Written evidence submitted by Professor
Richard Giulianotti
1. SUMMARY
1.1 This submission of evidence draws on over
20 years of social scientific research into football at local,
national and global levels. The submission is structured around
six main questions or issues that were initially highlighted by
the Committee.
1.2 The submission states that:
— Clubs should be treated
differently from other commercial organizations, for political,
social and economic reasons, particularly with regard to the public
benefits of football clubs, and how supporters understand their
attachments to the game.
— Governance rules need to
be changed to improve the financial management of clubs, and to
promote the wider engagement of different stakeholders, particularly
supporters, in running clubs.
— Debts in football are far
too high, hence tighter regulations need to be in place to restrict
borrowing and to improve financial management.
— The Supporters' Trust movement
has a positive mission and has had many notably achievements over
the past decade; there is substantial scope to build on these
achievements.
— Government intervention
may be directed towards promoting supporter representation and
ownership at clubs; enhancing wider social access and participation
in football; and, strengthening the financial management of clubs.
— There
is much to be learned from alternative governance models in other
nations and in other sports; in football, models of club governance
that involve full or partial control by supporter cooperatives
provide one way forward.
2. BACKGROUND
2.1 This submission of evidence has been written
by Professor Richard Giulianotti, Head of the School of Applied
Social Sciences, Durham University.
2.2 The submission is derived from personal research
into football at local, UK and global levels, which has been undertaken
since the late 1980s. Research has been conducted across the UK,
Ireland, mainland Europe (notably Italy, Germany, Spain, Sweden,
and Norway), South America (notably Brazil, Argentina, Uruguay,
and Paraguay), North America (USA, Canada), East Asia (South Korea,
Japan), Africa (Zambia, Zimbabwe) and the Middle East (Jordan).
This research has comprised mainly fieldwork and interviews with
football supporter groups, diverse decision-makers and officials
in national sport systems, journalists, academics, and public
commentators. Much of this research has explored continuities
and differences between local and national football systems and
cultures across the world. A significant strand of this research
has examined different models of governance and economics in these
football systems. This research has been published in various
outlets, notably my authored or co-authored books: Football:
A Sociology of the Global Game (Cambridge, Polity Press, 1999;
also translated and published in Brazilian Portuguese); Globalization
and Football (co-authored with Roland Robertson; London, Sage,
2009); and, Ethics, Money and Sport (co-authored with Adrian
Walsh; London, Routledge, 2005). This research has also been published
in various articles in peer-reviewed journals and edited books.
2.3 The following submission of evidence is structured
around the six main questions or themes that were highlighted
in the Committee's initial Call for Evidence
3. CLUBS AND
COMMERCE
3.1 The Committee asks: "Should football
clubs in the UK be treated differently from other commercial organizations?"
3.2 I agree that clubs should be treated differently
from other commercial organizations; I believe that this should
be the case, for political, economic and social reasons.
3.3 First, like many other key sports institutions,
football clubs are able to deliver many public "goods"
which should be protected from the vagaries and uncertainties
of the market. These goods include providing for general community
association; developing fitness, health and sport education among
community members; socializing children and young people into
community life; promoting civic and regional identity; enabling
social relations and interaction with diverse peoples drawn from
other cities, regions and nations; and, promoting diverse social
inclusion initiatives, such as anti-racism campaigns, education
among disadvantaged groups, and social activities for the elderly.
3.4 Moreover, football is generally understood
to be a vital component of the UK's cultural heritage and social
life. Football clubs are intrinsic to the game's national standing,
and provide the everyday focus for public interest and involvement
in the game. Arguably, given this public status, football clubs
should be treated differently to other commercial entities.
3.5 Second, as we have witnessed in the UK and
elsewhere in recent years, relatively unregulated commercial environments
do not provide a sufficiently secure setting for the long-term
survival and development of football clubs.
3.6 Third, key stakeholders within the football
community do not see their clubs, or elite football in general,
as an essentially commercial domain that is driven by profit-seeking
and consumerism. For example, many supporters object strongly
to being referred to as "customers" or "consumers",
for the simple reason that club attachments and loyalties are
based not on market interests but on deeper emotional, biographical
and social ties. Many supporters point out that they cannot conceive
of switching their allegiance to clubs in the same way that consumers
switch brands of washing powder or toothpaste. It is worth noting
that these non-commercial aspects of football are also often referenced
by new owners when they take over clubs, for example when stating
that they are also "true supporters" of the relevant
team, or respectful of its traditions and identity.
3.7 Fourth, over the past 15-20 years, there
have been substantial expressions of public unease regarding the
status of commercial interests in football. This unease is centred
on a variety of issues, including: the levels of debt, as reflected
in the large number of clubs that have entered administration
since the mid-1980s; the growing financial and competitive differences
between professional clubs in the football league system; the
volume of money at the top end of the game, as reflected in transfer
fees, salaries, and payments to agents; the lack of sufficient
investment in facilities and coaching at lower levels of football;
the long-term escalation in costs for attending fixtures; some
groups being "priced out" of football attendance, as
reflected at some clubs by the relatively high proportion of spectators
who are middle-aged, male, and high earners; the restricted distribution
of tickets to high prestige fixtures among ordinary supporters;
and, the costs of football merchandise and paraphernalia. Public
concern on these issues is often underpinned by the view that
the commercial influences within the game need to be controlled
and restricted by tighter regulations. These views are also influenced
by growing supporter awareness and experience of how football
is governed in other nations. For example, there is greater knowledge
of the mutual or cooperative model at clubs like Barcelona, and
also the large crowds and low ticket prices at fixtures in the
German Bundesliga.
3.8 For these reasons, among others, it could
be justifiably argued that football clubs should be treated differently
to other entities that are in the commercial sector. This treatment
would also reflect the use of non-commercial principles for assessing
the strengths and successes of club football. In other words,
the success of club football would not be measured in terms of
its economic value or annual economic growth, but according to
a wider range of criteria, such as crowd sizes and social composition,
social accessibility (eg with reference to ticket prices), community
and outreach schemes, national team successes, and the scale and
vibrancy of public participation in football (eg as qualified
coaches, players, officials).
4. GOVERNANCE
RULES
4.1 The committee asks, "Are football governance
rules in England and Wales, and the governing bodies which set
and apply them, fit for purpose?"
4.2 Arguably, these governance rules need to
be tightened and enforced more rigorously. In recent years, there
has been substantial public concern over several issues in regard
to football governance. These issues have included:
— Corruption in the game, for example in regard to hidden
payments to managers, agents, directors and players during transfer
negotiations. Internal investigations by the football authorities
failed to alleviate fully public concern, while further allegations
of corrupt practices subsequently emerged.
— The extent to which the "fit and proper"
test for club owners has been applied on ethical or financial
grounds. For example, in recent years, concerns have been raised
about the human rights record of one English club owner, while
there have been relatively limited checks undertaken on the full
backgrounds of international investors. There is therefore a clear
public interest in a far more robust process of scrutiny being
introduced with regard to club ownership and investment.
A related point here is the
extent to which adequate or appropriate financial plans are produced
by prospective investors. Thus, there is a compelling case - on
the grounds of public interest, and protecting the club's financial
security - for preventing prospective owners from using leveraged
buyout schemes to fund their takeover of clubs, as occurred in
recent years at Manchester United and Liverpool. Moreover, in
the context of individuals owning or holding substantial stakes
in clubs, a strong case may be made for reintroducing the rule
that such individuals should not seek to profit personally from
these share-holdings.
— Financial transparency and effective
budgeting at clubs. Cases such as Leeds United and Portsmouth
in recent years - as well as many clubs in the Football League
- illustrate the problems. To ensure financial transparency and
proper planning, there is a strong case for following some other
nations which require clubs to submit their budgets for independent
scrutiny on a six-monthly basis in order to secure their registration.
4.3 Two broad principles should inform the modernization
of these rules.
4.4 First, the rules should promote stronger
systematic engagement and dialogue with a wider range of stakeholders
associated with the game, notably different spectator groups,
as well as players and match officials. Indeed, these interests
should be formally represented on key decision-making bodies within
football. This engagement and representation would promote more
positive social relations, and greater senses of partnership and
trust, across the game's stakeholders. It would also enable football's
diverse governing bodies to draw on a wider pool of expertise
within the game, and would serve to enhance the public image of
football in England and Wales at international level. Ideally,
in the longer-term, this engagement and dialogue would be best
facilitated through clubs being converted fully or substantially
into cooperative institutions that are fully or largely owned
and controlled by individual supporters.
4.5 Second, there needs to be a tighter array
of checks and controls on investments in football, with particular
regard to "fit and proper" and "public interest"
criteria. The importance of these criteria is underlined if it
is agreed that football clubs should be treated differently to
other commercial organizations. If the first principle here -
concerning greater systematic engagement and representation of
more stakeholders - is also accepted, then there is a stronger
likelihood that the sources of these investments will be more
rigorously scrutinized.
5. DEBT
5.1 The Committee asks, "Is there too much
debt in the professional game?"
5.2 There is clear evidence that there is too
much debt. A UEFA report last year indicated that, for the 2007-08
season, English Premier League clubs accounted for 56% (£3.5
billion) of the net debt of all European clubs - a grossly disproportionate
figure. Recent figures also reveal that several clubs have debt
levels which are more than 2.5 times their annual turnover. Clubs
in the Football League have also encountered enormous debt problems
in recent years, as reflected in the high numbers that have entered
administration or which have struggled to ward off winding-up
orders.
5.3 These debts have different causes, such as
leveraged buyouts, large investment in capital projects, and heavy
spending on player transfer fees and wages (often, funded by large
loans from club owners and share-holders). In the case of many
Football League clubs, borrowings were financed on the back of
future television revenues which failed to materialize after ITV
Digital collapsed.
5.4 These levels of debt have a negative effect
on football clubs. They undermine the long-term security of clubs.
They also put pressure on clubs to maximize their revenue streams
from supporters, for example by charging high season-ticket and
seat prices, and directing a large number of tickets to prestige
fixtures towards corporate clients or wealthy fans.
5.5 There are various regulations which may be
introduced to control the debts and losses reported by clubs.
The UEFA "Financial Fair Play" rules from 2012 onwards
- which seek to control and ultimately, to eradicate the losses
that clubs report each year - should have an impact for clubs
which are pursuing European competition. Further measures in England
and Wales may include prohibiting leveraged buyouts; placing a
ceiling on club borrowings and/or wages relative to turnover;
and, submitting club budgets to close independent scrutiny on
a six-monthly basis.
6. SUPPORTER
TRUSTS
6.1 The Committee asks, "What are the pros
and cons of the Supporter Trust share-holding model?"
6.2 The mission of the Supporters Direct movement
is a positive one, in promoting supporter representation and participation
in the governance of football.
6.3 The achievements and successes of the "Supporters
Direct" movement should be underlined, as reflected in the
agency's own reported figures: Trusts are in place at over 160
clubs; there are over 120,000 members; Trusts contribute board
directors at almost 60 clubs; and, Trusts own or control 15 clubs.
Trusts have also played a key role in the survival of several
clubs that have been placed in administration. This kind of proximity
to club owners and directors should allow supporters to convey
their specific views regarding, for example, ticket allocations
and prices, club expenditure, and security in stadiums.
6.4 Some weaknesses in the the Supporter Trust
system, as it stands, may centre on its uneven influence. For
example, some of the largest clubs either do not have Trusts or,
where they exist, have little impact on the club in terms of how
it is run or how it treats supporters. The trend among the top
clubs towards complete takeovers by individuals may mean that
Supporter Trusts will have fewer opportunities, under current
regulations, to exercise influence in the management of clubs.
6.5 Arguably, there is substantial scope for
Government to intervene, to enable supporter movements and associations
to build more fully on the mission and achievements of the Supporters
Direct movement.
7. GOVERNMENT
INTERVENTION
7.1 The Committee asks, "Is Government intervention
justified and, if so, what form should it take?"
7.2 The question of potential Government intervention
is a delicate one, as FIFA is concerned to restrict the involvement
of national governments in running football.
7.3 However, intervention is justifiable, largely
for the reasons which have been set out above: that football contains
a number of public goods which extend far beyond the commercial
realm; that supporters should have the opportunity to exercise
greater influence over their clubs, ideally through a form of
mutual or cooperative ownership; that clubs currently on the whole
do not engage sufficiently with all stakeholders, particularly
supporters; that clubs carry excessive levels of debt; and that,
while recognizing its achievements, the current Supporter Direct
model does not go far enough for the achievement of these objectives.
7.4 Intervention might take several forms. First,
the Government should offer more substantial and tangible support
for supporter movements which seek to establish forms of mutual
or cooperative ownership of clubs, along the lines of other sport
clubs, such as in Germany, Spain (eg Barcelona), or the United
States (eg Green Bay Packers). Consideration should be given to
a form of intervention that empowers supporters to mount a collective
bid for a substantial share, or a takeover, of a club, according
to an independently agreed valuation.
7.5 Second, the Government should introduce some
regulations to ensure that the board of directors on each club
includes some representation from supporter groups and movements.
These supporter representatives should ensure in turn that they
maximize their engagement with the wider body of supporters, notably
different supporters' clubs.
7.6 Third, the Government should ensure that
stronger regulations are introduced in regard to ownership and
large shareholdings in clubs. A "fit and proper" test
should be more rigorously applied on financial and ethical grounds.
Prospective investors should set out adequate financial plans
for their running of the club. The rule that owners or shareholders
should not seek to profit personally from their financial participation
in clubs should be reintroduced. Leveraged buyout schemes should
be banned.
7.7 Fourth, the Government should introduce a
series of regulations to stabilize the financial position of clubs.
Clubs should be required to submit budgets on a six-monthly basis
for independent scrutiny. The levels of debt which clubs are able
to take on should be restricted.
7.8 Fifth, the Government should introduce policies
that promote social access to football. It should explore how
measures may be introduced, in order to restrict or limit the
price of match tickets or season tickets; and, in order to ensure
that clubs try to diversify their spectator composition, notably
in regard to age, gender, and ethnicity.
8. ALTERNATIVE
GOVERNANCE MODELS
8.1 The Committee asks, "Are there lessons
to be learned from football governance models across the UK and
abroad, and from governance models in other sports?"
8.2 There is much to be learned from the governance
models that are apparent in football and other sports in different
parts of the world. Moreover, different stakeholders in football
- including supporters - are increasingly aware of these different
models, hence it makes sense to engage fully with this issue.
8.3 There are various illustrations in sport
of leading clubs that are at least partially or wholly owned by
their supporters. This has provided the traditional model of club
governance in much of South America, Spain and Portugal, and,
in different ways, also Germany. In North American sports, the
Green Bay Packers are a highly successful, community-owned, not-for-profit
club.
8.4 Care should be taken to place these models
within their distinctive sporting and cultural contexts. For example,
in American football, revenue-sharing and the draft system for
allocating players help to reduce the impact of budget inequalities
between teams. In South America, the effective management and
financing of football clubs have been chronically affected by
massive debts and bankruptcy, mismanagement of finances by elected
officials, and corrupt relations between officials and supporter
movements.
8.5 In recent years, several nations in mainland
Europe and South America have amended their regulations for the
governance of clubs, thereby enabling individuals and corporations
to acquire ownership or more substantial shareholdings in clubs
that had been either entirely or principally founded on cooperative
models of ownership. Thus, several models of club ownership co-exist
in individual nations, as is the case in Germany, Portugal or
Spain.
8.6 It is likely that a mixed model of ownership
would be the most practical strategy for clubs in England and
Wales. For example, at an individual club, this would involve
individual shareholders and supporter associations holding substantial
stakes in clubs, with potential for local authorities to also
participate. Close consideration may be given to how supporter
associations may hold 51% of shares, as has been the case at some
German clubs. These models of ownership should include regulations
that are intended to avoid the problems found in other nations,
for example regarding financial mismanagement by club officials.
8.7 A wider issue here concerns the governance
structures of football as a whole, which feature numerous individuals
with ties to the FA, Football League, or Premier League. The wider
aspirations of football in England and Wales - for example, in
regard to winning bids to host future mega-events such as the
European Championships or World Cup finals - would be significantly
assisted by the integration and stream-lining of these structures,
while ensuring that key stakeholders, including supporters, are
fully represented.
January 2011
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