COMPLIANCE WITH BEST PRACTICE GOVERNANCE SYSTEMS BY NATIONAL SPORTS FEDERATIONS OF SOUTH AFRICA by Salmar Burger Submitted in partial fulfilment of the requirements for the degree MASTER OF BUSINESS ADMINISTRATION in the Faculty of Economics and Management Sciences, University of Pretoria, Pretoria Professor A.E. Goslin Professor M.J. Painter-Morland 14 January 2004 © University of Pretoria Declaration I, Sal mar Burger, herewith declare that the language of this research report has been edited by Mrs Maria Prozesky and Miss Thandi Meets. --------------------- ll BRARY SE RVIC ES/8 IB ~.Q_lj_EKD IE NSTE Salmar Burger UNlVERSlTY OF PHETORIA 2009 -03- 1 1 :;.!~~J1..&. .. :... .0.'e,::l Bu Rc; { R. Item No .... 1.~--~-~.la .. Z.... ·.X ... © University of Pretoria Table of Contents Chapter 1 - Overview of study . 1 1.1 Introduction ................................................................................ 1 1.2 Problem statement .......................................................................... 3 1.3 Research objectives ......................................................................... 5 1.4 Limitations of the study ...................................................................... 6 1.5 Research methodology ....................................................................... 7 1.5.1 Description of research design ................................................................. 7 1.5.2 Research instrument ......................................................................... 7 1.5.3 Data collection ............................................................................. 8 1.6 Conclusion ............................................................................... 11 2 Chapter 2- Economic relevance of sport ....................................................... 14 2.1 Introduction ............................................................................... 14 2.2 Structure of the South African sports industry .................................................... 16 2.3 Size and scope of the South African sports market ................................................ 18 2.3.1 Sports goods and equipment ................................................................. 22 2.3.2 Sport participants .......................................................................... 24 2.3.3 Sport spectators ........................................................................... 26 2.3.4 Commercial sector ......................................................................... 28 2.4 Sports governing bodies ..................................................................... 30 2.5 Clubs ................................................................................... 32 2.6 Local authorities ........................................................................... 33 2.7 Business case for good governance in sport ..................................................... 34 2.8 Conclusion ............................................................................... 36 3 Chapter 3- History and development of good governance ......................................... 38 3.1 Introduction ............................................................................... 38 3.2 Development of corporate governance .......................................................... 39 3.2.1 The Cadbury Report ........................................................................ 57 3.2.2 The Greenbury Report ....................................................................... 59 3.2.3 The Hampel Report ......................................................................... 59 3.2.4 King Committee Reports .................................................................... 61 3.2.5 The King Report on Corporate Governance (1994) ................................................ 62 3.2.6 The King Report on Corporate Governance for South Africa (2002) ................................... 63 3.2.6.1 Boards and directors ........................................................................ 64 © University of Pretoria 3.2.6.2 Risk management ........................................................................... 66 3.2.6.3 Internal audit .............................................................................. 67 3.2.6.4 Integrated sustainability reporting .............................................................. 68 3.2.6.5 Accounting and auditing ..................................................................... 69 3.2.7 Current status of the 2002 King Report on Corporate Governance for South Africa ........................ 69 3.2.8 Corruption in South Africa ................................................................... 70 3.2.9 Sports Governance Code .................................................................... 72 3.2.9.1 Role of the governing body ................................................................... 73 3.2.9.2 Structure, responsibility and accountability ...................................................... 74 3.2.9.3 Membership and size of the governing body ...................................................... 74 3.2.9.4 Democracy, elections and appointments ......................................................... 75 3.2.9.5 Transparency and communication .............................................................. 75 3.2.9.6 Decisions and appeals ....................................................................... 75 3.2.9.7 Conflict of interests ......................................................................... 76 3.2.9.8 Solidarity ................................................................................. 76 3.2.9.9 Recognition of other interests ................................................................. 77 3.3 Other governance codes in sport .............................................................. 77 3.3.1 Publications by the Australian Sports Commission ................................................ 77 3.3.1.1 Governing Sport- The Role of the Board and CEO ................................................. 77 3.3.1.2 Case studies .............................................................................. 78 3.4 Publications by the Football Governance Research Centre .......................................... 78 3.5 Relationship between governance and sport ..................................................... 80 3.5.1 Nature of sports governing bodies ............................................................. 81 3.5.2 Principle of self-regulation ................................................................... 83 3.6 Conclusion ............................................................................... 84 4 Chapter 4- Best practice governance systems .................................................. 86 4.1 Introduction ............................................................................... 86 4.2 Defining corporate and best practice governance ................................................. 87 4.3 Pillars of best practice governance ............................................................ 91 4.3.1 Accountability ............................................................................. 92 4.3.2 Responsibility ............................................................................. 93 4.3.3 Transparency ............................................................................. 95 4.3.4 Social responsibility ........................................................................ 97 4.3.5 Independence ............................................................................ 103 4.3.6 Fairness ................................................................................ 105 ii © University of Pretoria 4.3.7 Discipline ............................................................................... 107 4.4 Institutionalisation of sport specific best practice governance principles .............................. 108 4.4.1 Governing legitimacy ...................................................................... 108 4.4.2 Democracy, elections and appointments ....................................................... 109 4.4.3 Board composition ........................................................................ 109 4.4.4 Role of the elected board ................................................................... 111 4.4.5 Structure, responsibility and accountability ..................................................... 114 4.5 Identified principles of best practice governance within sport ....................................... 115 4.6 Conclusion .............................................................................. 116 5 Chapter 5- Research findings ............................................................... 117 5.1 Introduction .............................................................................. 117 5.2 Respondent profile ........................................................................ 117 5.3 Demographic information of national federations ................................................. 119 5.3.1 Federation size ........................................................................... 119 5.3.1.1 Individual membership of national sport federations ............................................... 119 5.3.1.2 Regional I provincial membership ............................................................. 120 5.3.2 Internet Presence ......................................................................... 121 5.3.3 Code of ethics ...........................................................................