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Error: Circular Reference

Les Miles will remain as coach of the LSU football team (at least for a while) despite being wooed by Michigan.  (LSU must wonder what's wrong with their coaching job - they have won two national championships this decade but can't get a coach to stay).

In order to keep Les Miles, LSU inserted this clause in his contract:

Should Miles win the BCS championship [ed:  which he now has accomplished] his contract states he has to be among the top three paid college coaches in the nation, which would bump him to the $3.5 million range.

This is not uncommon language now in sports contracts.  For example, players with a franchise tag in the NFL must get a salary equal to or greater than the average of the top five players at that position.

So here is my question.  What happens if three other college coaches, say Pete Carrol, Jim Tressel, and Urban Meyer (who have all won national championships in the last 10 years) were to demand that they too should be guaranteed a salary that puts them in the top three coaches?  Don't things start getting real recursive at this point?

Postscript:
Yeah, I know, the language generally says they get bumped to a top X position on the day of a certain event, like winning the BCS or having the franchise tag applied, which circumvents the circularity problem, mostly, by not being an open-ended reset.   It is still funny to think about.   There is nothing to stop 4 coaches from negotiating a clause with an open-ended reset such that their salaries would spiral to infinity.  Even Solomon might struggle with that one when it went to court, though the Gordian Knot solution would be to just run one of the four through with a sword.

I wonder if this has ever happened, say with two CEO's that had contracts that guaranteed that each would, at any given time, be the highest paid CEO in the Fortune 500.

Posted on January 10, 2008 at 12:12 AM | Permalink

Comments

Perhaps there could be two coaches tied for 3rd, 2nd, etc.

Posted by: anonNY | Jan 10, 2008 7:27:32 AM

I have often wondered the same thing about the claims of many firms that they will "beat any price."

Posted by: davesmith | Jan 10, 2008 8:04:21 AM

this same trend is often cited as exerting an upward bias on executive salaries. compensation consultants determine the "average" compensation for a CEO of CFO or head of marketing or whatever. but no one wants to hire an "average" guy and certainly not a below average one. so it becomes clear that your "better" guys should be paid above average compensation. this of course drives the whole average up. and sets up the next guy for even more compensation.

you might be surprised how many board members etc i have heard complain about this...

Posted by: morganovich | Jan 10, 2008 8:50:43 AM

Governments do that too, morganovich. City X wants its mayor, etc, to make a salary similar to neighboring cities, and then Cities Y and Z do the same thing a few years later.

Posted by: Craig | Jan 10, 2008 9:45:55 AM

criag-

i believe it.

in san francisco, our muni bus drivers have a clause written into their contract guaranteeing that they will always be the highest paid muni drivers in the nation. if someone else gets a raise beyond them, they automatically get one as well. most of them are making 6 figures once overtime is added in. they are also essentially unfirable, even after multiple at fault fatal accidents. (they can give you a formal warning after 3...)

and every year, SF muni puts up lousy on time and rider satisfaction numbers, one of the worst safety records in the nation, and loses money.

then some bright spark opines that what muni really needs is more cash and proposes a bond or some such. somehow neither raising fares or cutting costs ever seems to be on the table for discussion. and everyone wrings their hands and wonders why it's "so hard to fix muni".

surreal...

Posted by: morganovich | Jan 10, 2008 10:37:24 AM

This is not nearly as hypothetical as one might think. I've sat in on board meetings of top universities where the exact logic were used. "We need to raise tuition above the top 20 research institutions so we can stay competitive". This has actually caused an arms race between universities, with tuition flying through the roof!

Posted by: Ming Jack Po | Jan 28, 2008 3:14:55 PM

I have seen this in our local government too. For some reason they decided to pay for a study of pay rates for all of the positions in town and how they compare to other towns in the area. Now that they have their study the personnel board is arguing that those positions that are below the area average should be brought up to at least the average. I argued with them that this made no sense because other towns are doing the same thing. Therefore either all towns in the area would have to agree to pay the same rate for equal positions or every two or three years all town employees will have built in pay raises beyond that of cost of living and merit increases. Unfortunately they didn't see the merit in the argument.

Posted by: Peter Goodale | Apr 17, 2008 6:05:14 PM

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