There's no shortage of debate in this country over income inequality and high CEO pay. Nearly every day, there seems to be more news about the widening income gap, and President Obama has even made it a pet issue, barnstorming around the country to advocate for a higher minimum wage.
Perhaps that's no surprise considering the average CEO of an S&P 500 company now makes 354 times the salary of a rank-and-file worker . Corporate America has always been a target of unions and others, but based on that metric, there may be no organization more unfair than college football. While McDonald's CEO Don Thompson makes nearly 1,200 times what his hourly employees make, that ratio becomes infinite in the NCAA. University of Alabama football coach Nick Saban, for example, is set to pull in $7 million a year on the backs of players who aren't paid a dime.
Players of the world, unite
That disparity is gaining new currency this week after the National Labor Relations Board in Chicago ruled on Wednesday that Northwestern University football players are employees and can unionize. Northwestern is set to appeal, but the implications could be far-reaching as men's college football and basketball have become big businesses in recent years.
The central issue in the NLRB's decision is whether the Northwestern scholarship players are employees, who would therefore have the right to collectively bargain. Director Peter Sung Ohr found that, in a 24-page decision, the players are employees, based on the Supreme Court's common law definition, which states that "an employee is a person who performs services for another under a contract of hire, subject to the other's control or right of control, and in return for payment."
Among its findings, the board discovered that Northwestern players devote as much as 50-60 hours per week during training camp and 40-50 hours per week during the season to football-related activities as well as a significant time commitment for the remainder of the year. It also found strict rules regarding player behavior outside of football, including on social media use and living situations, and significant consequences for failing to fulfill all football-related commitments.
During a nine-year period from 2003 to 2012, Northwestern's football program brought in revenues of $235 million on expenses of $159 million, netting the university an average of $8.5 million in profit a year. Based on an average valuation in the stock market, the program would have a market value of between $100 million and $150 million. Considering Northwestern is much less prestigious than many other college football programs such as Michigan, Ohio State, or Notre Dame, on a market basis, the value of Division I college football likely ranges north of $10 billion.
In addition to revenue directly related to football through gate receipts, merchandise sales, and broadcast licensing, there is also the intangible benefit that football gives to the school's reputation, increasing alumni giving and new student applications.
What happens next
The consequences of Director Ohr's decision could affect all of college sports. Northwestern University's former president, Henry Bienen, said the board's ruling could cause Northwestern and similar schools to abandon Division I sports, which depend on athletic scholarships for major sports such as football.
It wouldn't be the first time a group of schools made such a move. Ivy League teams once dominated collegiate sports, but as sports became more commercialized, the elite schools made the choice to avoid the gray area that's often a consequence of athletic scholarships. Today, the Ivy League competes on a Division I-AA level, meaning it does not award athletic scholarships.
Northwestern is planning to appeal the ruling, which it must do before April 9, to the five-member board in Washington, D.C. From there the argument could advance to the federal court system.
College Athletes Players Association
Behind the Northwestern players' push for collective bargaining is the College Athletes Players Association, a group founded by former UCLA linebacker and advocate for players' rights Ramogi Huma and backed by the United Steelworkers. Among CAPA's demands are payment for ex-players' sports-related medical expenses, concussion experts on the sidelines at games, and money set aside to help former players graduate.
The organization was formed just months ago, and is an outgrowth of an advocacy group called the National Collegiate Players Association, which counts over 17,000 Division I college athletes as its members and was founded in 2001. Among the NCPA's goals are improving medical care for players, increasing scholarship money to cover basic necessities, and lifting graduation rates.
At the forefront of Northwestern's fight to unionize is former quarterback Kain Colter, who finished his playing career just last year. Colter wished no ill upon Northwestern or Coach Pat Fitzgerald, calling him "the best coach in the nation," but he still believed in the players' right to organize and fight for their rights. He said that if players were given the chance to vote to unionize, the majority would choose to do so. In fact, in January, nearly 100% of scholarships players signed union cards.
Flag on the play?
The Northwestern ruling is significant, but it is only part of a longer process in player advocacy and an attempt to find a balance in which college football works optimally for all stakeholders -- universities, coaches, players, and fans. Given that Northwestern plans to appeal, this standoff is likely to continue for several more years.
Even if players do unionize, college football will likely find a way to adapt. The CAPA's current requests -- concussion experts on the field, long-term medical care for sports-related injuries -- seem modest and reasonable. And, after all, sports are no stranger to unionizing as all four major professional leagues in the U.S. have player unions. While there are occasional strikes and lockouts, the unions are not seen as a detriment to the leagues, and help to maintain a balance among all stakeholders. College football, which has become a multi-billion dollar business and a major cash cow for universities, perhaps could use the same.
Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends McDonald's. The Motley Fool owns shares of McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.