While
people’s opinions vary on the severity of the sanctions, most agree about two
important items. First, the NCAA’s intent is to prevent similar behaviors and
actions that took place at Penn State from happening in the future at other schools.
More specifically, the goal of theses sanctions is to help ensure that administrators and academics will supersede coaches and athletics when it comes
to making decisions about conduct within sports programs.
Second, the people who will feel the brunt of the punishment handed down by the
NCAA are the current coaches and players at Penn State – none of whom had any
connection to what occurred with Jerry Sandusky and the alleged cover-up
perpetrated by former school officials.
The economic downturn largely caused by major financial and insurance
institutions forced people to ask similar questions people are asking now with
regards to Penn State. At the time, leaders of companies like Lehman brothers,
Bear Stearns, Merrill Lynch, AIG, and Goldman Sachs each made decisions
that cost billions of dollars in losses, millions of people to lose their retirement savings, and the global economy a worldwide recession. While it is true that some of these firms at the center of the crisis no longer exist,
finding the appropriate way to hold the specific individuals accountable has proven
to be a significant challenge. Similar to Joe Paterno, most of the many of the
people who had started and caused the crisis had received millions of dollars
in compensation prior to the economic collapse in the fall of 2008. Similar to both current
and former Penn State football players, employees, investors, and ordinary people are feeling the brunt of the repercussions from these decisions.
And Similar to the way the NCAA levied sanctions against Penn State, Congress passed the Dodd–Frank Wall
Street Reform and Consumer Protection Act to directly address what happened
during financial crisis and put in risk management regulations that would
prevent a future collapse from happening. This is not the first time Congress
has tried to pass regulation to ensure that corporations have appropriate
risk management procedures in place after a major economic calamity in the past
ten years. In 2002, Sarbanes-Oxley was passed to prevent another
Enron, Worldcom, etc. collapse from damaging the global economy. While the
impact of the legislation is controversial, Sarbanes-Oxley clearly did not
prevent firms from making risky decisions that could have worldwide impacts.
Even after the Dodd-Frank act was passed into law, major financial institutions have made similar
risky bets that have led to these firms recording record profits both in 2009
and 2010. The financial incentive remains in favor of making transaction that
could generate profit over those that could minimize risk.
If we agree that what happened with
financial institutions has parallels to what happened at Penn State then what
occurred after the financial crisis may leave most people with little hope that
things will change in college football. As Ozanian states, many football teams
simply make too much money for their colleges and universities for coaches and
athletic directors to not exert significant pressure on college administrators
to make decision that favor athletics over academics. If the NCAA handing down sanctions
will not change behavior then what will?
This time we can turn to both
Dodd-Frank and Sarbanes-Oxley for a potential blueprint. Both pieces of
legislation allow for the government to pursue clawbacks from senior leaders
had companies when there “accounting restatement due to any material
noncompliance with financial reporting requirements under securities laws”. In
English, this means that when a firm does not accurately report its revenue,
costs, or profits in any year, the government can force specific individuals to
pay back money they have earned in compensation during this time period. While
clawbacks have existed since Sarbanes-Oxely was passed in 2002, the courts have
only recently upheld that the SEC has the power to enforce clawback provisions
(in a similar way that the Affordable Health Care Act was upheld as
constitutional by the Supreme Court in June of this year). The SEC has already started to use this
provision more frequently and plans to adopt more official rules on “erroneously awarded incentive compensation” by the end of this year.
Clawbacks are provisions that the
NCAA should have in all coaches and administrators agreements have with
colleges and universities. This is potentially the only way that the NCAA can
hold accountable those people who cause schools to lose “institutional
control”. Having clawbacks also allows the NCAA to create a fund that can help
student-athletes at institutions that are subject to sanctions but had nothing
to do for why the institution received punishment. For example, the NCAA can
use this fund to help support non-revenue generating sports that depend on
football or basketball revenue to survive.
While these clawbacks may not end
the types of systemic problems that happened at Penn State, it does provide
incentives for coaches and administrators to make the right decisions. By
holding individuals financially responsible, the NCAA can send an even stronger
message to institutions than the actions it took with Penn State.
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