Assignment 1: Case Study Material
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Assignment 1: Case Study Material Cricket Australia Cricket has lost a generation in Australia and the Big Bash League (BBL) – replacing the Twenty20 Big Bash – is the answer says Cricket Australia’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 Melbourne 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 century 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 - New South Wales, Victoria and South Australia, as the foundation member associations, are each represented by three delegates, with Western Australia and Queensland two delegates, and Tasmania 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 the Ashes. 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 cricket in Australia. 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.