Oil Mar­ket Mad­ness Hits Coaches’ Pay

Com­pen­sa­tion ▶ Bonuses at the Univer­sity of Ari­zona are paid in en­ergy stocks ▶ “In this case, it hasn’t worked out for the coaches” Sean Miller

Bloomberg Businessweek (North America) - - Markets / Finance -

Like many big-time sports schools, the Univer­sity of Ari­zona gives its foot­ball and bas­ket­ball coaches longevity bonuses to re­ward them for stay­ing in their jobs a cer­tain num­ber of years. Th­ese can be worth mil­lions of dol­lars. In a twist unique to the Wild­cats, those in­cen­tives are tied to the price of oil.

That means , whose men’s bas­ket­ball team was set to play in the open­ing round of the NCAA tour­na­ment on March 17, and Rich Ro­driguez, who led the foot­ball team to the Gil­dan New Mex­ico Bowl, are in a strange sit­u­a­tion for suc­cess­ful coaches: Their bonuses have been los­ing value. Crude, which reached more than $90 a bar­rel in 2014, has crashed to $36. The first part of Ro­driguez’s longevi­tygevity pay­out, due in mid-march, is likely worth about $907,000, 41 per­cent­cent less than the pa­per value of thehe bonus in 2014. In full, the bonus plan­lan for each coach is prob­a­bly worthh $3.6 mil­lion, down from $6.2 mil­lion.

Ari­zona isn’t a ma­jor oil pro-pro­ducer, so how didd a pub­lic univer-univer­sity’s coaches’ payay end up linked to en­ergy prices?? The bonus struc­ture was putut into place two years ago af­terter the school re­ceived an anony­mous­ny­mous do­na­tion of 500,000000 shares of a mas­ter lim­it­eded part-part­ner­ship. An MLP isis a tax-ad­van­taged, pub-pub­licly traded com­pa­ny­pany that op­er­ates pipeli­ne­ses and other en­ergy in­dus-us­try equip­ment. Miller and Ro­driguez eachach re­ceived 175,000 shares, worth $6.2 mil­lion at thee time. Ath­letic Di­rec­tor Greg Byrne got 100,0000 shares, worth $3.5 mil­lion.on.

The name of thehe donor is redacted from pub­licublic records and wasn’t re­leasedased by the uni-univer­sity. How­ever,r, the records show a price of $35.36 for the do­nated shares on May 12, 2014, which strong­ly­ongly sug-sug­gests one com­pany:any: Western Refining Lo­gis­tics.tics. Jeff Stevens, the com­pany’sm­pany’s pres-pres­i­dent and chief ex­ec­u­tive­ex­ec­u­tive of­fi­cer, is an Ari­zon­a­zona alum­nus, and in 2009 he do­nated $10 mil­lion to help fund the school’s fa­cil­i­ties plan, at the timee the largest ath­let­ics gift in the school’sl’s his­tory. Thethe MLP traded at $20.74 on March 15. Stevens de­clined to com­ment.

Ari­zona had good rea­son to get cre­ative with its pay plan. Ath­let­ics de­part­ments are typ­i­cally among the rich­est cor­ners of pub­lic univer­si­ties, but salaries are grow­ing faster than

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