Assignment 1: Case Study Material

Cricket Australia

Cricket has lost a generation in Australia and the Big Bash League (BBL) – replacing the Big

Bash – is the answer says ’s (CA) general manager of cricket marketing services, Mike

McKenna. “Cricket has traditionally always been Australia’s favourite sport but, with a change in society and people having more entertainment options, we found it wasn’t connecting as well with new generations as it had in the past…” (Ridley, 2011, p.24).

The BBL made its debut in December 2011, following the announcement of the new concept in October

2010. The BBL consists of eight teams with 28 regular season matches played in the summer holiday season commencing just prior to Christmas and concluding in late January. Owned, controlled and managed by CA, this was not always going to be the case, with CA seriously considering private investment in each of its franchises. The projected level of investment fell short of total control, with CA mooting a 49% ceiling on private ownership to ensure control remained with CA and the state associations. According to Ridley (2011), offers of $15 million each from Indian backers for stakes in the

Sydney Thunderbirds and Renegades were nowhere near CA’s valuation of $50 million for a

49% stake in each franchise.

Ultimately, the BBL was established not only to reconnect with a new generation of Australians, but as another viable product capable of generating substantial revenues for a sport steeped in history and the traditions associated with the long forms of the game. As McKenna stated, “We are not hampered by the baggage of the last 100 years of evolution. We’ve got a chance to start again, which is pretty rare in the world of sport” (Ridley, 2011, p.25). One can only wonder what the foundation delegates to the newly formed Board of Control in 1905 would make of the directions cricket has taken in the twenty first to position the sport in a rapidly changing Australian society - a society heavily influenced by social media and instant gratification through shorter, impact oriented recreation and leisure options. The prospect of private ownership would likely see the nine foundation delegates turn in their graves. To this day, CA is governed by 14 directors, each nominated by their respective state associations

- , and , as the foundation member associations, are each represented by three delegates, with and two delegates, and one delegate.

Cricket, after all, is a sport owned by no one, yet metaphorically owned by all Australians. For all of its

100 plus years, the sport has been governed by volunteers committed to maintaining cricket as the country’s preeminent summer sport and, of course, ensuring it continued to foster talent capable of beating England in the biennial battle for . Yet, here was CA, itself still governed by a group of

14 delegates nominated by the States, seriously considering ‘selling off’ some of its new properties in the form of part private investment in BBL franchises. Private ownership, or part private ownership, brings with it forms of corporate style governance not normally associated with the governance of .

This paradox was further compounded by the review of cricket governance in 2011. Undertaken by corporate doctors, David Crawford and Colin Carter, at the invitation of CA, their remit was to:

Review the governance structure of Australian cricket which essentially means the role and composition of the Board, and its relationship with the various State cricket organizations. The intention of this review was to ensure Australian cricket, and in particular Cricket Australia and its constituent State members, have a governance structure to create an environment for correct and efficient decision-making so that Australian cricket maximises its ability to administer the game of cricket in the best interest of all its stakeholders (p.1/35).

Specifically, the terms of reference were to review: 1. The Memorandum of Association and the Constitution and By-Laws of Cricket Australia to ensure

Australian cricket has a decision-making process and lines of authority/decision-making to enable

Australian cricket to obtain the maximum benefit to cricket and all its stakeholders.

2. The composition of the Cricket Australia Board and the process of election of members of the Board so that the Board can act in the best interest of Australian cricket whilst at all times being conscious of the need to protect the interest of the members of Cricket Australia (i.e., the State Associations) and other relevant stakeholders

3. The roles and responsibilities of Cricket Australia, its Board, CEO and Management and the role and responsibilities of the member States in Australian cricket (p.35).

The purpose of the review, as had been the case in the AFL and other sports, was to find a mechanism to rid cricket of its traditional delegate system of governance. If successful, this would be part of a solution to identify and apply best practice governance in Australia’s iconic summer sport. This solution would, of course, only be a part solution as it was unlikely that such a review could change the federal structures associated with cricket. That proved to be the case.

In reviewing the main thrust of meetings with stakeholders and observing that an independent, skills- based board is the future for CA, the report noted:

In many of our meetings, it was often described as the “AFL Model”, but this is a misunderstanding.

Twenty years ago the AFL simply adopted what is now seen as the best governance model which is the same design as that of BHP Billiton and a not-for-profit like Mission Australia. These boards are designed, as far as possible, to remove ‘conflicts of interest’ and attract relevant skills. Among our professional sports, this is also the structure now adopted by the Football Federation of Australia…(p

6). There is little debate about the extent to which the AFL Commission represented best practice but, unlike BHP Billiton and Mission Australia, the AFL is still composed of some member states that remain separate legal entities, as is the case in all six states in cricket. At board level, the independent commission approach adopted by the AFL is widely regarded as best practice. When describing what this best practice looks like, Crawford and Carter stated:

The Board’s main role is to agree on strategy and appoint and oversee highly competent management on behalf of the owners. The owners appoint the Board as their representatives and are able to dismiss the Board, if necessary. A good board will be comprised of Directors who understand their primary duty is to act on behalf of all owners and not sectional interests. A good board will be of a workable size and its members will be chosen for their complementary skills, experience and their capacity to contribute. A good Board understands that its role is different to that of management.

The Board’s delegation to management will be clear and those major decisions that are retained by the Board will also be clear. Similarly, the Board’s accountability to the owners will be understood, and those few matters that must be referred to the owners for approval will be clearly defined (p.7).

In summarising findings from the review, Crawford and Carted found:

 Current governance structures fall well short of best practice

 The Board is far too large to be effective

 The Board is widely perceived to have conflicts of interest

 Process for appointing Directors does not take adequate account of Board skill needs

 There is a lack of clarity around the respective roles of CA Board, the States, and management

 Board and management roles overlap leading to confused accountability

 Decision-making roles of management, the Board and the States lack clarity which leads to indecision and conflict and the constant need for re-opening of issues (p.7). In the seven points above, the review summarised the pitfalls of the delegate and federal forms of governance. But the questions still remained, what to recommend so that the goal of striving for best practice governance was achievable, and acceptable to CA and the member states. The following 10 points summarise the recommended changes. Some of these are considered further in reflecting on how the cricket community responded.

1. Clarity around the states’ roles as owners (shareholders)

2. A smaller Board

3. Removal of conflicts of interest

4. A skills-based Board

5. Reconsideration of voting rights

6. Clarity of Board role relative to management

7. A partnership with management

8. The Chairman’s role

9. Other attributes of a high performing Board

10. A workable financial model (p.8).

The size and composition of the new Board was the central element of the 10 point plan for change. A smaller Board, and how a Director is appointed to the Board, deal directly with, for example, board size, conflict of interest and a skills based board. Fundamentally, the member associations as the ‘owners’ are to be responsible for the appointment of Directors, but not to nominate Directors as delegates of the association. A Nominating Committee would be formed comprised of four persons, two State presidents plus the Chairman of CA and one other CA Director.

The review ultimately recommended a Board of nine non-executive Directors plus the Executive Director who also has full voting rights. The Directors are to be appointed via the nominations process described above, and as Crawford and Carter noted, “it would be possible to require that, of the nine candidates, one is resident in each of the six States. This would be a better system than the current one, but it is not our preferred option” (p.15). The politics of the federal model are clearly reflected in this statement.

What the review team preferred is for all nine directors to be appointed on merit and a balance of skills rather than imposing restrictions relating to geographic representation. However, the likelihood of this approach being accepted by member States is reflected in the need to make the statement.

Interestingly, Lalor (2012), in his summary of outcomes, ‘took it as read’ that at least one Director would have to come from each of the six states.

Following the release of the review in late 2011, newspaper headlines such as: “Reforms go by the

Board” (Conn, 2011), “States to reject AFL-style cricket reform” (Lalor, 2012), “States hold key to change

– Cricket – the Reforms” (Saltau, 2012), indicated the possible resistance to change from within the cricket community. By mid 2012 no change had resulted and, following the June Board meeting, CA released the following statement.

Cricket Australia has moved a step closer to a new governance structure following today’s Board of Directors’ meeting in Melbourne

Following the meeting, CA Chairman Wally Edwards said that after receiving and reviewing the consolidated feedback from CA Members on the proposed governance changes, the Board resolved to implement a three-year transition to a new Board structure.

“Fundamentally, everything is proceeding as planned. Today we resolved that a special meeting for

Members will be called for 17 August where the relevant recommendations will be put to that meeting,” Mr Edwards said. “We‘re confident we’ll get a constitutional majority of acceptance”.

A special meeting on 17 August will now ask Members to vote on this resolution that would lead initially to a Board consisting of six State Association–appointed Directors plus three independent

Directors. If State Associations choose not to nominate a Director during this period, the nomination will be made by Cricket Australia. On or before the 2014 Cricket Australia Annual General Meeting, Members will then decide the structure of the Board post-2015, with focus on assessing the effectiveness of the new structure and the recommendations contained in the Governance Review conducted by David Crawford and Colin

Carter.

Today’s resolution is a continuation of the process that started earlier this year after the review tabled by governance specialists Crawford and Carter recommended Cricket Australia consider a range of changes including moving to a smaller, independent Board.

Source: Cricket Australia (2012, 15 June).

This statement further illustrates the difficulty of change, and the resistance of the current board to effectively vote themselves out of office. It also highlights the reluctance of the State associations to forego control of the sport nationally. Agreement to move to a smaller board is the only recognisable change to emerge from the 15 June meeting. The delegate structure will remain, with six state- association appointed Directors, thereby ignoring, in the short term, key issues pertaining to conflict of interest and the need for a skills based board. However, the introduction of the three independent

Directors is consistent with the recommendations, although there is no comment on how these three

Directors are to be appointed. What potentially remains after the 17 August Annual General Meeting, if there is agreement, is a hybrid Board structure. That it will take until 2015 to determine whether there is merit to the recommendations proposed in the review is further evidence of resistance and reluctance to embrace best practice governance as it is prescribed by Crawford and Carter.

Lalor (2012) illustrates the depth of the challenge to convince cricket administrators of the need for change and best practice sport governance. Bob Merriman, a former Chairman of CA and long time cricket administrator in Victoria, was firm in his convictions about the need for change when he argued: that the AFL shift to an independent commission might have been appropriate for a Victorian competition looking to nationalise itself, but pointed out that the federal model cricket used was the right one. "We are already a national game", Merriman said. Merriman claimed that "conflict of interest" issues had been eradicated at the board level for some time and that there had been a wide range of people with many skills at board level. Merriman believes that while the AFL clubs voted to give up their control of the game, cricket bodies would be less likely to (p.40).

Cricket’s position as a sport with genuine national importance and a rich history and strong traditions can also be a disadvantage. The likelihood of ‘cricket bodies’ giving up their control as Merriman opines, further reinforces the entrenched views ingrained in both a delegate and federal form of governance.

The contrast between the old and the new is brought into sharp focus when comparing the establishment of the BBL and the reasons for its existence, and views in relation to best practice governance.

Women in Sport Governance

McDonald's Thinks About Exiting FIFA Sponsorship Ahead Of 2018 World Cup

Is Ronald McDonald about to pick up his ball and go home? Less than a year away from the World Cup in Russia, one of FIFA's biggest sponsors is kicking around the idea of withdrawing sponsorship of the organization's premier tournament due to ethical concerns.

McDonald's executives are considering whether ongoing corruption controversies around international football's governing body are worth the cost to the brand. Among them are issues related to the awarding, planning, and organizing of the 2018 World Cup in Russia and 2022 World Cup in Qatar. The United States-based multinational fast food chain, however, is publicly stating that it intends to remain committed as a sponsor.

In 2015, McDonald's was one of FIFA’s top-tier sponsors—along with Coca-Cola, Visa, and Anheuser- Busch—to have demanded that president Sepp Blatter step down amidst a corruption controversy that included Swiss prosecutors opening criminal proceedings. That was quite a statement for a company that uses the sponsorship to reach people in more than 100 countries around the world, at a cost of tens of millions of dollars per year and likely many times that if it decided to bring a premature end to the deal. Even if McDonald's isn't planning to change anything just yet, it is another shot that surely has FIFA’s attention.

McDonald's has sponsored the World Cup since 1994. The corruption and ethical issues around FIFA have been around for much longer. So, why is it now that McDonald's may be taking on its latest round of thinking about whether it can continue justifying the sponsorship?

One reason has to do with the basic business management responsibility of conducting checks at frequent intervals to test the health of the business. Another reason has to do with McDonald's making changes in its sports sponsorship game of late, as part of new directions in its global growth strategy; last month, in a mutual parting of ways with the International Olympic Committee, the company ended its 41-year-long worldwide sponsorship of the Olympic Games. The third reason has to do with a shift in moral values. In the case of a sponsorship such as the one McDonald's has with FIFA, it would appear that so much money and so many years of planning are good enough reasons to keep things going as-is. But leaders of companies and organizations seem to be more attune these days to partnering on deals that might draw attention for the wrong reasons. In the past, partners on both sides of a deal could play a little bit of a waiting game as news of a scandal or ethical lapse came to light. But the pace and style of news with today's social media doesn't allow for much time or room to try to read the market, customers, and public sentiment.

Sports sponsorship can serve financial and social benefits, as Anheuser-Busch's Busch Media Group showed with its pioneering advances into television, events, and venues beginning in the early 1980s. But that all falls away when the ethics of one party or both come into question.

To add to things, Russia has been in the news headlines a lot lately, from updates about preparations for the World Cup to discussions between Russian officials and the Donald Trump presidential campaign. As with anytime politics finds its way into sports, charges of collusion don’t play well under the Golden Arches.

The idea that McDonald's executives may be at all ready to walk away despite the eyeballs and wallets that soccer attracts is a sign of what company executives think—and may have learned—about FIFA's business practices. At the moment, they're not lovin' it.