a couple of grad students and postdocs, equipment and supplies (a theoretician still needs fast computers) travel expenses to conferences to present those world-class papers, and so forth. Probably no more than $100-150K of that represents salary for the professor.
Also, is that money start-up funding (a lump sum) or annual support? It's not clear the way it's written, but a top researcher would most likely be expected to secure solid external support from government (National Science Foundation, DARPA, etc), corporate, and other funding sources within a year or so.
Forget notoriety. University football generates a ton of money, and since we live in a capitalist society, the people in profit centers tend to get paid a lot than people in cost centers.
If the average university has more than 10 professors, they are paying more in wages to professors than head football coaches. And if you figure the total amount paid in tuition in a year across the country, I'm guessing that will be a much larger number than the amount spent on tickets and television rights and merchandising for college football.
So, I disagree that professors are a cost center for a university and that, as a society, we invest more overall in head football coaches than in educators.
So, I disagree that professors are a cost center for a university and that, as a society, we invest more overall in head football coaches than in educators.
A look at some of those perks:
http://www.usatoday.com/sports/college/football/2006-11-16-c...
"About 10% of coaches get a cut of ticket revenue; Oregon's Mike Bellotti got $631,000 [in 2006] under such a provision."
I read somewhere that the football revenue from some universities can support the sports programs for all the other sports. That's probably true for the big college programs that have large fan bases, like Notre Dame and many SEC schools.
Sadly, a significant part of alumni contribution can be earmarked for sports and football/basketball in particular. [Sad because this is the state of affairs, not that contributors can donate to specific programs.] Those boosters pay for the new locker rooms and stadiums. It's an arms race to get the best facilities to attract the best athletes and get wins. (I heard the facilities at NC State were impressively professional.)
NY Times recently profiled Stanford's additional compensation to coaches for Palo Alto real estate: http://www.nytimes.com/2007/11/10/sports/ncaafootball/10stan...
"About 10% of coaches get a cut of ticket revenue; Oregon's Mike Bellotti got $631,000 [in 2006] under such a provision."
I read somewhere that the football revenue from some universities can support the sports programs for all the other sports. That's probably true for the big college programs that have large fan bases, like Notre Dame and many SEC schools.
Sadly, a significant part of alumni contribution can be earmarked for sports and football/basketball in particular. [Sad because this is the state of affairs, not that contributors can donate to specific programs.] Those boosters pay for the new locker rooms and stadiums. It's an arms race to get the best facilities to attract the best athletes and get wins. (I heard the facilities at NC State were impressively professional.)
NY Times recently profiled Stanford's additional compensation to coaches for Palo Alto real estate: http://www.nytimes.com/2007/11/10/sports/ncaafootball/10stan...
What proportion of football-related revenue subsidizes a university's academic department, and what proportion is just plowed back into the football program?
I don't know, but I guarantee Ohio State makes hundreds of millions and pays Jim Tressel one or two.
The article left out an interesting factoid, which is that many of them are the highest paid state employees in their state.
The article left out an interesting factoid, which is that many of them are the highest paid state employees in their state.
From the USA Today article I linked above:
"At Texas, for example, the return on the sizable investment in Brown is a pre-eminent football program that last season won the school's first football national championship in 35 years and accounted for 62% of all the Longhorns' athletics revenues, turning a $42 million profit. Football essentially underwrote 17 other sports at the school that don't make money -- all but men's basketball and baseball."
I'm not sure if the profit takes into account university merchandise. Powerhouse football programs sell lots and lots of university clothing, and the universities make money off the licensing.
I'm not sure if the profit takes into account university merchandise. Powerhouse football programs sell lots and lots of university clothing, and the universities make money off the licensing.
That would certainly seem to justify coach salaries.
Actually OSU only has 30-40 million in revenues.
http://www.pbs.org/nbr/site/features/special/subdir/college-...
What they don't tell you is that they are lucky to break even if you take into account the hidden costs. The next time they do a 15 million stadium renovation, it won't be counted against the athletic department's budget.
What they don't tell you is that they are lucky to break even if you take into account the hidden costs. The next time they do a 15 million stadium renovation, it won't be counted against the athletic department's budget.
Since when should we consider universities as for-profit institutions?
I don't have a position on whether they SHOULD be for-profit, but here's a list of many which are: http://en.wikipedia.org/wiki/List_of_for-profit_colleges_and...
But none of those schools have big-time football programs.
Ever watch a game on Saturday afternoon? Mixed in with all the ads for Nike, etc. are messages about how "this school really cares about academics", etc.
Ever watch a game on Saturday afternoon? Mixed in with all the ads for Nike, etc. are messages about how "this school really cares about academics", etc.
market forces also determine CEO salaries
Not really. A theoretical market requires unlimited buyers and sellers bidding. A company like the NYSE does a good job simulating one, but once you get to the back-slapping/rubber-stamping/cult of personality world of board room politics, the market-in-theory no longer exists.
For comparison, I tried researching minor league baseball coach salaries (which would more closely reflect the market) but came up dry. I'm guessing 100K tops, and probably less. The prices relating to college football are propped up just by being officially part of college and the environment.
I don't remember a single person talking about minor league baseball during college, and the same would have been true of football if its professional proving-grounds were the minor leagues rather than universities. Too bad.
Not really. A theoretical market requires unlimited buyers and sellers bidding. A company like the NYSE does a good job simulating one, but once you get to the back-slapping/rubber-stamping/cult of personality world of board room politics, the market-in-theory no longer exists.
For comparison, I tried researching minor league baseball coach salaries (which would more closely reflect the market) but came up dry. I'm guessing 100K tops, and probably less. The prices relating to college football are propped up just by being officially part of college and the environment.
I don't remember a single person talking about minor league baseball during college, and the same would have been true of football if its professional proving-grounds were the minor leagues rather than universities. Too bad.
That's absurd. I'd be willing to wager big school football makes orders of magnitude more than minor league baseball, hence the coaches do as well.
I'd be willing to wager that football, set up like minor league baseball, would make roughly the same as minor league baseball, or worse:
http://en.wikipedia.org/wiki/XFL
http://en.wikipedia.org/wiki/XFL
That doesn't make any sense at all.
College football programs rake in huge money, and therefore the people responsible for their success do too, whereas minor league baseball teams do not, and therefore their coaches don't.
College football programs rake in huge money, and therefore the people responsible for their success do too, whereas minor league baseball teams do not, and therefore their coaches don't.
They rake in huge revenue, but most programs are in the red. Former UMich president James Duderstadt wrote a book (Intercollegiate Athletics and the American University) where he claimed that the reported profits for most college football teams are bs, and in several supposedly-profitable Rose Bowl seasons, the Wolverines lost millions. Mostly the teams get so much $$ based on perceived (yet statistically negligible) alumni donation increases based on a team's success.
The XFL had a lot of problems, but very few were related to the business structure.
The biggest problem was that the best players in the world weren't playing in the XFL. Div I-A college football doesn't have that problem. The lower divisions do, though. I doubt many Div I-AA or Div II coaches are making $1MM.
The biggest problem was that the best players in the world weren't playing in the XFL. Div I-A college football doesn't have that problem. The lower divisions do, though. I doubt many Div I-AA or Div II coaches are making $1MM.
I'd like to see the numbers that prove that the stars/CEOs/whatever are not worth their money. Like, take two identical companies, but have a CEO run one and a random guy from the street run the other, and show that they both are equally successful?
Isn't the typical CEO salary being decided on by the vote of the shareholders? Why would they vote for paying so much, if it wasn't worth it?
I remember reading an article by Greenspun who says that the CEOs rip off the shareholders, though. Just not sure how they pull it off.
Isn't the typical CEO salary being decided on by the vote of the shareholders? Why would they vote for paying so much, if it wasn't worth it?
I remember reading an article by Greenspun who says that the CEOs rip off the shareholders, though. Just not sure how they pull it off.
http://www.gsb.stanford.edu/news/research/compensation_daine...
This study did a peer comparison:
[First, the researchers defined a way to measure CEO skill. Although many studies have examined the relationship between CEO pay and company performance, Daines and his colleagues wanted to isolate specific evidence of executive competence. After all, company performance can depend on a number of factors beyond the power of an individual CEO: the economy, regulatory constraints, or industry conditions, to name just a few.
They decided that a firm run by a skilled CEO should consistently do better than its industry peers. More specifically, a skilled CEO should continue a firm's prior good performance and reverse poor performance. Conversely, a bad CEO would be more likely to continue a poor showing and to reverse the firm's prior successes.
The results were instructive: The study, which reviewed CEO pay and economic performance between 1991-2002, found that in small firms, highly paid CEOs generally are more skilled than their industry counterparts. The correlation is even stronger if the firm has a large shareholder or if the CEO has been paid largely in stocks and options. Conversely, pay is more likely to be negatively related to skill in larger firms. "In many large firms, the highest paid executives actually performed the worst," said Daines.]
This study did a peer comparison:
[First, the researchers defined a way to measure CEO skill. Although many studies have examined the relationship between CEO pay and company performance, Daines and his colleagues wanted to isolate specific evidence of executive competence. After all, company performance can depend on a number of factors beyond the power of an individual CEO: the economy, regulatory constraints, or industry conditions, to name just a few.
They decided that a firm run by a skilled CEO should consistently do better than its industry peers. More specifically, a skilled CEO should continue a firm's prior good performance and reverse poor performance. Conversely, a bad CEO would be more likely to continue a poor showing and to reverse the firm's prior successes.
The results were instructive: The study, which reviewed CEO pay and economic performance between 1991-2002, found that in small firms, highly paid CEOs generally are more skilled than their industry counterparts. The correlation is even stronger if the firm has a large shareholder or if the CEO has been paid largely in stocks and options. Conversely, pay is more likely to be negatively related to skill in larger firms. "In many large firms, the highest paid executives actually performed the worst," said Daines.]
Well, it's not really the shareholders who vote on it, it's the board's compensation committee, if I'm not mistaken. The shareholders do vote on the board's composition... but even that is subject to some control by the company:
http://www.economist.com/business/displaystory.cfm?story_id=...
http://www.economist.com/business/displaystory.cfm?story_id=...
And the board's compensation committee is mainly executives from other companies, who want the executives on their board to also vote them a large pay raise...
It is simple collusion among the executive class, insulated from market forces, that determines executive compensation today. Shareholders are largely cut out of the loop.
It is simple collusion among the executive class, insulated from market forces, that determines executive compensation today. Shareholders are largely cut out of the loop.
I wouldn't go quite that far, but the folks at The Economist have made a good case that a few tweaks to the system wouldn't hurt.
Well, this Economist story explains why executive pay is unlikely to decline: http://www.economist.com/business/displaystory.cfm?story_id=...
They seem to go back and forth, don't they?:-)
http://www.economist.com/business/displaystory.cfm?story_id=...
I certainly wouldn't favor any broad laws meddling in that kind of thing, but a tweak here and there to open things up to shareholders probably wouldn't hurt.
http://www.economist.com/business/displaystory.cfm?story_id=...
I certainly wouldn't favor any broad laws meddling in that kind of thing, but a tweak here and there to open things up to shareholders probably wouldn't hurt.
I think the big difference between CEO's and football coaches is that the coaches' products are more easily subject to scrutiny.
The average joe can watch weekly football games and judge for himself whether a team looks disciplined and prepared.
CEO performance is documented in complex financial reports released once a quarter. The reports aren't as readily available as nationally televised football games, and the connection to the CEO's contributions isn't as immediately obvious. Also, recent history is replete with incidents where the bottom unexpectedly dropped out of a company because of unbeknownst-to-the-public mistakes or transgressions committed under the CEO's watch.
I think public perception about the differences in transparency is what drives distrust in CEO's but not in college coaches.
The average joe can watch weekly football games and judge for himself whether a team looks disciplined and prepared.
CEO performance is documented in complex financial reports released once a quarter. The reports aren't as readily available as nationally televised football games, and the connection to the CEO's contributions isn't as immediately obvious. Also, recent history is replete with incidents where the bottom unexpectedly dropped out of a company because of unbeknownst-to-the-public mistakes or transgressions committed under the CEO's watch.
I think public perception about the differences in transparency is what drives distrust in CEO's but not in college coaches.
This is slightly offtopic, but why in the world do developers make their sites resize my browser window? Not the blog post, but the USA Today coach salary database- is there a legitimate reason for this or do they just enjoy pissing off users?
A large university might have several hundred professors, but it only has one head football coach. Even if you consider a coaching staff (none of which individually make as much as the head coach), you're only talking about a dozen or two individuals at most. However, a university gains a lot more notoriety by having a winning football team than it does by having a well published professor. If you were in charge, who would you pay more? Don't answer before considering all the alumni that you have to keep happy if you want to keep your job.
Edit: Also consider that once a professor is tenured, it takes a lot for him/her to mess up and get fired. However, as soon as a football coach has a losing season, his future employment is up for reconsideration. The bigger paycheck also means a lot less job security.