Major Violations for the NCAA: How the NCAA can Apply the Dodd-Frank Act to Reform its Own Corporate Goverance SchemeExpressO (2012)
AbstractThis paper applies the Dodd-Frank Act, and specifically its corporate governance laws, to the National Collegiate Athletic Associate (NCAA). The NCAA has experienced rapid, largely uncontrolled growth over the past decade that has led to an influx of corporate governance and regulatory problems within its member institutions. As with financial institutions, the influx of money itself is not the inherent problem. Money in college athletics is good. When large schools succeed, they help support smaller schools in their conference through revenue sharing plans. It is the lack of control and governance mechanisms regulating the influx of money that poses the risk. Money flowing from the public to athletic associations or NCAA member institutions helps drive the NCAA. But, when money flows from the public, or even from institutions, to student athletes in an impermissible manner, the NCAA slips toward the kind of professionalism that will ultimately cause severe damage to the member institutions and the NCAA as a whole. As more money flows into the NCAA, its member institutions, and its corporate leaders, new opportunities for exploitation and profits arise. Over the past few years, the NCAA has struggled as agents and boosters begin to play an increasingly significant, but undesirable role in the athletic programs of NCAA member institutions. Cheating amongst players, coaches and administrators is rampant. The NCAA, like the financial industry, is experiencing a period of rapid growth, inconsistent (or a total lack of) enforceable regulation, and a tremendous influx of “foreign” variables into its system. Much like the structured finance, mortgage backed securities (MBSs), and collateralized debt obligations that eventually brought down the financial system in the United States, the influx of agents, booster control, and extreme profits within NCAA member institutions threatens the amateur status and ultimate viability of the NCAA and its member institutions. The NCAA is also experiencing a moral hazard problem. In the financial sector, the idea of government bailouts creates moral hazard problems by effectively insuring large financial institutions. “The notion of ‘too big to fail’ creates a race to the bottom, whereby institutions attempt to grow faster than regulators can regulate, in order to force themselves into the category of ‘too big to fail’ to implicate the implicit insurance scheme.” The NCAA is experiencing a similar phenomenon, as the largest institutions understand that they bring significant value to the NCAA, and that the NCAA will be hesitant to levy harsh penalties with severe financial consequences on large institutions because of the consequences such penalties would have on the rest of the NCAA. The NCAA, however, has the opportunity to avoid the fate of the financial industry by adopting modified provisions of the Dodd-Frank Act to reform corporate governance both within NCAA corporate headquarters and member institutions. More stringent regulation of coaches, boosters and agents, harsher penalties for violation of those regulations, and consistent enforcement of such penalties will help curb the impermissible behavior of the NCAA’s member institutions. Part I of this paper briefly discusses the goals of the NCAA and identifies the harms being imposed as a result of the current regulatory regime. Part II of this paper explores the similar market trajectories of the United States financial sector and the NCAA. Part III highlights the need for corporate governance reform. Part IV explores how many of the corporate governance reforms in the Dodd-Frank Act can solve the problems in NCAA corporate governance. The purpose of this part is not to explore the many arguable flaws in the Dodd-Frank Act as it applies to governance in the financial sector, but to explore its novel application to solving the much less complicated, but equally present corporate governance issues in collegiate athletics. Part V concludes.
- Dodd-Frank Act,
- Corporate Governance,
- Corporate Reform
Publication DateJune 7, 2012
Citation InformationJason Rudderman. "Major Violations for the NCAA: How the NCAA can Apply the Dodd-Frank Act to Reform its Own Corporate Goverance Scheme" ExpressO (2012)
Available at: http://works.bepress.com/jason_rudderman/3/