Reform in Football, Part II – Governance

Governance can be improved across the game through independent regulation, strong licensing and governance plus most importantly a proper structure for fan engagement, decision making and control

Paul The Esk 08/05/2021 9comments  |  Jump to last
  • Independent regulation
  • Full engagement, decision-making and degrees of control for fans

Football needs reform at every level, from FIFA, UEFA, to the Premier League, The EFL and the Football Association, to individual clubs at professional level, all the way to the core of the game, grass roots. As an opening statement, it is as obvious as others stating we need to solve global warming or world hunger. The question is (i) what form of reform and (ii) what are the real issues at levels where reform (and thus a change in outcomes) is possible?

Enforced reform in corporate life can only arise from proper systems of governance, imposed by statute or independent regulators as necessary.

Governance is the system by which entities are directed and controlled. It is concerned with the structure and processes for decision making, accountability, control and behaviour. In the case of football, I would add it has to include the structure, process and powers of independent regulation.

Let’s start with the domestic game, in particular the Premier League, The Football Association (for reasons I will explain) and individual clubs. The EFL, I imagine, falls under the general new regulation of the game.

Independent Regulation

For a multitude of reasons, it is obvious that self-regulation isn’t working in football. The fact, that the game as a whole can go through such an extended bull market, a period of huge growth over more than two decades, yet be in such a perilous and – one might argue – rogue state speaks volumes. Whilst the game is more popular than ever, the resulting riches poured into the game are controlled by a few – all of whom have no interest in the wider game, leaving the footballing pyramid wholly unbalanced financially and from a control perspective. The two most recent attempts, Project Big Picture and The Super League demonstrate the inadequacies of the current governance structure as well as the naked, self-serving greed of those at the top of the game.

Thus, backed by legislation, the football regulator would be totally independent of the game. By 'independent', I mean having no individuals, organisations, or financial contributors with an existing commercial or ownership interest in professional football.

The regulator would have three key areas of responsibility:

  • Be the sole licensing authority for the professional game – all clubs would be subject to the licensing requirements of the independent regulator
  • Be the sole provider of governance within the professional game at League, competition and club levels (as part of their licensing requirements)
  • Manage and protect the role of supporters in the game, providing the framework for fan engagement, involvement and degrees of control over certain aspects of the professional game including critically, degrees of fan control at individual clubs (more below)

Licensing would work in a similar manner as to how licensing at UEFA works. Simply, without meeting the conditions of the licence, you don’t qualify. The conditions would be wide and considerable, including the suitability of the owner of a club, proper financial regulation around expenditure, debt and source of funding, a commitment to various elements relating to the well-being of the game, academies, football schools, community involvement, grassroots support and critically fan engagement, involvement and the ceding of control to fans over various elements of the game.

The governance responsibilities would start at the top of the game with the Football Association, the Premier League and EFL having direct reporting and accountability to the regulator. Each organisation would have to conduct itself in line with the framework provided by the regulator, with complete transparency by the organisations. The framework would provide the structure and processes for decision-making, accountability, control, behaviour and importantly (i) the relationships between each organisation and (ii) the relationship between the professional game, the amateur game and grassroots football.

The role of the fans

The third area of control from the regulator would concern the role of the fans. Engagement and communication (both ways) would be a critical part of any new structure across the footballing organisations, focusing on the game in its entirety (ie, not partisan or individual club focused) but most fundamentally at individual club level.

Any future governance or regulation model has to include the involvement of fans in decision-making generally but specifically control or the power of veto over certain decisions (mainly surrounding ownership, change of control, ability to leave or alter the game’s structure and competitions).

How would that be best achieved?

I have seen many advocates for fan representation on the boards of clubs. Whilst I understand the immediate appeal of that, in practice, in itself, it is not enough. Firstly, what authority does one board member have? One director would itself not stop boards from making decisions. Secondly, how do the fans ensure that the fan representative has the necessary experience and will represent the collective opinion of fans? Additionally, confidentiality constraints would make the position impossible to be effective. How can a fan report on board activities if the board meeting remains confidential?

I have an alternative structure.

A proper fans' trust that holds sufficient voting shares (or owns a “Golden share”) to block certain activities. The key point here is the class of shares. Clearly, given the size most Premier League clubs, economic ownership of a significant block of ordinary shares is not possible. A 25% block of shares in Tottenham Hotspur would cost more than £500 million – way beyond the means of ordinary fans.

However, control is the key, not economic ownership. Thus create a single class of shares that has sufficient voting rights to block certain activities. Manchester United has two classes of shares, one class (wholly held by the Glazers) which has 10 times the voting rights of ordinary, non-Glazer held shares.

A fans' or supporters' trust could hold a block of voting shares (different from the ordinary shares owned by the owner) which confers voting rights (say 25.1% for example) but no economic ownership of the club. The owner owns the financial interest (and value) in the club but is restricted by statute (Company Law) or the Articles of Association by the block of voting shares.

What decisions the trust could block would either be enshrined in law, be part of the regulatory framework of the regulator, and/or be an integral part of the football club’s Articles of Association. Typically they would include veto over change of ownership, control, stadium and location plus other key aspects relating to the club’s relationship with the community, city, region etc.

Alternatively, the Golden or Special share model.

This is the model used by the Premier League and the Football Association. Within the Articles of Association (the document that governs how a company is run), the 20 clubs in the Premier League have granted the Football Association the “Special Share” which gives the Football Association veto over certain decisions (extract from Articles of Association below):

Special share

Why a fan or supporter trust?

A fan or supporter trust would have a proper legal structure – important if holding voting shares in the football club. It would have its own board with elected members accountable to the fans. It would have its own reporting structure back to fans. Importantly, the trust could also appoint independent directors with wider business and board experience to advise the trust and also represent the trust on the club’s main board.

Whilst the degree of control an owner would have to cede under these regulations may be problematic for some and thought unnecessary by the “good” owners, it is a mechanism that protects the interests of individual clubs, their fans, and thus football generally, without removing the economic and status benefits of ownership.

It would ensure continuity for the game. As a result, it may attract new investment from those who perhaps are currently interested in investing in sports but see football – particularly English football’s very weak governance – as a major barrier to entry. A regulated and stable background with strong governance and financial controls should promote longer-term more stable investment, perhaps attracting longer-term, institutional funding rather than the diverse range of oligarchs, billionaires and individual States which are causing such havoc in the game at this most difficult of times.

To conclude, governance can be improved across the game through independent regulation, strong licensing, and governance plus most importantly a proper structure for fan engagement, decision-making and control.

Done properly, not only would the game be more secure at the highest levels but the benefits could flow through the pyramid in a far more equitable and beneficial manner for all.

Part I here

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Reader Comments (9)

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Alan J Thompson
1 Posted 08/05/2021 at 19:08:09
I still don't see it. Who in their right mind would put such an amount of money into anything like this unless they were guaranteed an annual return they'd be unlikely to achieve elsewhere and how difficult would it be, if they are not convinced of that profit, to divest themselves of their current shareholding. When all's said and done, business is business, if you don't look like making a profit then who is likely to offer the wherewithal to an organization that may be unable to guarantee any hard decisions to turn it around.
Paul [The Esk]
2 Posted 08/05/2021 at 23:08:55
Alan, many businesses are regulated, the utilities, financial services, professional services, and they all attract sufficient investors and investment.

The fact is that football currently only attracts a certain type of investor (by and large). Greater regulation would increase the quantity and quality of investors to football over the long term, not the predominantly dodgy lot we have now...

Alan J Thompson
3 Posted 09/05/2021 at 07:31:16
Paul, regulation is one thing but having to share ownership and/or decision-making with your customers/fans is something entirely different.

If it is really about billionaire owners wanting the biggest dollar then, however unlikely, it does nothing to stop them packing up and moving somewhere they feel they are more welcome. After all, this is mostly about TV revenue and that goose will only worry about their advertising revenue and not too much where you are based, nor will your Asian or African audiences, and how much would losing a fair portion of the British market affect which most?

Unless all bodies including FIFA and UEFA threaten total bans on all clubs and all players involved from participating in any other football under their control, thus removing a lot of players' negotiating power, then such a breakaway, at some stage, will again raise it's head. However, to give all parties equal chance of participation, problems of relegation and promotion affecting other Leagues seem the biggest drawback.

Presently, it appears that these breakaway clubs may have negotiated a punishment or penalty with UEFA but we still haven't been told which clubs were contacted and showed willing in making up the other three "permanent" and the five asked to make up the twenty.

Danny O’Neill
4 Posted 09/05/2021 at 09:14:48
Thought provoking Paul, as was Part 1.

Regulation is key. I would call it accountability. Fans, or members as they would be should have a voice to hold clubs accountable. They already do but not in a formal way like is being suggested. But, they would likely have to be paying members to have that voice. Now, some will rightly say we already pay, but I think most will know what I mean. It's why I've highlighted that the much vaunted 50 + 1 isn't necessarily the panacea we think of it at face value, but it does add a degree of accountability and gives clubs more of a conscience than our current model as we have seen very recently.

Now I don't have your financial wisdom but, as you say, other business sectors are subject to regulation and top flight football for too long has been ignored in this respect. I'm relatively new to the commercial world, but I can't think of many industry verticals that allow organisations en-masse to operate at continuous loss with wage bills exceeding 60% of income. And as you highlight, income that should, theoretically, see them operating with very comfortable profit margins if they are regulated and accountable.

Anyway, stepping out of my lane here so I'll get back in my box and get back to the football. For me, it's about fixing it from the bottom up. If I go to Holland and Germany, where I have lived, I see individual village or district teams playing on their own self-contained facility and a very good facility at that. They are coached by qualified coaches, from 6 years old. The system in place feeds the pyramid way better than ours.

I go to the local west London park near where I live now. I see multiple teams from the same area playing on 10 pitches marked out on a park by the council. In the spring they play on long unkempt grass covered in daisies. In the winter a mud quagmire. They are often shouted at by unqualified coaches who have the best intent at heart but want to win a Sunday match rather than develop footballers.

For me, it's about the point you make that despite the amount of money English football in particular has accumulated in the past decades, the investment is unbalanced and does not reach down to where it is needed most.

The pyramid starts at the foundations, not at the top.

Once again, I apologise for my rants on this subject, but it is a subject I love talking about.

Paul [The Esk]
5 Posted 09/05/2021 at 13:09:28
Great comments, Danny, keep them coming.
Paul [The Esk]
6 Posted 09/05/2021 at 13:13:48
Alan,

I appreciate your comments and I understand the scale of change we are talking about. Billionaires aren't the only source of capital and, if they don't like the rules, then they can find other sectors to invest in.

Greater regulation attracting higher quality investors might reduce the amount of control ceded to fans but what is clear is that we cannot leave the game unregulated and at the mercy of people who only have self-interest at heart and feel no responsibility or obligation to the wider game.

Tony Everan
7 Posted 09/05/2021 at 14:33:38
Hi Paul, It seems likely that the token punishments handed out by UEFA have been negotiated with the clubs in a very cosy way. “What's the minimum we can do to make this go away?”

It should worry everyone that the same process is underway with the FA, Premier League and Government review. I am not sure they have the resolve to make the necessary binding changes to protect the league from anticompetitiveness.

These clubs particularly Arsenal Liverpool Tottenham and Man Utd are hell bent on snuffing out competition or threat to their businesses. It will take bravery and fortitude to drag them into line kicking and screaming with their million dollar lawyers crying foul.

Only time will tell how far these powerful and greedy clubs get with their lobbying and veiled threats. But make no mistake they've been planning this for three years , they won't walk away easily from it . They may appear to , but it will be a facade to regroup and come back stronger in a new guise.

I suspect that there will be headline making sanctions that don't really amount to much when dissected but will say something along the lines of how important the Premier League is and a joint statement of some sort.

I think the cartel juggernaut will roll on regardless of the inevitably diluted sanctions. The changes they want will just be introduced by ‘creep' chipping away merrily at uefa to increase protectionism to guarantee revenues. ie The concession for qualification by past coefficients is a hammer blow to the likes of Everton trying to compete. Remember UEFA is happily on board with the greedy clubs in this assault on fair competition.

I suspect that over the next few seasons the
Greedy clubs will find ways of retaining TV money for themselves, to further make sure their status is protected.

This will then give those clubs increased power to call the shots and create a changed Champions League that is a super league in all but name.

Barry Hesketh
8 Posted 09/05/2021 at 15:04:20
Two of the owners have already said they will pay the 'huge' fines from their own pockets. UEFA are and have been in negotiations with London-based Centricus Asset Management, a sum of £6bn has been touted which will more likely go to those clubs who were involved in the Super League project.

I can't see any significant reforms of the game in the near or mid-term future, the sums of money are far too great and the richest clubs have all of the power, the fans of those clubs will cause some disruption but when everything settles, the richest owners and those with international sponsors will have their way.

Where all of this leaves Everton FC and its proposed new stadium is a cause for concern, I do wonder what the game will look like in five years' time, as individual clubs use modern technology to beam their games live to every part of the world, thereby getting an even greater share of the media revenues than they do at present.

Dave Lynch
9 Posted 09/05/2021 at 15:30:13
"For me, it's about the point you make that despite the amount of money English football in particular has accumulated in the past decades, the investment is unbalanced and does not reach down to where it is needed most."

Nail on head Danny... The FA is a very rich and lucrative body, a self serving one at that.
They can bleat on all they want about the "Big clubs" wanting a bigger share of profits but they have to look at themselves and how they re-invest at grass roots level.

The PFA are no better, in 1999 they bought a Lowry painting for near 2 million as "an investment", they all want the money but none want to spend it where it's needed to keep the game alive.


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