Penn State’s decision to pay James Franklin almost $50 million not to coach the school’s football team says as much about the power of incentives as it does about the dysfunctionally surreal nature of college football. A public university is paying a $49 million severance to an employee that ran a department with $113 million in annual revenues. For comparison, Boeing paid Dave Calhoun a similar amount when it fired the CEO in 2024, but Calhoun’s parting gift was less than one-tenth of a percent of Boeing’s $78 billion in revenues. Penn State is paying James Franklin a whopping 43% of its annual football revenues to go away.
When Franklin signed a contract extension in November 2021, Penn State was in the final weeks of what would ultimately become a 7-6 season for the Nittany Lions. Not only did the Penn State athletic director think it was wise to make Franklin one of the highest paid coaches in college football, she also committed to keeping him on that list for the next decade.
Curiously, that athletic director announced her retirement weeks after Franklin’s new contract took effect.
The pattern is familiar, and not just in athletics. The athletic director was committing other people’s money (OPM). And when people are spending OPM, prudence tends to vanish.
The government offers endless examples. No rational person would spend his own hard-earned money to study shrimp running on treadmills or pay $20,000 for a single designer trash can. Or spend $1.2 million for an outdoor sculpture practically “copied and pasted” from an artist’s previous work. Yet the government does. A recent General Accounting Office report found that the federal government spends hundreds of millions of dollars annually to maintain, lease and furnish empty office space.
Incentives explain at all. People are generally careful with their own money but often remarkably generous with everyone else’s. Whether it’s an athletic director handing out ridiculous 10-year contracts or bureaucrats justifying absurd spending, the dynamic is the same: once you start shelling out OPM, the connection between decision and consequence is broken. And when that happens, accountability disappears, and excess often becomes the norm.
Which brings us back to football, where paying people not to work almost feels like another sacred tradition. What do Robert Neyland, Doug Dickey, Lane Kiffin and Josh Heupel have in common? They are the only Tennessee head football coaches the school didn’t fire. If the vast majority of coaches are going to eventually be fired anyway, maybe schools should quit giving them 10-year contracts. Besides, if your coach wants to go somewhere else, he is eventually going to leave you anyway. And if he doesn’t, then you’ll probably pay him to.
David Moon is president of Moon Capital Management. A version of this piece originally appeared in the USA TODAY NETWORK.