Football Governance

Written evidence submitted by Cardiff City Supporters Trust (FG 12)

1. Introduction

1.1 Established in 2008, Cardiff City Supporters Society Limited (the Trust) is a democratic, not-for-profit group of supporters, committed to giving fans a voice in the decision-making process of the club, and to strengthening the links between Cardiff City and the community it serves.

2. Concerns

2.1 The Trust shares the concerns of many supporters across the United Kingdom at the way football clubs are owned and managed by wealthy individuals simply as businesses without any concern for, or involvement by, the wider social and footballing community. We have seen clubs chasing the golden goose that is football’s Premiership, making short term investment decisions which have long term consequences.

2.2 Investing in football on a purely business basis, without concern for a club’s sustainability is contrary to the interest of the club itself and indeed the interest of the fans who will still be attending matches long after the investor has moved on to other business ventures.

3. Cardiff City

3.1 Chasing that dream of Premiership football Cardiff City has over recent years, swayed from one financial crisis to another. Players were enticed with unrealistically high signing on fees and wages without the club having the long term means of paying for them.

3.2 Under the ownership of Lebanese businessman Sam Hammam, the club was run at a significant operating loss. This resulted in the club loaning more than £21.7 million from Citibank between 2000 and 2004. Citibank called in those debts in late-2004, so the club then borrowed £24 million from a mysterious Swiss-based Panamanian-registered company called the Langston Corporation. The advance was given in the form of unsecured loan notes.

3.3 This particular loan was unsecured because there were no material assets at the club other than the playing squad. (A pepper corn rent was being paid to the council for the use of Ninian Park, the club’s ground at that time).

3.4 The club was incurring heavy losses and has only showed a net profit in one year during the last ten and then only because promising players or those with a proven track record were sold. There could be no more borrowing. Consequently, costs had to be cut but the club’s hands were tied with a high wage bill and long term contracts for players in place.

3.5 Ninian Park could not be redeveloped so a new build was conceived – this would be more attractive to those who had not previously attended football matches, would increase the capacity and raise the price supporters paid to attend the all seater stadium. Retail outlets were in large part to pay for the new stadium. However, delays in the project meant it finally opened during a recession.

3.6 Even after the new stadium opened cash flow became a problem. Season tickets were offered for sale earlier and earlier. Some contractors at the stadium went unpaid. This season’s season tickets were offered to supporters well before Christmas 2009. Fans were told that the money raised would go towards strengthening the playing squad.

3.7 The supporters were keen to play their part in helping the club financially, but the first they heard of the financial difficulties was when the local paper announced that the club had been served by HMRC with a petition to wind the business up for non payment of taxes. As it transpired, the season ticket money, given in good faith to purchase new players, was used to pay outstanding bills. The new players never materialised. It was against this history of mismanagement that the Trust was set up.

3.8 By early 2010 the Trust became concerned that the club had not held an AGM for three years. Such a meeting would have allowed small investors, which by then included the Trust itself, to ask searching questions as to the financial viability and the management of the club.

3.9 The Trust pushed for an EGM to discuss the ongoing crisis. It wrote to every investor in the club and asked them to proxy their votes to the Trust in order to call a meeting. In the face of such discontent the club did finally call an EGM. Some unpalatable truths were disclosed at that meeting, in part as a result of the actions of small investors and the Supporters Trust itself.

4. Recommendations

4.1 In the light of the experience of the Cardiff City Supporters Trust we offer the committee the following recommendations with regards to the future management and regulation of football in the United Kingdom.

4.1.1 The government should establish a UK Football Commission (the Commission) which would oversee the financial and corporate governance arrangements of professional football clubs. The Commission would include representatives from the FA, football trust or Supporters Direct and a players’ representative.

4.1.2 The Commission would conduct the ‘fit and proper person’ test for chairmen of football clubs over and above all other aspects of due diligence undertaken when a club changes ownership. This test would become a statutory obligation and be conducted in conjunction with the Football League and the Football Association, with the Commission having the final say on the suitability of all such persons to run a football club.

4.1.3 The existing fit and proper person test would be strengthened. New measures could include the person’s previous record not simply in business but also in football, their personal history and past and their present financial standing.

4.1.4 A club’s players wage bills should be capped as a percentage of the total turnover of the club and monitored by quarterly returns to the Commission. This would ensure there is no breach of the cap and that the figures could not be somehow masked over longer accounting periods.

4.1.5 Supporters trust should have formal representation on the boards of professional football clubs, even if this is simply in an ‘observer’ capacity. Fans issues should become a permanent agenda item at all clubs’ board meetings.

4.1.6 New share offers in football clubs should ensure preferential status for properly constituted supporters trusts so that they have the first right to buy any new share issue. This would continue until the supporters trust has achieved a %age of the total shareholding of the club. (We suggest this should be set at 25% of the overall shareholding.)

4.1.7 As happens in France and the NFL, football clubs should be liable to independent audits every year so that the Commission is aware of the financial state of professional football clubs.

4.1.8 In order to encourage supporter participation and ownership, tax relief should be offered on investments by supporters’ trusts in their clubs.

4.1.9 Before there is a takeover of a professional football club, an ‘intentions test’ should be required by the Commission which lists and assesses potential investors’ plans to develop the club as a community enterprise as well as what role they intend fans to play in the governance of the club. This should then be made a condition of agreeing any take over.

January 2011