A CRITICAL ANALYSIS OF GOVERNANCE STRUCTURES WITHIN SUPPORTER OWNED FOOTBALL CLUBS SARA WARD DEPARTMENT OF MANAGEMENT SUBMITTED OCTOBER 2013 This thesis is submitted in partial fulfilment of the requirements for the degree of Doctor of Philosophy by The Manchester Metropolitan University Declaration I hereby declare that this thesis entitled ‘A Critical Analysis of Governance Structures within Supporter Owned Football Clubs’ represents the results of my own work except where specified in the thesis. Sara Ward ii Abstract The aim of this study was to critically analyse governance structures within supporter owned football clubs. Mutuality is a longstanding successful model of ownership within European professional football. There was little understanding of mutuality as a form of ownership in British football until it emerged during the past decade, albeit confined to lower leagues. This research utilised a multiple case study methodology to critically analyse the key issues relating to governance structures within supporter owned football clubs. Due to financial mismanagement under private ownership, there has been a recent rise of Supporters’ Trusts taking ownership of their football clubs in the U.K. The key objectives of this research were to identify what mutual business models exist in the organisation of football and examine which governance structures are the most appropriate for mutual football clubs to operate effectively. The study focused on five football clubs adopting varying mutual business models with differing fortunes. The sample encompassed clubs who had matured with the model, clubs who had adopted it out of financial necessity and newly formed clubs which had evolved using the mutual model. This research represented what Weber referred to as ‘ideal types’ by purposively selecting case studies by type, which brought to the surface issues and tensions that improved our understanding of mutual organisations in a specific temporal context (Weber, 1949). The main findings reveal that supporter ownership allowed a greater sense of ‘buy in’ and inclusion of a wider cross-section of stakeholders. However, evidence shows limitations to mutuality in identifying alternative revenue streams, overly bureaucratic decision-making, and ability to developing capabilities to compete. It is the first major study to identify detailed governance processes of supporter owned football clubs and more significantly, has provided an original qualitative critique in the academic field. This thesis makes a number of significant contributions to knowledge. The research has been conducted in a way that allowed an emergent approach to epistemology. It has afforded the researcher the opportunity to produce knowledge that is both practically useful and academically rigorous, and it represents an important contribution to the nonprofit governance literature as well as providing a deeper understanding of sports governance themes in a football context. iii Acknowledgements I would like to thank my parents, David and Christine Parnell, for their support, which has included reading draft chapters and offering advice and guidance throughout the past four years. I would like to thank my two children Anya and Thomas for their understanding as to why Mummy has had her head in a book for the past four years. I would also like to thank my husband Noel, who has provided constant support and encouragement during the more difficult phases of this project. He deserves a special mention for always being there. A final acknowledgement must be to my dog, Rosie, whose need for long walks has helped me ‘clear my head’ and refocus my mind on several occasions. I could not have completed this long and often difficult challenge without my family’s encouragement, motivation and support in seeing this project through to the end. This thesis is dedicated to them all. This PhD would not have been completed without the financial support of the studentship awarded by the research department at Manchester Metropolitan University, for which I will always be grateful. I would also like to thank all the contacts at the five football clubs who agreed to be interviewed and for their hospitality when I visited. Without their thoughts and valuable insights into their football clubs’, this research would not have been possible. Finally, I would like to thank my supervisors Doctor Thomas Scanlon and Professor Tony Hines who have overseen the thesis from its conception. Their comments, contributions and guidance throughout the project have proved invaluable. iv CONTENTS Declaration ..................................................................................................................... ii Abstract .......................................................................................................................... iii Acknowledgements ........................................................................................................ iv CONTENTS .................................................................................................................. v List of Figures ................................................................................................................ xiii List of Tables ................................................................................................................. xiii List of Appendices ......................................................................................................... xiv CHAPTER ONE – SCOPING THE RESEARCH ........................................................ 1 1.0 Research Background and Rationale ............................................................ 1 1.1 Aims & Objectives ........................................................................................ 8 1.2 Overview of the Thesis ................................................................................. 9 CHAPTER TWO – MUTUAL OWNERSHIP STRUCTURE ..................................... 11 2.0 Introduction ................................................................................................... 11 2.1 Organisational Theory ................................................................................... 11 2.2 Investor-Owned Business Model ................................................................... 14 2.3 Types of Nonprofit Organisations ................................................................. 15 2.3.1 Cooperatives or cooperative societies .............................................. 15 2.3.2 Mutual Societies ............................................................................... 16 2.3.3 Self-help groups ............................................................................... 16 2.3.4 Definitions commonly used for Supporter Ownership .................... 16 2.4 Critique of the Mutual Business Model ........................................................ 17 2.5 Ownership Issues in English Football ........................................................... 19 2.6 Supporters’ Trusts ......................................................................................... 23 2.7 Critique of the Supporters Trust Movement ................................................. 24 2.8 Ownership Structure of German Football ..................................................... 26 2.8.1 Structural Changes of German Football Clubs ................................ 28 2.8.2 Critique of the Legal Form of Members’ Associations ................... 32 2.9 Conclusion .................................................................................................... 35 CHAPTER THREE - COMPARING NONPROFIT AND PROFIT GOVERNANCE STRUCTURES ................................................................................. 39 3.0 Introduction ................................................................................................... 39 3.1 Corporate Governance .................................................................................. 38 3.2 A Comparison of Corporate Governance to Nonprofit Governance ............ 39 3.3 Models of Nonprofit Governance ................................................................. 41 3.3.1 Traditional Model of Governance .................................................... 41 v 3.3.2 Policy Governance Model ................................................................ 42 3.3.3 Executive Centred Governance Model ............................................ 44 3.3.4 Stakeholder Models .......................................................................... 45 3.3.5 Stewardship Theory ......................................................................... 46 3.3.6 Owner Accountability - An Agency Theory Approach ................... 47 3.4 Sport Governance .......................................................................................... 50 3.5 Corporate Governance Issues within the English Football Industry ............. 54 3.5.1 Fit and Proper Tests, Owners and Assets ......................................... 54 3.5.2 Financial Administration .................................................................. 55 3.6 Corporate Governance Issues within the German Football Industry ............ 57 3.6.1 Governance Regulation .................................................................... 58 3.6.2 The ‘50+1’ rule ................................................................................ 59 3.6.3 Critique of ‘50+1’ Rule .................................................................... 60 3.7 Conclusion ...................................................................................................