Football Governance - Culture, Media and Sport Committee Contents

Written evidence submitted by the Football Supporters' Federation


1.1  The Football Supporters' Federation (FSF) represents over 180,000 fans supporting professional clubs and national teams at all levels throughout England and Wales. We would like to endorse the evidence separately submitted by our friends and partners at Supporters Direct.

1.2  The proposals and recommendations contained in this evidence are summarised as follows:

—  The creation by Parliament of a special legal status of "registered limited sports club" as part of a new comprehensive Sports Act (section 2).

—  Strengthening of the owners' and directors' tests and their enforcement (section 2).

—  Further reforms of FA governance, starting with the appointment of two new independent FA main board directors (section 3).

—  Continued adequate funding by the game of the FSF and Supporters Direct (section 3).

—  New rules to inhibit leveraged buy-outs and curb disproportionate debt (section 4).

—  Government to intervene as a facilitator to ensure that essential governance reforms are introduced by the FA (section 5).

—  A study of models offered by other nations and sports (section 6).


2.1  We believe that football clubs are principally sporting and cultural assets. Their prime purpose should be to serve their geographical and supporter communities by (a) providing the best level possible of football on the pitch; (b) providing the best possible level of supporter facilities and value for money off the pitch; (c) supporting the development of the game at all levels as a "beacon" of football in their town or city; and (d) the promotion of community cohesion and well-being. All other purposes and objectives should be ancillary to and support these objectives. In many cases what actually happens is very different.

2.2  Almost all professional football clubs in this country are legally either private or public limited companies. Indeed Premier League and Football League regulations require that professional clubs be registered as such.

2.3   There are a number of clubs whose final legal majority or sole owner is a mutual Industrial & Provident Society (eg Exeter City, Brentford). This is a major success for Supporters Direct and the mutual supporter ownership movement.

2.4  To regulate football clubs solely as private sector commercial businesses is to miss the point of professional football as a sporting and cultural good. The game's European governing body UEFA, the Union des Associations Européennes de Football, believes that the best form of organisation for a professional football club is a mutual member-owned club. We agree.

2.5  In the British context we propose the creation by statute as part of a comprehensive Sports Act of a new limited liability status for sports clubs whose goal is not primarily one of profit for shareholders.

2.6  The directors of all private or public companies limited by shares owe an overarching fiduciary duty to the company's shareholders. All other objectives are secondary. Even this objective is often not met in football, as demonstrated by the financial crises at many clubs over the last two decades. Most recently at the elite level we have seen the economic collapse of Portsmouth, Liverpool almost collapsing under the weight of acquisition debt piled on the club by its new owners in a leveraged buy-out in 2007 and the deeply controversial leveraged buy-out of Manchester United in 2005.

2.7  Last season saw the collapse of the former Chester City FC, expelled mid-season from the Football Conference. These and many other instances demonstrate that the current model of football governance is broken and needs urgent reform

2.8  The football authorities deserve credit for a range of reforms which they have introduced in recent years. They need to go much further. The owners' and directors' tests (formerly the "fit and proper person" tests) need to be extended and strengthened. The resources and expertise applied to their enforcement needs to be enhanced.

2.9  Currently the owners' and directors' tests (ODTs) bar any person from owning or directing a club where they have been responsible for two episodes of football insolvency or have serious unspent convictions.

2.10  The amendments to the Premier League's ODT require potential new owners to provide details of their business plans and proof of funds prospectively rather than retrospectively. Clubs are now also required to report on tax payments due to HMRC. This is all welcome.

2.11  When a prospective director or owner is resident and domiciled in the UK there are fewer problems with investigation and enforcement. However, it becomes difficult when the prospective new director(s) and/or owners are foreign nationals and/or resident abroad, particularly in countries known to experience corruption. The former Manchester City owner Thaksin Shinawatra is an example. When Shinawatra took over Manchester City respected international non-governmental organisations like Amnesty International and Transparency International expressed grave concerns. There should be a place in the ODT for the examination and consideration of such evidence, whilst applying the rules of natural justice.

2.12  There are other problems with the rules as they relate to past records. As they stand Robert Mugabe would pass the test but Nelson Mandela wouldn't.

2.13  The football authorities claim that they are constrained by UK and EU law. Whilst this is true, we believe that they could do far more, even within the current legal framework. We believe that some legal changes will be required however to allow football to effectively regulate itself.

2.14  The recent jurisprudence of the European Court of Justice (ECJ) suggests that professional sports governing bodies may introduce rules which control and curb the economic activities and/or employment rights provided that the rules are necessary, proportionate and introduced for primarily sporting rather than economic reasons.


—  The creation by Parliament of a special legal status of "registered limited sports club" as part of a new comprehensive Sports Act.

—  Strengthening of the owners' and directors' tests and their enforcement.


3.1  The most recent reform of the FA's internal governance structure took place following the enquiry into the organisation's governance by cross-bench peer Lord Terry Burns, whose findings and recommendations were published in 2005.

3.2  Lord Burns made it clear that the reforms he proposed hung together as a coherent whole. Despite this the FA decided to dine from the recommendations a la carte. Some reforms were implemented, notably the appointment of an independent chairman, the creation of the semi-autonomous Football Regulatory Authority (FRA) within the FA (although with neither the functions nor the governance that Burns envisaged) and the addition of representatives from the members of the "football family" formerly unrepresented within the game to the FA Council.

3.3  However, Burns recommendation for additional independent non-executive members of the Board was not adopted. The supporters' representative on the FA Council, Dr. Malcolm Clarke will submit separate evidence to the Committee on the FA's structure and governance arrangements.

3.4  We do not necessarily believe that the Burns model, which was by his own admission a compromise based on what he thought it was possible to get accepted, represents the ideal end-state. We do however believe that the partial implementation of even his limited reforms is inadequate.

3.5  The rejection of the draft response to the seven questions posed to the football authorities by the former Secretary of State for Culture, Media & Sport, the Rt Hon Andy Burnham MP submitted by Lord David Triesman to the FA Board demonstrates the problems of conflicts of interest within it.

3.6  The Guardian revealed that Triesman's draft contained the following recommendations, which the FSF supports:

—  The FA must be trusted to lead across the full breadth of its remit, including its role as regulator, which [is] a core function of the FA,

—  A licensing system, overseen by the FA, in which clubs would commit to financial regulations, and minimum levels of community and supporter involvement, and youth development.

—  Clubs to make annual financial reports to the FA, including whether their accountants have passed them as "going concerns".

—  A single fit and proper person test to be applied to all professional clubs, including prohibiting people from being owners or directors if they are under criminal investigation or have been cited by Human Rights Watch as human rights abusers.

—  Owners must say where all the money they invest in clubs has come from.

—  "A formal relationship [to be] developed with supporters groups … promoting discussion of the distinct local character of the club and its community role".

—  Boards to publish "an annual statement of their plans for the club".

—  "A preliminary discussion" to be held on sharing money more equally in football, and providing clubs with financial incentives to develop young players.

—  "A discussion" to be held with UEFA about "wider distribution" of Champions League television money.

—  Working to prevent clubs signing players from overseas until they are 18 years old.

3.7  The instability of the FA is evidenced by the procession of chief executives who have resigned or otherwise been forced out since the resignation of Graham Kelly in 1998. The FA has had six chief executives in less than 13 years.

3.8  It should be remembered that one of the express reasons behind the FA's creation of the Premier League—which broke away from the Football League in 1992-93—was to promote the success of the England national team. The Premier League chairman Sir David Richards said at the third Dubai Sports Council conference in 2008 that the reality has been different. He argued that the Premier League's failure to reduce its size to 18 clubs as planned and the constant pressure on managers for results, leading them to not blood young British players, has damaged the national team. What supporters might think of an 18 team League hasn't been tested. As usual, they haven't been consulted. They should be, but it is telling that a senior Premier League and FA official thinks that it would benefit the English national team.

3.9  We are a long way from the kind of player development and youth coaching infrastructure that exists in other major European football countries, as is demonstrated by the performance of the England team at last year's World Cup.

3.10  Nor do we utilise the game's great former players as we should. Franz Beckenbaur, the former West German international player and manager is a senior figure within the DFB (the Deutsche Fußball-Bund, or German Football Federation) and a member of the executive committee of FIFA (the Fédération Internationale de Football Association). Former French great Michel Platini was co-president of the organising committee for the 1998 World Cup in France and is now president of UEFA and a vice-president of FIFA.

3.11  If supporters are to play a real part as stakeholders in the game as envisaged by the Government, both the FSF and Supporters Direct must be properly funded by the game. This has been recommended by a succession of independent inquiries going right back to the Chester report in 1968, as well the Football Task Force in 1999 and reports by the All-Party Football Parliamentary Football Group. The FSF received support from the Professional Footballers' Association (PFA) before a new arrangement was introduced four years ago giving us £75,000 per year from each of the PFA, the Premier League and the Football Association. Unfortunately that arrangement ceases in summer 2011.

3.12   The PL and PFA contributions are to be replaced by a new Fans' Fund for which we will also be in competition with other organisations in a situation where it appears that the Fund may be under-financed to meet existing commitments. Furthermore, the new fund will focus on time-limited projects whereas much of the work of the FSF as a democratic, representative supporters' organisation, is not, by its nature, project work. There is also a requirement to seek matched funding from elsewhere. Whilst we have been working to do so, in practice such sources of funding are difficult and time-consuming to obtain—particularly in the current economic climate—for the kind of projects envisaged by the Fans Fund. We do not know if the contribution from the FA will continue beyond summer 2011.


—  Further reforms of FA governance, starting with the appointment of two new independent FA main board directors.

—  Continued adequate funding by the game of the FSF and Supporters Direct.


4.1  It is an irony that at a time when the professional game has massively increased its income from media rights and commercial/sponsorship agreements, more and more clubs throughout the United Kingdom are becoming legally insolvent.

4.2  Her Majesty's Revenue & Customs (HMRC) has had to accept substantial losses to the public purse as a consequence of clubs going into administration. Since the FA created the Premier League in 1992, there have been no fewer than 64 (Beech, CIBS, 2008) insolvency events in the three divisions of the Football League. This reflects to some extent the negative consequences of the huge imbalances of wealth between different levels of the football pyramid, which is an incentive for financial irresponsibility as clubs strive to reach or maintain themselves at the next level. The Premier League has now experienced its first insolvency at Portsmouth.

4.3  Not all debt problems arise from overspending. Prior to the leveraged buy-out in 2005 and subsequent de-listing of Manchester United had no long term debt but now has over £500 million of such.

4.4  This debt has done nothing whatsoever to improve the club on or off the field. Some £260 million has flowed out of the club since 2005 in debt repayments, all of which was loaded onto the club balance sheet by the new owners having been contracted to pay for their purchase of the club. The Glazer family has personally taken out at least £20 million over five years.

4.5  A similarly highly leveraged takeover by the American investors Tom Hicks and George Gillett of Liverpool almost led to the club's bankers seizing control of the club's shares. The Royal Bank of Scotland insisted that the club be sold to clear its debts, almost all of which was transferred to the club following the leveraged buy-out, in direct contravention of pledges made.

4.6  Debt itself, intelligently incurred, prudently managed and invested in assets such as stadia and training/coaching facilities, is not a bad thing per se. However, debt which is used to redress annual operating losses, as it is in case of many clubs, is the road to financial instability, rather like paying your mortgage by credit card.

4.7  The football authorities have failed to adopt and enforce strong enough rules on debt load and management to secure clubs as sporting and cultural assets.


—  New rules to inhibit leveraged buy-outs and curb disproportionate debt.


5.1  Successive Sports Ministers and Culture Secretaries in both the previous Labour and current Coalition governments have expressed concern at the apparent inability of the football authorities to introduce lasting reforms to protect the game and give the FA the structure and authority it requires to discharge its functions as the guardian of the game.

5.2  The calls for government regulation or intervention and oversight arise from a sense of frustration at the apparent inability of the game to cure its administrative ills unaided.

5.3  The FSF hopes that the Committee and Government ministers will want to play an active part in ensuring that the right regulatory framework exists in the game, supported by an appropriate and proportionate statutory underpinning. This must respect the rights of football to organise itself as part of civil society. On the other hand when it expects and receives Government support as the national game, football cannot expect to be above any legal accountability.


6.1  The FSF believes that the internal self-regulatory regimes applied in professional football in France and Germany have much to commend them. They are not perfect but it is no accident that of the four biggest football nations in Europe, Germany's Bundesliga is the one with the least financial problems and also the most competitive. It is also better attended and has much cheaper matchday prices than the Premier League. France has also taken significant strides to address the constant financial problems that plagued the game there.

6.2  The regulatory licensing regime employed by the Deutsche Fußball Liga, responsible for the German game's two elite national professional divisions, has much to commend it. If clubs fail the stringent financial viability tests placed upon them their professional licence is revoked and the club concerned automatically relegated to the semi-professional regionalised third tier. In practice the "death penalty" of relegation on financial grounds acts as a sufficient deterrent to prevent the insolvencies which plague the game here.

6.3  We also commend to the committee's consideration the administrative reforms introduced by the Australian Football League, the governing body of Australian Rules Football. In 1985 the AFL (then known as the Victorian Football League) replaced its former board of directors with the Commission.

6.4  The Commission comprises eight non-executive commissioners, a non-executive chairman and a full-time chief executive. Commissioners are elected by the 16 AFL club but may not hold any club position. Commission members include business people, a senior trade unionist and a judge.

6.5  The Commission has absolute discretion. Its decisions can only be overturned by a vote of three-quarters or 12 of the 16 AFL clubs. This system has not been without its controversies but it allows the Commission to run the game unhindered by minority or factional interests. The Commission has overseen the expansion of the code's elite professional competition from the state of Victoria to New South Wales, Queensland, South Australia and Western Australia. The only state without an AFL team so far is Tasmania.

6.6  Under AFL rules all clubs have a duty to fund and promote the grass-roots game in their communities and states. The AFL Commission model has seen the game expand and grow to become the leader amongst Australia's four football codes (Australian Rules, rugby league, rugby union and football). The National Rugby League is about to adopt the commission model of governance. Interestingly, all 16 AFL clubs are wholly or mainly owned by their members and/or the state semi-professional leagues.


—  Government to intervene as a facilitator to ensure that essential governance reforms are introduced by the FA.

—  A study of models offered by other nations and sports.


7.1  We would be delighted to provide further more detailed papers to the Committee. We would also welcome the opportunity to give oral evidence.

Football Supporters' Federation

26 January 2011

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Prepared 29 July 2011