The Corporate Governance of Football Clubs 2006
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Football Governance Research Centre The State of the Game The Corporate Governance of Football Clubs 2006 Research Paper 2006 No. 3 The State of the Game Published by the: Football Governance Research Centre Malet Street, London WC1E 7HX Tel: 020 7631 6740 Fax: 020 7631 6872 www.football-research.bbk.ac.uk [email protected] Sponsored by: Mutuo 77 Weston Street, London SE1 3SD Tel: 020 7367 4150 Fax: 020 7407 4476 www.mutuo.co.uk [email protected] Grant Thornton Melton Street, Euston Square, London NW1 2EP Tel: 020 7383 5100 Fax: 020 7383 4715 www.grant-thornton.co.uk [email protected] The Professional Footballers Association 20 Oxford Court, Bishopsgate Manchester M2 3WQ Tel: 0161 236 0575 www.givemefootball.com [email protected] Further copies are available for £25.00 (including post and packaging) (£5.00 for students, club officials and supporters’ trusts) from the FGRC. Also downloadable free of charge from www.football-research.bbk.ac.uk ISBN 0-9549012-7-4 ISSN 1473-7884 SOTG2006 (SC)Insidesv12-Ray.qxd 11/12/06 16:14 Page i Contents Page About the Authors ii Acknowledgements iii Preface by José Luis Arnaut, Chair, Independent European Sport Review iv Foreword by Rt Hon Richard Caborn, MP, Minister for Sport, DCMS v Glossary of Terms vi Executive Summary ix Chapter 1. Introduction 1 Chapter 2. Regulation and Governance by the Football Authorities 2 1. The Independent European Sport Review 5 1.1 The organization, structure and methodology of the review 7 1.2 Key recommendations and assessment 7 1.3 Assessment 9 2. The Football Association: Regulatory Changes and Governance 10 2.1 The FA code of corporate governance 10 2.2 Implementation of the Burns review 11 2.3 Football agents 11 2.4 Ownership issues 12 3. A Brighter Future for Football? 13 Chapter 3. Premier and Football League Clubs 14 1. Ownership models for clubs and the Nice Declaration 14 1.1 Revenue inequality, competitive balance and risk 16 1.2 Attitudes to redistribution 17 1.3 Impact of greater redistribution 18 2. Compliance with Company Law and Best Practice Corporate Governance 19 2.1 The Annual General Meeting (AGM) 19 2.2 Dialogue with shareholders and stakeholders 20 2.3 Dialogue with supporters’ trusts 23 3. Corporate Governance, the FA Guide and the Combined Code 23 3.1 The board of directors and the nominations committee 24 3.2 Induction and training for directors 26 3.3 Directors’ pay and the remuneration committee 26 3.4 Risk, internal control and the audit committee 27 3.5 Attitudes to regulatory measures 28 4. Enterprise Governance 28 4.1 Financial management 28 4.2 Resource utilisation 29 5. Conclusion 30 Chapter 4. The Football Conference 32 1. Corporate Governance Standards at Conference National Clubs 32 1.1 The board 32 1.2 Accountability and audit 35 1.3 Relations with shareholders 38 2. Corporate Governance Standards at Conference North and South Clubs 40 2.1 The board 41 3. Stakeholder Relations in the Football Conference 44 3.1 Relationships with the football authorities 44 3.2 Attitudes towards regulatory measures 45 3.3 The approved playing budget 46 3.4 The Football Association guide to governance 47 3.5 Relationships with stakeholder organisations 48 3.6 Football Conference, clubs and the community 51 4. Conclusion 53 Chapter 5. Supporters’ Trusts 54 1. Trust Membership 54 2. Trust Governance 54 3. A European Supporters Direct Movement 56 4. Conclusion 57 Chapter 6. Conclusion 59 Appendix 1 The Nice Declaration 61 Appendix 2 Terms of Reference of the Independent European Sport Review 63 Appendix 3 Working Process of the Independent European Sport Review 67 Appendix 4 Survey of Clubs and Supporters’ Trusts 69 SOTG2006 (SC)Insidesv12-Ray.qxd 11/12/06 16:14 Page ii About the Authors Acknowledgements About the Authors This is our sixth annual survey of professional football clubs and supporters’ trusts and we would like to thank all the club officials and supporters’ trust board members who took the time and effort to complete and return our Jonathan Michie, Christine Oughton and Geoff Walters are members of the Football Governance Research Centre, questionnaire. Without their efforts we would not have been able to compile the information that informs and Birkbeck, University of London. Michie and Oughton are co-editors of A Game of Two Halves: The Business of underpins this research. We are also grateful to John Moules, Chief Operating Officer, The Football Conference and Football (Mainstream, 1999) with Sean Hamil; and with Sean Hamil and Steven Warby: Football in the Digital Age: Kellie Discipline, Secretary, The Football Conference for advice and assistance with contacting Conference clubs. Whose Game is it Anyway? (Mainstream, 2000) and The Changing Face of the Football Business: Supporters Direct (Routledge, 2001). Our thanks go again to our three sponsors: Grant Thornton, the independent financial and corporate advisors; Mutuo, the think-tank for the co-operative and mutual sector; and the Professional Footballers’ Association. Jonathan Michie is Professor of Management and Director of Birmingham Business School, University of Birmingham. A number of people have helped us by providing information and support: these include Alex Phillips, Head of Professional He is also a Visiting Professor at Birkbeck, University of London and previously held the Sainsbury Chair of Management Football Services, UEFA for providing many documents on UEFA policies and for allowing us to refer to results from our at Birkbeck, University of London where he was Head of the School of Management & Organizational Psychology and paper on Competitive Balance undertaken for UEFA. We are also grateful to Alex Howells, of The Football Association. the first Director of the Football Governance Research Centre. Prior to that he was at the Judge Institute of Management at Cambridge, and before that he worked in Brussels for the European Commission. He was a founding Director of We would like to acknowledge valuable assistance from Matthew Holt and Richard Tacon who helped with Supports Direct, and is a Board Member of Mutuo. preparatory and field work on the survey while they were Research Officers at Birkbeck. We are also grateful to tel: 0121 414 3555 Matthew Holt, now Client Manager for national sport at Sport England for work he undertook on our report on the email: [email protected] Role and Regulation of Agents that we cite in this paper and to Richard Tacon, now Research and Evidence Officer, Central Council of Physical Recreation for work he undertook on our paper on Competitive Balance in Europe which Christine Oughton is Professor of Management at Birkbeck, University of London and Director of the Football is also referred to herein. Thanks are also due to Giambatista Rossi, PhD student in the Football Governance Research Governance Research Centre. She was previously Chair of the Department of Management and was the first Director Centre, Birkbeck for assistance with organising the launch. of Birkbeck’s MSc in Sports Management and the Business of Football. She has published widely in the fields of economics and management, including corporate governance and various aspects of the business of football. She is Christine Oughton would like to thank fellow members of the Economic Group of the Independent European Sport a Board member of the Regional Studies Association and a member of the Academy of Social Sciences. In 2006 she Review Team - Gerry Boon (Group Leader) and formerly founder and Head of the Sport Business Group at Deloitte, was a member of the Economic Group of the Independent European Sport Review, whose reports were published in Professor Egon Franck, University of Zurich, and Hallvard Johnson, Norwegian School of Management – for May and October 2006 under the Chairmanship of Mr José Luis Arnaut. generously sharing their thoughts and expertise on the finance and economics of football. tel: 020 7631 6768 email: [email protected] We are indebted to Paul Rawnsley, Director, Sport Business Group, Deloitte and Dan Jones, Partner, Sport Business Group, Deloitte for advice and for providing data and copies of their Annual Review of Football Finance. Geoff Walters is a Research Associate of the Football Governance Research Centre at Birkbeck, and is currently working on a PhD funded by the Economic and Social Research Council looking at corporate governance in the The front cover photograph was provided courtesy of Wembley National Stadium Limited (WNSL) and we are grateful football industry, with a particular focus on the stakeholder model of governance. He is also author of a research to Jessica Hart, Public Relations Assistant, and staff at WNSL for their kind assistance. paper that looks at the role and growth of the Professional Footballers’ Association. tel: 020 7631 6884 Ray Calder at Acumen Design carried all the design and print work for the report with good humour and great efficiency. email: [email protected] Finally, we would like to thank José Luis Araut, Chair of the Independent European Sport Review for contributing the Preface to this year’s report, and the Rt Hon Richard Caborn, Minister for Sport, Department of Culture Media and Sport, for providing the Foreword. ii iii SOTG2006 (SC)Insidesv12-Ray.qxd 11/12/06 16:14 Page iv Preface Foreword by José Luis Arnaut, Chair, Independent European Sport Review by Rt Hon Richard Caborn, Minister for Sport, DCMS The Independent European Sport Review resulted from the need EU Governments felt to act in order to protect and Before putting pen to paper for this foreword, I looked back with interest at Brian Barwick’s equivalent piece from safeguard the European Sports Model.