Written evidence submitted by Southend
United Supporters' Club Trust t/as The Shrimpers Trust
1. INTRODUCTION
— The
Shrimpers Trust has a membership of over 1,100 Southend United
football supporters, which currently equates to around 20% of
current home attendance. Its motto is "To Help not Hinder".
— Shrimpers
Trust has, along with the vast majority of our supporters, a serious
concern over the future of Southend United FC. The current Board
of Directors in which the Chairman has, it would seem, the only
decision-making voice, displays a complete lack of transparency
over what is happening within the club. In season 2006-07, Southend
United were in the Championship. They now languish in the bottom
half of League 2 and are reported to be losing £100,000 per
month—although this figure is down on previous years.
— The
Shrimpers Trust would like it to be known that overall it has
a good working relationship with the Football Club and this submission
is not meant to imply anything different generally. There are,
however, negative issues relating to specific events which we
feel could have been handled differently by the Club and would
not have occurred with supporter involvement in Board decisions.
— The
Shrimpers Trust welcomes the coalition government's initiative
"to encourage the reform of football governance rules
to support the co-operative ownership of football clubs by supporters".
This is something we have been striving to achieve with Southend
United without success.
2. A BRIEF HISTORY
— Southend
United supporters purchased the land and built the current stadium
at Roots Hall, where the football club play their home games,
in 1955. Supporters subsequently handed over and entrusted ownership
of the stadium and its environs to the football club. Subsequent
Chairmen have since been unable to operate the Club without making
a financial loss, and have disposed of most of its assets.
— The
Shrimpers Trust was formed in July 2000 by members of the existing
supporters club (Membership ca 300) who felt that the sale of
the remaining assets of the club to a local property developer
(the current Chairman) represented a real threat to our football
club existence. This threat still remains today.
— A lot
has been said and reported about "fit and proper tests for
directors". Whilst we are not cognisant of the current requirements,
there has been a lack of stability in the Southend United Board
composition. We have seen a frequent change of Directors especially
in the past year, the Chairman (and owner) being the main exception.
The Shrimpers Trust would be interested to know what "current
regulatory process" is in place and how it is policed.
— A further
point of note is that it would seem that the Board at Southend
United is largely irrelevant as there is a perception that the
owner says and does what he likes. Ron Martin owns a controlling
majority of shares and therefore it is materially irrelevant what
other directors and the fans think. This autocratic style of management
is likely to hamper implementation of any Government co-operative
initiative.
— Nevertheless,
the owner does make himself accessible and is prepared to listen
to fans concerns and will often act on them. However, the conflict
between his business interests and the Football Club make it difficult
to see how Southend United will survive the next few years without
something radical happening.
— Contracts
have been agreed between the Chairman and Sainsbury plc which
is intended to result in the current stadium, Roots Hall, being
demolished. This will be replaced by a supermarket and other development,
with the football club moving to a new stadium which is still
to be built. Plans were approved for the stadium some years ago
but to-date no work has started, with the current economic recession
and stubborn shopkeepers who will not sell their premises being
cited as the reason for the delay.
— The
planned development at Fossetts Farm, including a new stadium,
Hotel and retail outlets will all be owned by companies controlled
by Ron Martin, the existing ground has all but been sold to Sainsbury's.
The fans have always been told that the "enabling development"
at Fossetts Farm will be used to provide funds to the Football
Club. However, as Ron Martin will own everything, it is still
unclear as how Southend United will be able to survive at a new
stadium any better than they can now. At this point in time, neither
the "enabling development" nor future rent has been
explained except in sound bites and generalities.
3. RECENT EVENTS
— The
past 24 months have been particularly turbulent with the Chairman
using unpaid Vat and Tax due to HMRC as temporary banking facilities,
a practice which is understood to be a more than isolated occurrence
within football clubs. Players have regularly not been paid, which
is felt to be a major contributing factor in last year's relegation,
suppliers regularly go unpaid for months and often a Winding up
order is the only mechanism left to resolve the situation. I hate
to think how much money has been spent on legal proceedings over
the last two years, especially with regard to our numerous visits
to the High Court to meet our friends at HMRC.
— It
is perhaps worth mentioning that although HMRC's job is to collect
revenue for the Government, the overzealous and unreasonable behaviour
of HMRC during the court cases with constant changing of figures
without giving appropriate time to react, does suggest that their
tactics should be reviewed. It is my view that the public money
wasted by HMRC during several of these cases has been nothing
short of scandalous.
4. FINANCIAL
LOAN TO
THE CLUB
— The
Shrimpers Trust was asked to loan the Football Club money during
this period. I personally received a call on a Friday lunchtime
from the Chairman saying that if he did not pay the PFA around
£120,000 immediately, the Football league would not be able
to lift our transfer embargo. At the time we had nine players
available, although as we had already been knocked out of the
FA Cup competition we were not playing until the following Tuesday.
After a little consideration the Trust entered into a written
short term Loan Agreement with the Football Club with a personal
guarantee from the Chairman and loaned the Club the £60,000
required. The PFA were paid, Southend United were released from
their embargo and a number of players were signed on loan. Two
months later Southend United had a further transfer embargo applied
as a series of other bills were unpaid.
— On
the maturity date of the Loan, the funds were not repaid as agreed,
no contact was made by the Club, no apology was received and it
was left to the Trust to establish contact. A revised payment
plan was prepared ie the deadline for repayment was extended.
This subsequent repayment date passed without funds being received,
no contact was made by the Club and no apology was received. This
scenario continued until the money was finally paid in the summer
of 2010, some eight months after the repayment was originally
due. Throughout this process, the Chairman was silent on the matter
and the Shrimpers Trust had to continually try to make contact
with him, hardly a recipe for a harmonious working relationship.
The Shrimpers Trust and its over 1,000 members were useful when
money was needed and then treated with contempt.
— During
this period, the Shrimpers Trust also had to step in several times
to a) ensure suppliers were paid and b) to underwrite travel costs.
— The
Strategic objectives of the Shrimpers Trust when set-up were and
still remain:
— To
be a democratic organisation that seeks to represent the views
of all supporters of Southend United through open affordable membership;
— To
strengthen the links between the Club and the Community and to
represent the interests of the Community in the running of the
club;
— To
help raise the profile of the Club and encourage new support within
the community;
— To
encourage the Club to take proper account of the views and interests
of its supporters in its decisions;
— To
encourage and promote the principle of supporters representation
on the Board of the football club.
— During
the loan period Ron Martin agreed that a representative of the
Supporters Trust would be invited to join the Football Club board
in July 2011. We did ask (without response) at the time as to
why he felt we were capable of being Board members in July 2011
but not prior to that time. As we approach July 2011 it will be
interesting to see if the Chairman keeps his promise. Quite clearly
the Chairman is interested in what we have to say, particularly
as money changes hands regularly (the Shrimpers Trust is the Youth
Team financial sponsor and has made tens of thousands of pounds-worth
of donations into the club's Under-18 side; the Centre of Excellence;
the Community & Educational Trust and for physiotherapy equipment
over the past decade) but when it comes to decision making he
has no real interest. The Government's current initiative and
intervention in this area is obviously welcomed.
5. GOVERNMENT
QUESTIONS
In answer to the specific questions presented, The
Shrimpers Trust would answer as follows:
Should football clubs in the UK be treated differently
from other commercial organisations?
1. As the most popular sport in the UK, football
affects the lives of millions of people and therefore its health
needs to be protected, to ensure its long term life. As with any
business, the continued operation of Clubs with expenditure exceeding
income cannot be allowed to continue.
2. Clearly football is, however, different from
other commercial organisations. Generally speaking a customer
of Sainsburys can go to Tesco or Asda should they be unhappy about
the products or services of those commercial organisations. A
football supporter usually has allegiance to only one club and
would be very unlikely to consider an alternative when the product
or service provided to him is less than satisfactory.
3. A useful start might be to reverse the ruling
that allows HMRC to hound Supporters Trusts for Corporation Tax—one
wonders how much money is spent in collecting a few pounds from
the coffers of volunteers trying their best to help their local
community asset, up and down the country.
Are football governance rules in England and Wales,
and the governing bodies which set and apply them, fit for purpose?
4. Great strides have been taken by both The
Football Association and The Football League to improve football
governance rules in recent years but, at the moment, there is
clearly still an unsatisfactory situation in place.
5. Recently-departed FL Chairman Lord Mawhinney
attempted to implement a wage cap at 60% of a club's turnover,
but so far only League Two is subject to this as there is objection
higher up the Football League. It is important for the sustainability
of football in the short, medium and long-term that this is rolled
out not just within the Football League, but in the FA Premier
League as well.
6. The FA, too, is attempting to improve matters;
as mentioned before, the "fit and proper" persons test
is a good idea, but its' current structure sometimes makes decision-making
difficult. There is a clear conflict between the professional
and the grassroots game that needs to be resolved before The FA
can become a progressive organisation.
7. In summary it's difficult to see that the
football governance rules have had any material impact at Southend
United.
Is there too much debt in the professional game?
8. Buying success today and worrying about it
tomorrow is not a great business model—it only works if
you have Middle Eastern or Russian backers! So of course there
is too much debt, that is only too apparent.
9. Few successful companies have prospered without
a level of debt, indeed it's difficult to expand and grow a company
without taking on debt. But clearly that debt needs to be managed
carefully
10. Southend United has more debt than it can
cope with. All remaining rights to assets have long since been
transferred to the Chairman's confusing group of companies—not
least by way of setting rent too high for the club to afford.
As rent has not been paid interest has accrued. The Chairman has
written off some of the rent interest and insists he has no intention
of collecting the remainder, but from a book-keeping point of
view it has ensured that any funds the Club were due when vacating
their existing ground are no longer applicable.
11. The Club and owner's accumulated debt appears
now at a level that makes it difficult to see how a new stadium
can make any sense financially and with the Sainsbury debt secured
on our existing stadium, there is some serious concern as to what
would happen should the planned development fall through.
What are the pros and cons of the Supporter Trust
share-holding model?
12. We feel as a trust that not only do the fans
have a moral claim to the Club, but we also believe that supporter
ownership offers a more appropriate business model. One that would
not risk the Club's fortune on short term or even objectives not
best suited to the club. The Club would not have got in so much
debt with a democratic elected board with a legal remit to manage
the finances appropriately.
13. As a business model, being community owned
could offer wider social and economic value. A community club
should be more in tune and responsive to the needs of the local
community—for example local suppliers would be paid on time.
As a brand, we feel it is better for sponsorship, tapping into
company's CSR budgets and building other revenue streams as a
result of the community brand. Generally the fans would be more
loyal as it would be their club. If they did not like how the
club was being run they could elect a new board or stand themselves.
14. Our ambitions of having an elected Supporter
Director on board are public and we still have ambitions in this
area. However we also have concerns—we would be a minority
Board member and shareholder, almost a lone voice. The concept
needs a progressive Board and clear terms of reference for it
to be successful, with full financial disclosure. If this had
been the case at Southend United, we would have been alerted to
the financial issues earlier and may have been able to stop the
debts increasing.
15. It is difficult to see too many Cons in this
model—there is an argument that says "nothing gets
decided by committee" but it's not one the Shrimpers Trust
subscribe to.
Is Government intervention justified and, if so,
what form should it take?
16. Football clubs should be run as businesses
and the Shrimpers Trust believe that government intervention is
only justified when there is a clear case of mismanagement and
a risk of bankruptcy. Furthermore, the persons involved should
be made accountable, not the club. There have been cases of owners
using the 10-point rule to effectively start afresh next season.
17. However, the worry is that whenever intervention
occurs be that audit, fines, HMRC or embargos, it is actually
the fans that suffer, not the management.
18. A law change requiring those individuals
making decisions to be more accountable or at least their actions
transparent would be a good start. Boards should be made to be
more transparent—including all aspects of cash flow—that
way fans and other interested parties can see if the club is being
run within its means.
19. In Southend United's case, financial information
is routinely withheld—accounts are almost always late, and
shareholder information few and far between. The Chairman is always
able to hind behind the statement "I'm sorry that's commercially
sensitive"—clearly with the Fossetts Farm development,
retail partners, CPO's, and contracts for existing site and development
in mind, a lot of the information probably is commercially sensitive,
but that just adds to the frustration of the fan base who just
want to know "what's going on" and whether they are
going to have a club to support over the next few years.
Are there lessons to be learned from football
governance models across the UK and abroad, and from governance
models in other sports?
20. We are no experts at the Shrimpers Trust
on alternative governance models but we understand from Supporters
Direct and a well read member that the Bundesliga has a lot we
could learn from. If, for example, they have not had an insolvency
case in their history and there are several every year in the
Football league, then this for starters is an area we could learn
from.
6. SUMMARY
We hope that his opportunity to address the failings
of Governance in English football is taken fully so that fans
finally have their rightful place in the decision making process
at their club and that there is less pressure for clubs to spend
more than they receive.
The Shrimpers Trust is pleased to have been given
this opportunity to be involved in this initiative and would willingly
re-engage should that be necessary.
January 2011
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