The State of the Game: the Corporate Governance of Football Clubs 2002
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Football Governance Research Centre The State of the Game The Corporate Governance of Football Clubs 2005 Research Paper 2005 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 4177 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 0-9549012-4-X ISSN 1473-7884 Contents Page About the Authors ii Acknowledgements iii Preface by Lars-Christer Olsson, Chief Executive, UEFA iv Foreword by Brian Barwick, Chief Executive, The FA v Glossary of Terms vi Executive Summary viii Chapter 1. Introduction 1 1. Crisis or crossroads? 1 2. Regulatory response 2 3. The State of the Game 2005 findings 2 4. Conclusion: where’s the beef? 3 Chapter 2. Regulation and governance by the football authorities 5 1. ‘Subsidiarity’ and the governance of football 5 2. The Burns Review of the FA 6 2.1 The FA Board: composition and responsibilities 7 2.2 The FA Council 8 2.3 The relationship between Council and Board 9 2.4 The committee structure 9 2.5 ‘Subsidiarity’ and the structure of the FA 10 2.6 The Burns Review and regulation 12 2.7 Accountability of the ‘Regulation and Compliance Unit’ 13 2.8 Summary: the need for a better governed game 13 3. The regulation of domestic and European football 13 3.1 Regulatory and sporting divergences across Europe 14 3.2 Changing the regulatory framework of European club football 14 3.3 The ‘homegrown’ player initiative 15 3.4 Summary: ‘subsidiarity’ and the boundaries of regulation 16 Chapter 3. FA Premier and Football League clubs 18 1. Ownership models: the rise and fall of the football PLC 18 1.1 Revenue steams, profitability, risk and redistribution 21 1.2 Attitudes to redistribution 22 2. Compliance with company law and corporate governance 23 3. Corporate governance and the Combined Code 29 4. Enterprise governance 35 5. Conclusion 36 Chapter 4. The Football Conference 38 1. The Burns Review 38 2. Governance standards in the Conference National 39 2.1 Board composition and responsibilities 39 2.2 Information disclosure and consultation with shareholders 40 2.3 Board use of the AGM to disclose information to shareholders 41 2.4 Consultation between club and fans 41 2.5 Risk assessment and management 42 2.6 Resource utilisation 43 3. Governance standards in the Conference North and South 43 3.1 Board composition and responsibilities 44 3.2 Consultation between club and fans 44 3.3 Risk assessment and management 45 3.4 Resource utilisation 45 4. Regulatory issues in the Football Conference 47 4.1 Sporting sanctions 48 4.2 The Approved Playing Budget 48 5. Conclusion 49 Chapter 5. Supporters’ trusts and local communities 50 1. Trends in the supporters’ trust movement 50 1.1 Trust membership 57 1.2 Turnover 58 1.3 Corporate governance in trusts 59 1.4 Objectives and strategies 61 2. Relationships between trusts and clubs 62 2.1 Board representation 62 2.2 Donations and investments 63 2.3 Differing perspectives 63 2.4 Working relationships 64 2.5 Joint initiatives 64 3. Trusts, clubs and communities 65 3.1 Football in the Community 65 3.2 Football clubs and Football in the Community 65 3.3 Supporters’ trusts and Football in the Community 66 4. Conclusion 69 Chapter 6. Stakeholder networks in the football industry 70 1. Stakeholder analysis of the football industry 70 1.1 Network theory and corporate governance 71 2. Football clubs and the stakeholder network 71 2.1 Strength of stakeholder relationships 71 2.2 Level of influence over club governance 72 3. Supporters’ trusts and stakeholder networks 74 3.1 Strength of stakeholder relationships 74 4. Conclusion 75 Chapter 7. Conclusion 76 1. The 2003 version of the Combined Code 76 2. Redistribution requires good governance 77 3. For the mutual benefit of football 77 Appendix 1: Terms of Reference for the Burns Review 79 Appendix 2: UEFA Declaration on the local training of players 80 Appendix 3: Survey of clubs and supporters’ trusts 81 Name and Subject Index 82 i About the Authors Matthew Holt, Jonathan Michie, Christine Oughton, Richard Tacon and Geoff Walters are members of the Football Governance Research Centre, Birkbeck, University of London. Michie and Oughton are co-editors of A Game of Two Halves: The Business of Football (Mainstream, 1999) with Sean Hamil; and with Sean Hamil and Steven Warby: Football in the Digital Age: Whose Game is it Anyway? (Mainstream, 2000) and The Changing Face of Football: Supporters Direct (Frank Cass, 2001). Matthew Holt is a Research Officer at the Football Governance Research Centre at Birkbeck. Matthew has focused in particular on the role of the governing bodies in football, with regard to the regulation and governance of the domestic and European game. t: 020 7631 6743 [email protected] Jonathan Michie is Director of Birmingham Business School and Visiting Professor at Birkbeck. He was a founding Director of Supporters Direct, and is a Board Member of Mutuo and The Co-operative College. t: 0121 414 3555 [email protected] Christine Oughton is Professor of Management at Birkbeck. She is also Director of the Football Governance Research Centre at Birkbeck, University of London. t: 020 7631 6768 [email protected] Richard Tacon is a Research Officer at the Football Governance Research Centre at Birkbeck. His research interests include the role of football clubs in local communities and the evaluation of football-based social inclusion projects. t: 020 7631 6871 [email protected] Geoff Walters is a Research Associate of the Football Governance Research Centre at Birkbeck, and is currently working on an ESRC-funded PhD researching governance and networks in the football industry. t: 020 7631 6884 [email protected] ii Acknowledgements This is our 5th 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 questionnaire; without their efforts we would not have been able to compile the information that informs and underpins this research. Our thanks go once 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. We would also like to thank Brian Barwick, Chief Executive of the FA for contributing the Foreword to this year’s Report, and Lars-Christer Olsson, Chief Executive of UEFA for writing the Preface. iii Preface by Lars-Christer Olsson, Chief Executive, UEFA For the first time in its history, UEFA has produced a detailed, formal, written strategy for European football. The strategy – Vision Europe – was approved at the UEFA Congress in Tallinn earlier this year, and defines how UEFA plans to shape the direction and development of European football over the next decade. One of the key points that transpired was that, in the past, UEFA, like many sports governing bodies, tended to react to events rather than shape them. As we strive for a better future, we made a conscious decision to deal with the root causes of the problems in European football – rather than to keep reacting to the symptoms, when it is often too late. If you trace those symptoms to their cause, you invariably arrive at the question of governance – governance at all parts of the football pyramid, from the UEFA level, to our members the national associations, down through the leagues, the regional (county) associations and the individual clubs themselves. Rather than always reacting, camped outside our own penalty area as it were, it should be football’s needs setting the agenda – not state regulators, broadcasters, sponsors, lenders, or other stakeholders from outside the football family, no matter how important and necessary they may be. UEFA has therefore aimed to grasp the regulatory nettle by introducing new initiatives such as, for example, the UEFA Club Licensing System and the new sports rules to encourage local trained (homegrown) players. The Club Licensing System has now been revised and made tougher, especially in the financial area, based on its first year of operation and we are already beginning to see the benefits across Europe. The local trained player sports rules will come into force from next season, and we hope that they will help to start clawing the agenda back towards football by encouraging professional clubs to focus more on training and on giving their young players – regardless of nationality – a chance. And, depending on the permanent consultations that we maintain with the different football stakeholders, there will be more measures to come. Because of this direct interest that we have in governance issues, we are monitoring with great interest the various developments in England and the UK, such as the Burns’ Report and the incredible growth of the Supporters’ Trust and wider organised fans’ movement.