Swinney Contract Extension: My Extended Thoughts

We've discussed the Swinney contract extension here a bit but I hadn't taken the time to do the simple math to understand exactly what the numbers mean for Clemson University.  This is by no means an attack on Dabo Swinney.  Swinney's teams have won 32 games in three seasons--that is a very big accomplishment and the staff, the program, and head man deserve credit there.

I'll discuss the raise now then the buyout terms in more detail later.  First and foremost, many refute questioning this issue and say, "Swinney deserves every cent he's given, he's earned his raise."  These people miss the overall terms of the contract.  I'll make my opinion on annual salary clear...I have no problem with a raise, as winning games deserves a raise.  I would have preferred a lower base with incentives worth much more (raise the base to around $2.75 but include a $3 - $4 million bonus if we win a National Championship and a $1 - $2 million bonus for winning the ACC without a MNC, for instance) than a simple raise, but the raise is not the issue. In fact, my preference may not have been acceptable given the recent overall success.  Again, the issue isn't Swinney getting a raise.  A bump in salary was expected and shows that the general Clemson base is happier now than four to six years ago.  The issue many of us have is Clemson is locked into a deal that could present the University similar / more impactive financial issues as Tom Bowden's last contract.

Again, I won't fault or criticize a coach who goes out and capitalizes at the correct time.  He struck while the iron was hot and apparently was very convincing to D-Rad and those in charge by the appearance of the overall package.  Additionally, I want what is best for my Alma Mater, so hopefully we'll be successful beyond our wildest dreams and none of these buyout terms will come into play.

All this being said, the recent contract extension is loaded in Swinney's favor.  The information is very easy to digest if you do some basic arithmetic and look at the total picture.  I'll emphasize again, this is not a knock on Swinney...he got about the best deal he could have wanted and did this through negotiation and agreement with Clemson Administrators.  This aspect is important because success and failure over the next decade will be associated with D-Rad after making the move.  Consequently, D-Rad's boat should sail or sink with the success of this football program.  Hopefully this bit ensures a continuing shift to give the AD as many advantages as possible-including the ability to bring in junior college transfers.

The buyout / salary analysis below is based on numbers from an STS post laying out this deal.  I'll try to lay out my thoughts out in a concise manner and encourage you to comment on the deal based on the numbers and perceived risks to all sides.  I'll also point out that none of my commentary directly takes into account the time value of money.

Here is how the core information shook out for Swinney's contract (NOTE:  All dollar figures henceforth are in millions):

To better understand how the buyout amount really evolves out over time, I decided to examine the total amount remaining on the contract by looking at the total contract amount ($27.15 mil over eight years) then subtracting out amount paid throughout the deal.  For instance, in 2014 Clemson will pay $3.15 million.  The total salary deal (sum of all the years of salary) is worth $27.15 million, hence there is $24 million left to earn in salary through 2021 (Total Remaining on Contract in Table below).  I also wanted to see how this compared to the amount of buyout Clemson must guarantee.

As you can see, Swinney is essentially guaranteed the balance of his contract should he stay through the 2016 season.

The next question is "What will the total value of the deal be if Clemson parts ways with Swinney at any point during this deal (assuming the deal remains as is with no adjustments through the '21 season)?".  "Salary" is the amount scheduled for that season, "Total Salary Earned" is the sum of the amount earned during that season and all seasons prior during this contract via salary.  The "Total Worth" is the total earned value plus the buyout from Clemson (if terminated, how much total would Clemson have paid on this contract?).

Here is how those items fell in place:

Essentially, if Clemson fires Dabo after the 2014 season, they'll have paid $3.15 in salary and owe $24 mil in buyout bringing the total deal to $27.15.  If they part ways in 2018, for example, Clemson will have paid $16.8 mil over five years of the contract and would owe $7.7 in buyout cash, making the total haul $24.50 million.  As the numbers above show, Clemson is making a guaranteed $23.65 to $27.15 million total commitment to Swinney over the next eight years.

If you look solely at the numbers above, it is clear that it is financially best for Dabo if he gets dismissed in '14.  Essentially, he'd earn the same amount of money for getting fired in year #1 as he would make by completing the entire duration of the deal (obviously without including incentive options).  Same goes for year 2 and essentially year 3.  I am by no means suggesting that he would ever try to get fired or do poorly, just pointing out how the numbers work out.  It is least advantageous from an overall contract perspective for Swinney to be terminated in 2017 as his total guaranteed pull would be $23.65 million.

I made the argument earlier that Swinney got the definitive better part of the deal.  Below you see how Clemson's obligations compare to those of Dabo Swinney.

Clearly both sides made an effort to lock the other into this deal through at least the 2016 season.  It would take a mega school to fork out the $5 million to buy out Swinney and Clemson would have a very, very difficult time justifying an eight digit buyout.  If things go great, all parties win.  There are incentives in Swinney's contract that allow him to earn more money and Clemson would likely back up the cash dumptruck if we win something really big.  Also, the only schools Swinney would leave CU for would be those able to pay the big cash, so winning is definitely in both parties' best interest.  If things go sour, though, Clemson must make a decision...shuck out tons of cash or just cross your fingers that things will turn around.  When you look at it from that perspective, there is no doubt where the risk lies in this deal.  Let's hope we don't have to evaluate these buyout items anytime soon.

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