As the revenue of collegiate athletics continues to skyrocket, the people who are responsible for managing athletic departments are not being paid commensurate with their actual duties and responsibilities due, in large part, to an outdated contractual compensation model.
In 2009, The Ohio State University agreed to a 10-year, $110 million marketing and media rights deal with IMG College, and in 2016 it inked a 15-year, $252 million ($112 million product; $103 million cash) sponsorship deal with Nike. However, the man responsible for these impressive deals, Athletic Director Gene Smith, did not receive any additional compensation, as a bonus or otherwise, that was directly linked to his efforts in negotiating these lucrative contracts on behalf of the University.
Mr. Smith’s employment agreement with Ohio State sets forth several specific duties and responsibilities, including “develop[ing] and implement[ing] programs to increase revenue sources for the [Athletic] Department, including effective plans for marketing and promotions…” Interestingly, a recent extension of Mr. Smith’s employment contract at Ohio State included an increased emphasis on academic performance and career development, with a decreased importance on athletic performance-related bonuses. However, Ohio State did increase Smith’s compensation for his work “responding to the media” by $220,000 from the previous contract, to a total of $420,000. This type and level of additional compensation is one that is rarely seen, if ever, in the employment contracts of modern day athletic directors. Case in point, in the wake of his extension, Mr. Smith stated that his previous contract structure was based on a model that became popular in the 1980s.
Although it is debatable whether the increase to the additional compensation related to Mr. Smith’s media activity was a cleaver way for Ohio State to reward him for his negotiation efforts with the likes of IMG College or Nike, it is apparent that the contractual compensation model for athletic detectors in the modern era is critically outdated and in need of revision. With the present culture of public scrutiny continuing to dramatically escalate, institutions would be well served to adopt a contemporary version of employment contracts that provides compensation to athletic directors in a straightforward and quantifiable manner, and is directly related to their efforts, and perhaps more importantly, their results.
Both modern day, and future, athletic directors will continue to have far different duties and responsibilities than their predecessors, and as such, their employment relationships require a contractual structure that properly reflects the tangible business specifics of the profession.
Matthew Baldwin is Chair of the Sports & Entertainment Law Group of Silverman, Thompson, Slutkin & White, LLC. Mr. Baldwin’s practice has focused on the representation of collegiate and professional coaches and sports executives in the National Collegiate Athletic Association (NCAA) and National Football League (NFL), among other sports leagues. He has negotiated complex employment, marketing and broadcasting contracts in both collegiate and professional athletics, and he has developed several unique strategies to benefit his clients in their employment relationships. Mr. Baldwin graduated from the University of Toledo College of Law (JD) and Rice University (BA), and is a member of the Board of Advisors for the Center for Sport and the Law at the University of Baltimore School of Law.