Football Governance

Written evidence submitted by Vince Cullen ( FG 78)

Summary

· Football clubs should be treated differently from other commercial organisations because football is not simply an ordinary commercial business and a monopoly situation exists whereby fans are at risk of being exploited. There are responsibilities to local communities, to cultural considerations and to the good of football overall that need to be safeguarded. These require a different governance, and I would argue legislative, framework.

· It would appear that the governance rules and governance bodies in English football are not fit for purpose. The situation where the recommendations of the Burn’s report on the structure of the FA have yet to be implemented fully and the debacle of Premier League clubs in a financial mess, would suggest that governance is in need of major reform. It may be necessary to establish a separate, independent football regulatory authority if reform to the FA proves too difficult. From a fan’s perspective it seems that the authorities running football lack transparency and accountability.

· There seems to be far too much debt in the professional game. Spiralling players’ fees and wages and the unbridled ambition of clubs, fuelled by transient availability of finance through wealthy benefactors – the so called ‘financial doping’ - seem to underpin this. This will ultimately lead to lack of serious competition and diminish football as a spectacle for fans. Even Formula 1 racing has attempted to reform its financial aspects to improve its appeal for spectators and to make it more competitive.

· The greater involvement of fans in club ownership in the Bundesliga in Germany seems to have aided stability and has led to less debt, and greater profitability, relative to other European countries with significant football leagues. Criticisms of this model include the reduced proportion of shares to attract external investment and the inability to afford the higher wages demanded by the world’s top players. However, the benefits include reinvestment of profits into the club, consideration of fans in setting ticket prices (thereby raising match attendance figures )and in negotiating TV deals. In general, the emphasis is on acting in the best interests of the club and its fans, and in doing so the integrity and stability of football itself is maintained. Perhaps a 25.5% proportion of each club could be allocated to ownership by supporters’ trusts so that the club would be protected from being taken into private ownership.

· Government intervention is justified in protecting the heritage of clubs as national assets and the interests of a significant number of fans, primarily by ensuring effective legislation is enacted. It can also be involved in ensuring the processes for governance are carried out properly, such as providing effective oversight bodies that have ‘teeth’. These need not be exclusive bodies just for football but may be a responsibility of a government department, for example. Government should be involved in a leadership role to promote the need for reform and to ensure that effective change occurs.

· One thing is clear - decisive action is needed. Ideas have been mooted for years and there has been a lot of talk about good intentions for embracing fans and so on, but little has changed really. Even major recommendations have been slow in implementation or in impact. For example the Burns Report made significant recommendations for reform of the FA some five years ago now. It is important that this current investigation does not go the same way in its recommendations being ignored.

Introduction

1. I have been an Arsenal fan since I was six years old. I remember watching Charlie George lying down on the pitch after scoring the winner in the 1971 FA Cup against Liverpool, and in 1989 Brian Moore shouting :

"Arsenal come streaming forward now in surely what will be their last attack. A good ball by Dixon, finding Smith, for Thomas, charging through the midfield. Thomas, it's up for grabs now!"

2. I say all this not to practise boring any future grandchildren I might have, but to give a flavour of one individual’s experience, the type of which is repeated for thousands of others who love football! It illustrates the impact football has in people’s memories and lives, and the bond that forms between them and their ‘beloved’ club. This bond is good news for business for football clubs but it is one that has been systematically abused by many clubs over the years, and particularly in more recent times. They have been preying on the loyalty of fans and abusing their position of monopoly. This includes the financial demands made by players. Yes, in the past players were not for the most part rewarded as well as they should have been, but the situation has moved too far towards the opposite extreme nowadays, and it is seriously undermining the future of the game.

3. It is ironic that some of my greatest memories also involve Liverpool FC and it genuinely saddens me to see the predicament the club seems to have got itself in to in recent times. It has always been a great rival club and that’s the point, it’s what English football is all about. Great rivalry means great games, classic moments and fond memories. It is also disturbing to see that Man Utd FC should be saddled with such a large debt when it is one of the world’s most successful sports clubs. What is happening?

4. I take some comfort in that Arsenal seems to be run well financially and does not seem to take advantage of its fans’ loyalty. Nevertheless, over the past few years there have been concerns that a rich majority shareholder might take overall control and jeopardise the club’s sound running and apparently benevolent approach to fans. With Arsenal it seems that its plurality of ownership model, with a spread of shareholders, has maintained stability for the club so that no one person has been able to embark on an autocratic vanity project. Of course, this balance depends on the good intentions and integrity of the shareholders, and who knows what might happen in the future?

Comments

Position of football clubs

5. Fans’ and community attachment to clubs transcends ordinary operational considerations and temporary club ownership. This means that the clubs effectively have a complete monopoly, and many abuse this position. There needs to be effective safeguards to protect fans and club staff from the excesses of some clubs, such as wealthy owners parachuted in for a short period and then leaving, causing untold damage in some cases.

6. Fans maintain the identity of the club and its link to the local communities. The opening up of UK football to overseas players has been welcome and important, and there should be no problem with bona fide overseas board members, but some ‘globalising influences’ have been less beneficial for the game and loyal fans. A balance has to be struck between a club’s responsibility to its local fan base and its global commercial aspirations.

Football governance and governing bodies

7. Unfortunately for football, the composition of the existing English football authorities means that they function more as members’ organisations rather than as a regulating body – it is like the difference between the British Medical Association, as a professional member representative organisation, and the General Medical Council as a regulator. The latter is primarily concerned with the interests of patients rather than doctors, but also in contributing to the advancement of the profession of medicine by ensuring important infrastructure elements like ensuring high practice standards. An independent football regulatory authority could fulfil a similar function by ensuring that the interests of fans and the long term health of football are protected. Rather than necessarily a separate body, the reconstitution of the FA may be able to achieve this function. Perhaps the FA’s remit should be more about protecting the integrity and future of football and less about being a members’ association. If this is not palatable for the FA then an independent body is the only option for achieving a fair and impartial governing of the game.

8. Coherence in governance is essential. The English Premier League’s operating as a separate entity seems to have undermined the FA’s authority and seems to have contributed to disharmony and a fragmented governance of football. The relationship between the governing body of football in Germany, the Deutscher Fußball-Bund, and the operator of the Bundesliga, the Deutsche Fußball Liga, would appear to much more successful.

9. Of course in making significant changes in football governance it is important to recognise the successful aspects of what has been achieved in UK football and to acknowledge the contribution of the various bodies. However, simply leaving these bodies to cooperate with each other, and to manage their own internal difficulties, does not seem to have worked for the good of football. The lead needs to be taken by an independent external influence, and I would suggest that this needs to be the government because of the inevitable legislative changes that will have to occur. I believe it is also important that significant representation of fans should not just happen at clubs but also in the FA, the Premier League and any future football regulatory authority.

10. By ensuring effective governance in the top football authorities, this will set a good example for governance in clubs and throughout the whole of football’s infrastructure.

11. There are many issues that a successful governing body and system will need to address effectively. Major important ones from my perspective as a fan include:

· It is necessary to remove vested interests from the bodies running the game.

· Effective test for fit and proper persons in positions of major management responsibility in clubs.

· Need to ensure that local talent gets a fair chance to help maintain a healthy pool of national talented footballers.

· Careful consideration needs to be given to the development of women’s football, including investment, and to ensure proper representation of women in the governance structure.

· Wage structures – the situation across Europe where many clubs are spending significantly more than they earn is ridiculous. I have often heard the excuse that players will go elsewhere. With UEFA’s new financial fair play rules coming in. there is a chance to tighten up the requirements for English football. More effective regulation of agents is probably required to ease pressure on inflated player fees and wages.

· May need some sort of constraint for clubs to stop inflation of player fees and wages so that the big clubs are not able to create a huge grip on success in the league simply by their spending power , to the detriment of smaller clubs. This stifles competition and could ultimately make watching football predictable and less attractive for fans.

· Clubs need to be run with integrity and sound financial management.

· An effective mechanism of feeding money down to properly support lower league and grass roots football.

· The way football managers are treated by major top league clubs is appalling in many cases. As criticism of managers and their dismissal is so prolific, has a high media profile and is done in the glare of publicity, this sets a poor example for employment rights and for loyalty aspects. It gives the impression that clubs are not professional .

· There needs to be a better system of handling TV rights that considers fans. There appears to be too much of a monopoly by one TV company. The respect for fans should extend to how football is broadcast also.

· There should be reasonable control on ticket prices to ensure that young people, and those of limited means can afford to go to games, and on merchandising to protect fans from unreasonable demands on their finances (such as a too frequent kit change, for example).

· Owners and boards are custodians of clubs and need to respect the club’s heritage.

· Require proper business financing for borrowing to purchase or fund a club.

Debt in the professional game

12. Stricter financial parameters are required to avoid ‘financial doping’ that effectively is ‘cheating’ due to overspending by an injection of finance that is not generated by the operations of the club.

13. This needs to go hand in hand with tight financial regulations that limit spending to what can be afforded by income. There should be strict financial parameters for clubs to operate within that are enforced effectively and not open to abuse or influenced by vested interest. Even Formula 1 racing, that leviathan of corporate spending and excess, has curbed spending in recent years in order to make it more competitive and attractive to watch.

14. Clubs should be required to break even financially. Costs should not exceed income and this should be a requirement of continuing to operate as a football club. We should build on UEFA's Financial Fair Play initiative to ensure a more equitable financial situation between clubs. The Premier League would appear to generate the most revenue in world football and yet its clubs have financial difficulties. Surely something is not right? This must be due to uncontrolled costs and if clubs were required to spend only what they earn, presumably the income generated from being in such a successful league would be sufficient to enable the clubs to do well financially with increased profitability. One is really only financially wealthy in relation to one’s expenses.

Supporter trust share-holding

15. There should be a requirement for a proportion of a club to be owned by fans because many clubs and the football authorities seem to regard fans very low in their priorities. The transient nature of football club ownership and the tenure of operational officers at clubs and football authorities is transient when compared with the long term affiliation of fans to clubs and to the game in general. Simply having a fan representative on club boards is not sufficient any more; there needs to be real, tangible influence that comes with having a stake in the club.

16. There will be difficulties in choosing a model for this to operate but there are apparently successful models elsewhere, such as in the Bundesliga and the Green Bay Packers NFL team. I am sure there will be obstacles to overcome but the anticipated cry that it will stifle Premier League development does not seem credible. It is not simply down to the Premier League that England’s top league is so popular – there is a heritage in English football going back decades to point towards the current success of the top league. Besides, fan ownership in the examples given above does not seem to have hampered success.

17. Giving a fans’ trust a proportion of the shares would ensure effective fan representation. While 51% of the shares, as in the Bundesliga, is a mouth watering prospect for a fan, I think around the 25% proposed by the last Labour government would be a good balance. It enables a lot of potential investment opportunity in the club by the business sector but crucially enables fans to have an influential voice and, to ensure that the club cannot be made private by an individual, I would have thought 25.5% should be the figure for fan ownership.

Government intervention

18. In a Utopian moment I think it would be great to let everything be open and liberal so that everyone could benefit from less constraints, but I fear that, like banks in the recent financial crisis, football institutions will not curb excesses, nor taking unreasonable risks, of their own volition. Stifling of innovation and opportunity is often cited by the ‘business’ world as resulting from government interference. However. I would point to an example of how government and public sector ‘interference’ laid the necessary foundations and infrastructure for a subsequent huge success – the internet. I believe government has a role to play in acting as a catalyst for changes that ensure the long term success for football in the UK.

19. FIFA rules seem to prohibit too much government interference, but they would say that wouldn’t they? If any body was particularly in need of reform it is FIFA. Nevertheless, government ‘interference’ is surely justified when it involves the rights of consumers? Legislation is evidently needed as collectively those running football have mostly demonstrated that fans are not regarded with the respect they should be. The government could prepare the way for much needed change by forging a legislative path to enable a more democratic model of football governance to emerge. The Premier League is evidently wedded to its free market model. Ideally there should be as much freedom as possible, but history has shown that some people seem to exercise their free rights to the detriment of others’.

Other governance models

20. The football governance model in Germany stands out to me as one that warrants careful scrutiny. With its blend of significant fan ownership, coherent regulatory governance structure and tight financial rules, the Bundesliga appears to be successful in terms of numbers attending matches and profits earned by clubs.

21. Also (and of course I have to declare an interest here!), Arsenal FC seems to have developed an effective financial operating model, and its approach to respecting fans seems to be good. Perhaps this needs further study also.

January 2011