Tag Archives: contract

They Said It: Amy Phenix

They Said It: Amy Phenix

The Board of Regents (“Board”) effectively approved the contract extension of Richard Pitino on August 14, 2015. The Board delegated authority to the President, who delegated to his Chief of Staff, Amy Phenix. Ms. Phenix signed under the big block letters, “REGENTS OF THE UNIVERSITY OF MINNESOTA.”

The timing of certain members of the Board voicing their concern about Pitino’s contract and their claim of a lack of a role in approving it is a topic for another day, but one which certainly is deserving of further discussion.

Now, let us move on to the topic of this article: “They Said It: Amy Phenix”

In a Star Tribune article published on March 31, 2016, Chief of Staff Amy Phenix explained, “The reality is you’re very rarely going to fire someone not for cause in year one of a contract extension,” she said. “It’s just highly unusual.

Let’s quickly explore what “the reality is.”
Continue reading They Said It: Amy Phenix

Sharing Options:
Facebooktwittergoogle_plusredditpinterestmail

Parrish Misses the Mark on Critique of UCLA, Alford Buyout

July 9, 2013
Parrish Misses the Mark on Critique of UCLA, Alford Buyout

Today Gary Parrish of CBSsports.com staunchly critiqued the contract between UCLA and men’s head basketball coach Steve Alford in his piece, “Why UCLA’s buyout in Steve Alford’s contract makes no sense for UCLA“. Parrish writes:
Continue reading Parrish Misses the Mark on Critique of UCLA, Alford Buyout

Sharing Options:
Facebooktwittergoogle_plusredditpinterestmail

Q&A: Richard Pitino’s Contract with Minnesota

April 16, 2013
Q&A: Richard Pitino’s Contract with Minnesota

Q #1: How many years does Minnesota have Pitino locked up for?
A: Zero. Contracts are made to be broken. However, the term of the agreement is 6 years ending April 2019. We would expect some of the terms to change (i.e. compensation) over the next one to three years.

Amendments and restatements to college coaching contracts are common. As an example, VCU’s Shaka Smart agreement with the school has been changed each and every year he’s been there.

Q #2: What is Pitino’s compensation?
A:  The following are key elements of his compensation. We believe it’s likely that the guaranteed compensation will be increased in the next one to three years.
Guaranteed compensation – $1.2 million in 2013-14 consisting of $500k base and $700k supplemental. The $500k must be increased by at least 5% each year (i.e., will be a minimum of $525k for 2014-15).
Stay bonus – $133,333 per year. If he is still employed on April 30, 2016, Pitino will receive a payment of $400,000. Also, if he’s still coaching the program on April 30, 2019, he’ll receive another payment of $400,000.
Performance bonuses – Coach Pitino can earn bonuses each season for reaching certain athletic and/or academic performance targets. Most years we’d expect these to total between $50k and $200k. See also Question #7 below.

Q #3: I heard Minnesota is letting Pitino fly private, but they are limiting the cost of those flights to only $50,000 per year?!
A : We see the $50,000 as largely symbolic. There are situations where being able to fly on a private jet is essential to performing your job at the highest level. Many schools that pay big bucks for their head coach’s recruiting travel don’t have anything formally agreed to and they see it for what it is – a business expense that provides value to the program.

Let’s imagine it’s the end of July and Coach Pitino has been doing an excellent job with the program. The school has already spent $50,000 on private flights and Richard is trying to figure out how to get from Orlando to Las Vegas as quickly as possible. In that situation he’ll be flying on a small jet and the cost will be well worth it.

In other words, don’t get hung up on the $50,000. Pay more attention to the administration showing that they are interested in supporting the basketball program.

Q #4: What happens if Coach Pitino leaves Minnesota early? Does he owe the school something?
A: If Pitino leaves prior to April 30, 2016, he would owe the school a $1.5 million termination fee. If he leaves after then but before the six year term has been completed, he would owe a $500k termination fee.

In addition, any of the stay bonus “earned” but not yet paid would be forfeited. For example, if Pitino stayed three seasons before leaving in early April 2016, he would miss out of the $400,000 due to him if he stayed to the end of the month.

Finally, Pitino must pay back the Florida International contract buyout costs (estimated by Pleasant Avenue Athletics to be around $400k including tax gross-ups) that Minnesota covered if he leaves before April 30, 2018.

The April 30 date in these provisions is important. If a coach leaves one program for another it generally occurs well before that date.

Q #5: You said that Minnesota’s buyout costs to terminate Tubby Smith were about $3.25 million. How large is the termination fee for Coach Pitino?
A: If Pitino was fired without cause today the termination fee would be around $5.9 million. This amount decreases by approximately $950k to $1 million per year over the term of the agreement.

Pitino is in a very different position than Tubby Smith. He should be given a good four to five years before any strong consideration is made regarding an early end to his employment with Minnesota.

The termination is large, but the risk of a significant financial hit is considerably less with Coach Pitino than it was with Coach Smith.

Q #6: I’ve heard that if Minnesota fired Pitino and he then got another job, the U could stop making termination fee payments. Is that correct?
A: Not really. First, let us be clear: we are not offering tax advice in this article. That said, based on how the agreement is written and US tax regulations, it’s likely Minnesota would pay around 40% of the termination fee regardless of whether Pitino found other employment a short time after being terminated.

The issues surrounding this matter are complex and this is not the forum to get into the detail. (Besides, we don’t see Pitino on the hot seat any time soon, if ever.) You may hear from others that Minnesota will “get out of the buyout costs” if Pitino gets another job; however, the issues here are complex.

Q #7: Are the bonuses available to Pitino similar to those in Tubby’s agreement?
A: They’re similar in nature (i.e., bonuses for winning the conference, making the tourney, etc.), but overall? Not really. They are far more reasonable in amounts and are more difficult to achieve. We find the goals and amounts that Pitino can earn to be reasonable for his situation. The reality is that with success, Minnesota will need to increase their coach’s guaranteed pay.

Remember, contract terms are frequently revisited. If the incentives earned under the agreement aren’t deemed adequate, an increase in compensation (or a discretionary bonus) may be warranted.

Q #8: Coach Pitino’s pay is a lot lower than Tubby’s was, right?
A: Indeed. Tubby had a sweetheart deal at the U and he’s now making considerably less at Texas Tech. Let’s compare what compensation would have been for Smith and what it would be for Pitino under a hypothetical scenario for 2013-14.

Compensation under Hypothetical Scenario for 2013-14 Season
We’ll assume Minnesota finishes in 4th place and makes NCAA tournament appearance, where they  lose in their first game. The team has an APR of 950, GPA of 2.9 and a graduation success rate of 50%.

Pitino Smith
Guaranteed $1.33 million $2.25 million
Incentives $0.08 million $0.35 million
  TOTAL $1.41 million $2.60 million

Using the hypothetical scenario above, Smith would have made over $1.19 million (84%) more in 2013-14 than Pitino would.

Note: Certain information and interpretations in this article were provided by Pleasant Avenue Athletics.


Sharing Options:
Facebooktwittergoogle_plusredditpinterestmail

Tubby Smith’s Buyout: Approximately $3.25 Million

February 13, 2013
Tubby Smith’s Buyout: Approximately $3.25 Million

There are two key points presented below.

First, our interpretation of the employment agreement between the University of Minnesota and its men’s basketball head coach Tubby Smith is that the cost of a “buyout” at the end of this season would be approximately $3.25 million. You may have been hearing multiple other sources discussing the $2.5 million termination fee as being the buyout figure, but this particular agreement is unique in some respects as compared to most other head coaching contracts.

Second, it’s important to remember that the cost of a buyout isn’t all new. Had the agreement not been amended last summer, buying out Smith’s contract would have cost the University approximately $2.36 million. The increment cost resulting from the amendment is less than $900k.

Question:
If Minnesota terminated Coach Smith’s contract in late March or early April, how much would they still have to pay out to Tubby?

Answer:
Approximately $3.25 million.

Explanation:
The $3.25 million figure includes three components:

(1)    Termination fee – $2.5 million

If Minnesota terminates Smith’s contract without just cause, they are required to pay one-half of the base salary and supplemental compensation owed for the remainder of the term of employment, subject to a maximum of $2.5 million.

(2)    Ninety (90) day written notice clause – $498k

Minnesota is required to provide written notice to Coach Smith 90 days prior to the termination of the employment agreement. The $498k represents base salary and supplemental compensation for 90 days from the date of notification.

This requirement in general and especially its length is rare for head coaching contracts. For Minnesota, it’s helpful from a PR perspective in that it effectively keeps a half million of buyout dollars out of the headlines and most news stories. See also component (3) below.

(3)    Supplemental retirement contribution – $250k

If Smith is still employed as of April 30, 2013, he will be due a supplemental retirement contribution of $250k. The contribution immediately vests.

Although the notification of termination might be made several weeks before April 30, the 90 day written notice requirement means his employment will not have been terminated as of April 30.

Question:
If the contract had not been amended in July 2012, how much would they still have had to pay Tubby if he were to be terminated in late March or early April 2013?

Answer:
Approximately $2.36 million, or $890k less than under the amended contract. 

Explanation:
Prior to the amendment last summer, a termination effective after May 1, 2013 would not have resulted in a termination fee. However, Minnesota would have been required to pay Smith the remainder of his base salary and supplemental compensation through the end of the agreement (i.e., April 30, 2014).

The written notice and retirement contribution components discussed above also existed in the original contract.

Jordan Sale at Eastbay.com - Save Up To 60%!!  Online Only, Some Exclusions May Apply.

Question:
Why are you including the 90 days of pay and retirement contribution in this discussion?

Answer:
The 90 day written notice requirement effectively creates an additional termination fee. When a college coaches is fired, the school and the coach quickly move on. The school will not receive value in exchange for paying the coach this “salary and supplemental compensation”.

The intent(s) of the supplemental retirement contribution isn’t explicitly conveyed, but we believe there is some element of reward for the future commitment by the coach. That is, if Minnesota wanted to retain Coach Smith but he wanted to leave after this season and did so before April 30, he would lose out on that $250,000 contribution. The intent may partly be to compensate him for past services, but the retention of his services is relevant as well. Since the $250,000 payment would not result in retention of his services if the University terminated the agreement, we are including this amount in the buyout discussion as well.
—————–
Follow us on Twitter at @LateNightHoops

Sharing Options:
Facebooktwittergoogle_plusredditpinterestmail

Fact Check! Fran McCaffery’s new contract with Iowa

FACT CHECK: Iowa says men’s head basketball coach Fran McCaffery’s new deal puts him in the upper half of Big Ten Conference with regard to guaranteed compensation.

Is this claim factual? No.

How outrageous is this claim? Not very. Whether a simple mistake or a white lie, we’re talking about Iowa and a coaching contract we actually like. Let’s give them a break (especially after Licklighter).

“The seven-year agreement guarantees McCaffery a minimum average of $1.66 million annually over the length of the contract, beginning with a base salary of $1.3 million in 2012-13. The base salary moves McCaffery to the upper half of the Big Ten Conference in comparison to his colleagues.”

The University of Iowa said in July 2012 that a new deal between the school and head coach Fran McCaffery moves his base salary into the upper half of the Big Ten Conference in comparison to other head coaches. In this context the school is using “base salary” to mean guaranteed pay, but the comparison does not include various incentives that could be earned.

Overall, I like the contract. The school is providing a significant financial incentive for McCaffery to get the team into the NCAA tournament and to do so quickly. However, the claim of their head coach’s guaranteed compensation being in the upper half of the conference is simply untrue.

Specifically, let’s consider the six Big Ten teams who are likely to be preseason picks to finish higher than Iowa this season: Indiana, Michigan, Michigan State, Minnesota, Ohio State and Wisconsin. The head coach of each of those programs earns more guaranteed compensation than McCaffery’s new deal. We could go on (by looking at Purdue’s Matt Painter, for example), but we’re already comfortable stating that McCaffery’s guaranteed compensation remains in the bottom half of the conference and not in the top half as the University of Iowa has claimed.

Original article being fact checked:
Coach’s teams have revitalized the Hawkeye fan base

Sharing Options:
Facebooktwittergoogle_plusredditpinterestmail