- On January 6, 2017
The college football postseason concludes next Monday with the College Football Playoff National Championship Game (Presented by ATT). And since the four New Year’s Day Bowl games were held just a few days ago, a recent article at CBS Sports discussing the pay of the executive directors of the organizations that run these bowl games is timely: “College bowl director pay rises as Fournette, McCaffrey skip bowl games.” In the article, Jon Solomon writes about the pay of the executive directors of most of the college football bowl organizations, in the context of the fact that some high-profile players are beginning to withdraw from their teams’ bowl games.
We admit our ignorance of the organization and structure of the college football bowl system. Not that we don’t care about college football bowls (we do, much to our spouses’ chagrin), but rather that we’ve rarely given much thought before to the infrastructure behind organizing and hosting these games. And we’ve rarely considered that the organizations behind many of the most prestigious bowl-organizing organizations might be tax-exempt, not-for-profit organizations. And that the executives of the tax-exempt companies who put together these one-day sporting events might be paid significantly more than the heads of many other charitable organizations, and even more than many smaller and mid-sized for-profit organizations.
We can’t judge whether these executives are overpaid, underpaid, or fairly paid, considering that we don’t have any organizational context or data on the external competitive market for the talent leading these organizations. However, their pay levels do raise questions that are worth discussing.
Bowl Executive Pay
Solomon’s article summarizes the financial resources and the pay of the top executive of most of the not-for-profit organizations that sponsor college football bowls:
Bowl game finances
Increase/decrease from previous year in parenthesis
|Bowl Organization||Bowl Net Assets||Bowl Director Pay||Year|
|Sugar Bowl||$70 million (+8%)||$761,439 (+1%)||2014-15|
|Orange Bowl Committee*||$55.1 million (+6%)||$614,832 (-22%)||2014-15|
|Arizona Sports Foundation (Fiesta)#||$54.5 million (+8%)||$1,077,099 (+83%)||2014-15|
|Pasadena Tournament of Roses Assoc.||$34.9 million (+3%)||$427,320 (+17%)||2014-15|
|Peach Bowl||$30.7 million (+28%)||$680,010 (+4%)||2014-15|
|Cotton Bowl Athletic Assoc.||$19.3 million (+19%)||$994,065 (+2%)||2014-15|
|San Antonio Bowl Assoc. (Alamo)||$16.9 million (+1%)||$578,216 (+3%)||2014-15|
|Florida Citrus Sports Assoc.^||$9.9 million (+13%)||$459,756 (+8%)||2014-15|
|Tampa Bay Bowl Assoc. (Outback)||$5.9 million (+18%)||$863,222 (+4%)||2014-15|
|San Diego Bowl Assoc. (Holiday/Poinsettia)||$4.3 million (+2%)||$343,718 (+4%)||2014-15|
|Gator Bowl Association (TaxSlayer)||$4.1 million (+8%)||$426,187 (+6%)||2014-15|
|Liberty Bowl Festival Assoc.||$2.0 million (0%)||Not listed||2015-16|
|Music City Bowl||$1.8 million (+64%)||$414,096 (+5%)||2014-15|
|New Orleans Bowl||$1.7 million (+13%)||Not listed||2013-14|
|Sun Bowl Assoc.||$794,829 (-20%)||$186,462 (+4%)||2015-16|
|Tangerine Sports Assoc. (Russell Athletic)^||$720,932 (-55%)||$459,756 (+8%)||2014-15|
|DC Bowl Committee (Military)||$399,750 (+59%)||$257,722 (-6%)||2014-15|
|Mobile Alabama Bowl (Dollar General)||$140,734 (-56%)||$100,000 (0%)||2014-15|
|Independence Bowl Foundation||$-582,512 (-905%)||$101,000 (-14%)||2014-15|
|San Francisco Bowl Game Assoc. (Foster Farms)||$-769,619 (-285%)||$315,121 (+2%)||2014-15|
* Orange Bowl CEO Eric Poms’ total compensation declined because of a smaller bonus in 2014-15 ($143,278) than in 2013-14 ($397,171). His base pay increased by $5,292 in 2014-15.
# The Fiesta Bowl paid $876,349 to former director Robert Shelton and $200,750 to new director Mike Nealy in 2014-15.
^ The Citrus Bowl and Russell Athletic Bowl are run by director Steve Hogan, who received $459,756 in total compensation and not multiple payments of that amount.
We are not sure why Net Assets is the only financial measure included in the table, but it suggests that Net Assets is proxy for how well the organization was managed. Unfortunately, this perpetuates the notion that “asset-collecting” tax-exempt organizations are somehow more effective than those that provide actual services or resources to the communities they serve. If an additional measure of the value of programming or community services provided was included in the table, readers would have a better understanding of the performance of the organization (more on this later).
However, in spite of the Net Assets issue, these data are still thought-provoking and raise a few questions:
- On what do the football bowl organizations spend the money they make from the games? What kind of, and how much community support do they provide?
- What exactly do the executive directors of the bowls do? How large an organization do they run?
A quick review of an example disclosure can add some insight to this discussion. (If any readers are more knowledgable on these issue, please add your commentary below in the comments.)
Bowl Finances and the role of the Executive Director
Again, to be fair, we are not experts in how to organize a successful college football bowl game. (We are experts in compensation and linking to business strategy.) However, a few insights can be gleaned from perusing a bowl organization’s Form 990 (the 990 is a public disclosure form detailing financial data and executive compensation required from all tax-exempt organizations). For this example, we reviewed the 990 for the Arizona Sports Foundation (“ASF”), the organizer of both the Tostito’s Fiesta Bowl and the Motel 6 Cactus Bowl. ASF’s 2014 990 is the most recently filed disclosure, which we believe includes the 2015 Fiesta Bowl.
ASF disclosed that in 2014 it earned $13.7 million in program service revenue (compared to $15.0 million in 2013), and $14.5 million in total revenue, which includes $0.5 million in investment income and $0.3 million in other revenue. Of the $13.7 million in program service revenue, $12.6 million came from game revenue (we assume ticket, concessions and merchandise sales), and the other million and change from sponsorships, advertising and “acknowledgements.”
Where did the money go? Of the $13.7 million, $5.7 million in expenses were directly related to the bowl game itself, with another $0.5 million spent on game promotions and hospitality. Approximately $2 million went to employee compensation, with another $0.3 on employee benefits. All other expenses (legal, accounting, IT, depreciation, insurance, etc.) brought the expense total to $10.4 million, leaving a surplus of $4.0 million.
And what about executive compensation during the year? ASF had three executive directors in 2014. Robert Shelton was Executive Director through Jan 13, 2014 and was paid $873,180. Of that amount, $555,000 (one year’s compensation) was paid to Mr. Shelton as severance. Duane Woods served as interim Executive Director until May 13, 2014 and was paid $108,000 for his service through that date (notably, an amount not included in the table.) And Michael Nealy, who began as Executive Director on May 4, 2014, earned $195,332. So $1.2 million was spent on compensation and severance for executive leadership of ASF during the 2014 tax year.
We are not exactly sure what the complete responsibilities of the Executive Director of the ASF is, but we are happy to engage in rampant speculation. It is possible that Mssrs. Shelton, Woods, and Nealy did much to advance the mission of the organization and address all the economic and social challenges of the Arizona community. However, it is also quite possible that they worked hard to ensure sponsorship of the event in January and February, and lined up all the events and activities in October, November and December, and spent the other 7 months golfing with potential sponsors and community foundations supported by ASF (it’s called business development). And, ASF disclosed that in 2014 they had 105 employees and 300 total volunteers, so there were at least some people management or oversight responsibilities required.
The CBS Sports article describes the pay levels for these bowl executives juxtaposed against the fact that some of the biggest stars of college football — Leonard Fournette (Running Back from LSU) and Christian McCaffrey (Running Back from Stanford) — intentionally declined to play in their teams’ respective bowl games. Fournette and McCaffrey are both projected to be first round picks for this summer’s NFL draft, and both decided not to play in their bowl games to prevent injuries from harming their draft potential.
Frankly, we can’t blame them. It’s surprising that more players with draft potential don’t opt out of playing in their teams’ football bowl games, considering the injury risk (significant) relative to the reward (little) of playing in an individual bowl game.
While it is an interesting exercise to review the executive pay of bowl directors while players are opting out of their teams’ games, we think a bigger concern should be (a) the “charitable” missions of these organiations — should they really qualify for taxpayer subsidies? and (b) the magnitude of executive compensation, even while key suppliers of the entertainment — the performers — the players — get paid nothing?
The issue of college athlete compensation is a long and complicated issue, with so many considerations that we won’t have time to resolve it here. Protections provided to the government-sanctioned monopoly like the NCAA will continue until enough players, fans and sponsors agree upon a competitive platform.
The more important issue from our perspective, is whether these organizations deserve taxpayer subsidies. In the example of ASF that we discussed above, their total charitable contributions in their 2014 tax year amounted to a whopping $4,638. 0.03% of their total $14.6 million in revenue.
Perhaps 2014 was an anomaly. In fact, in the prior year, ASF showed total grants amounted to $686,726, or 4.3% of their $16.1 million in revenue. And the lack of charitable support in 2014 was more than likely influenced by the turnover in ASF’s executive leadership.
But the limited community support was also more than likely influenced by the fact that over $1 million of charitable resources were spent on the compensation of their three executive directors during 2014.
The mission of the Arizona Sports Foundation is:
The Fiesta Bowl strives to create a positive economic impact for Arizona and focus on the community while having fun.
So, it is possible that all organizational resources spent on actually hosting the game — including executive compensation — might be considered by the Board to be activities in support of the organization’s mission. We suspect that any organization would be able to justify almost any expenditure if the mission is to “focus on the community while having fun.” But, again, is such a mission worthy of subsidies from taxpayers? We’ll leave it to readers to decide.
Sheffield Barry is a Compensation and HR Consulting firm, providing customized advice to clients at an affordable price. We leverage technology to deliver data and analysis as efficiently as possible, so we can invest more time understanding our clients’ unique business issues to develop custom solutions and advice. For more information, please visit us at SheffieldBarry.com or email us at info@SheffieldBarry.com.