Smith’s contract on par with nation’s best

MINNEAPOLIS – On July 23, Gophers men’s basketball coach Tubby Smith finally agreed to the terms of a contract extension with the university, one that extends his tenure through 2016-17 and that had been under discussion for more than a year.

On Friday, the terms of the extension were made available, revealing a breakdown of what Smith gained in the contract negotiations. His is an interesting case: He has amassed a 92-59 regular-season record and a lackluster 38-49 Big Ten record while at Minnesota after earning his solid reputation in 10 seasons at Kentucky through 10 NCAA tournament berths and a national championship. Smith has led a team on the decline in his past two seasons in Minnesota and he hasn’t seen a single one of his Gophers players drafted into the NBA, yet he must in part be compensated for what he did a decade ago. Paying a coach with such a resume can be a tricky task, and with Smith’s extension, the university is giving him a chance to redeem himself and his team, incentivizing performance while remaining realistic about its resources if Smith were to stay his current course.

In order to break down Smith’s contract and place it in the bigger picture of coaching compensation today, one must first examine its component parts. Each individual contract term has not only a dollar amount, but also a meaning, representing months of negotiations and an agreed upon value. So to start, here’s a breakdown of the extension:

– Salary: The contract includes a $600,000 base salary with 5 percent annual raises and an additional $1.2 million in annual supplemental compensation. In addition, the university provides for perks, benefits and a retirement plan.

– Buyout: Smith’s deal includes a buyout half of his remaining base and supplemental salary for the remainder of the contract, up to $2.5 million, if he’s fired before April 30, 2016. Thus, $2.5 million is his maximum buyout and would be the amount he’s compensated if he’s fired between now and at some point in the contract’s final three years. It also stipulates that Smith cannot be dismissed without cause during the season (between the Gophers’ first game and their last). The contract will also be reviewed following the 2012-13 season.

– Bonuses: Smith will receive an additional year added to the contract if he wins a Big Ten tournament championship, a Big Ten regular-season championship or reaches the Sweet 16 or better in any given year. His bonuses will be $250,000 if the Gophers win a Big Ten regular-season championship, $250,000 if they win the Big Ten tournament championship, $150,000 if they make it to the second round of the NCAA tournament, $200,000 if they make it to the Sweet 16, $300,000 if they make it to the Elite Eight, $600,000 if they make it to the Final Four and $1.5 million if they win an NCAA championship. He’ll also get bonuses for finishing higher in the Big Ten standings: $150,000 if the Gophers finish second or tied for second, $100,000 if they finish third or tied for third and $50,000 if they finish fourth or tied for fourth. Academic performance initiatives were also included; he’ll receive $150,000 for APR greater than or equal to 970, $100,000 for a team GPA greater than or equal 2.9 and $150,000 for a team GPA of 3.25 or above. Finally, he’ll get $100,000 if he’s named Big Ten Coach of the Year or National Coach of the Year.

Smith’s approximately $2 million in annual compensation represents nearly the same annual pay structure as his original contract; with those 5 percent raises, he’ll be making about $765,000 in base salary in 2012-13, and the supplemental compensation rose by $50,000 annually in the extension. But with how his team has performed and the state of the economy, even those modest gains represent a boon for the coach, who started out with a pay scale that now seems inflated for his recent accomplishments.

Smith came to Minnesota on the heels of those 10 NCAA tournament berths. He had won the SEC just two years before he was hired, in 2004-05. He was a big-name coach sent to revive a program, and he was compensated as such. Five years later, he hasn’t made the tournament since 2010, when his team lost in the first round. In fact, Smith has never led the Gophers past the first round of the tournament and has never finished higher than sixth in the Big Ten standings. To improve his initial pay scale even marginally after what the economy has done since he was hired in 2007 represents a steep financial commitment to Smith on the part of the school.

Multiple reports have stated that the university spent so long negotiating Smith’s contract because of the sensitivity involved with offering a 61-year-old coach who has underperformed such a lucrative extension. But to delay the announcement was to delay the inevitable; no matter when the terms were released, they still put Smith in the upper echelon of salaries despite his team’s struggles; his earnings are on par with what the coaches of North Carolina, Baylor, Georgetown, Wisconsin and Vanderbilt – all of which qualified for the NCAA tournament – made last year.

Perhaps the most interesting terms of Smith’s extension, though, are in the fine print. The clause that prevents in-season termination without cause likely represents the coach’s worries about his inconsistent team, especially when much of its success next season hinges on a player who missed all of least year with a torn ACL, Trevor Mbakwe. Its presence is both a reflection of Smith’s struggles and a vote of confidence from the school; Smith is worried about security, and the university is banking that his performance won’t be so terrible as to warrant in-season termination.

In addition, Smith’s other performance bonuses increased immensely. His incentive for winning a national championship increased threefold, his Final Four incentive from $250,000 to $600,000. Smith will make $225,000 more under this new contract if he reaches the Elite Eight, $150,000 more if he makes the Sweet 16. He’ll also be incentivized for making it into the second round of the tournament with a $150,000 payment and for various finishes in the Big Ten standings. All of those additional perks are borne of the program’s desire to be a factor in the Big Ten and the NCAA tournament for the first time in years. The program has declined, and the school is willing to pay for it to regain its standing.

Smith’s $1.965 million salary next season before bonuses is more than the contracts of John Thompson III, Roy Williams, Scott Drew, Frank Martin, Jim Boeheim, Shaka Smart and Mick Cronin, among others, provided last year. Each of those coaches has found more recent success than Smith, yet some, like Smart and Cronin, made little more than half of what Smith will net.

What’s most interesting, though, are Smith’s bonuses. They’re greater than even Kentucky’s John Calipari’s, and for a reason. Such bonuses should be weighted in terms of their likelihood, and Calipari poses a strong threat to earn them. Smith, at least in the near term, is a longer shot, and the contract represents an implicit statement that the university is willing to pay through the nose for success if it’s possible. Smith hasn’t necessarily earned a guaranteed pay raise, but he has warranted the chance to make big money if he can take his team farther than he yet has since he came to Minnesota.

Whether Smith and the Gophers make an NCAA tournament run or finish in as disappointing a fashion as they have in recent years, the coach will still make money. Good money. With the new contract, Smith is still compensated on par with the best coaches in college basketball, and the University of Minnesota is paying a premium for his past success. That success has been a burden, at times, but it still holds promise for the team, which has committed itself both to Smith and to a steep cost of success.

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