A Different Way to "Hold" Coaches to Contracts

We have had some discussion here lately about colleges using injunctions to try to keep coaches who are under contract from jumping to other schools.

Well Memphis, fresh off its Championship Game appearance (and almost victory) gave Head Coach John Calipari a five-year extension, averaging $ 2.35 million per year. And, according to the current Sports Illustrated, the school found a way (it hopes) to keep him from jumping ship: a $ 5 million bonus if he stays until the end of the contract. Think about that--an extra $ 5 million just for adhering to the terms of the contract.

We could look at the bonus as the school really paying him $ 3.25 million per year and backloading some of the money). Or, this is the mirror of the liquidated damages clause that schools have been trying to enforce lately--if you stay to the end, you get $ 5 million; if you leave early, we get $ 5 million. In other words, rather than using equity to keep coaches, schools will use a different form of market incentive.

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