Everton

Reform in football part III, alternative structures to protect fan interests

In part II of the Reform in football series, I explained a structure that gave fans more meaningful representation and most importantly, power within football clubs, offering a regulated structure with monitored elections, model articles of association and certain powers of veto for fans either through the holding of non-economic voting shares or through a “golden share” with powers of veto written into each club’s own articles of association.

By incorporating these types of arrangements, there’s proper accountability of supporter board representatives back to the fans, but, importantly, much more control over the owner or major shareholders than just having a fan representative on the board as proposed by Chelsea and Tottenham Hotspur plus some no doubt well-meaning, but inadequately experienced and informed pundits.

I will stress again that just having a supporter or fan representative on the board of a football club will achieve very little. What is more, it will provide clubs and owners with a cheap means of presenting a valuable PR point in saying they’ve listened to fans, heard their concerns and reached out offering engagement and influence. As a stand-alone proposal it should be rejected by all fan groups and fan representative organisations.

Alternatives

With the DCMS (Department for Culture, Media and Sport) “fan-led” review taking centre stage, now is a tremendous opportunity to reshape the game, putting into place measures which protect clubs, retain their competitive advantages with other European clubs but, also enshrine the club’s responsibilities to their fans, their communities and equally importantly the football pyramid all the way down to grass roots. This is the opportunity to put right the huge disparity of power and resources throughout the pyramid.

Independent regulation

Whatever the alternative becomes, it must, as I have stated in earlier pieces, start with independent regulation, removing the power to regulate from those that promote, organise, administer and benefit from the various competitions in professional football.

If the Big Picture and The Super League were not enough evidence of the need for regulation and proper governance structures, then a look at the state of the football pyramid despite a quarter of a century of bull market conditions with untold riches flowing into the game should convince anyone of the need for change and for the removal of power from those charged with running the game and running the largest clubs.

One of the concerns about regulation, golden shares or changes in voting structures is the potential impact on the attractiveness of Premier League clubs on existing and future owners. Would the Premier League and its constituent clubs be able to continue to attract the levels of investment seen in the last couple of decades?

My answer to that is that greater regulation and transparency of dealings, a separation of powers away from the participants would attract new investors should the existing investors not wish to participate under appropriate and proper scrutiny. Equally, a cleaner, better regulated Premier League should attract higher quality sponsors and commercial partners. Why can football not attract the more socially and ethically aware commercial partners of the future rather than relying upon the friends of state/sovereign fund investment or indeed the corporate friends of oligarchs?

Football should have a bigger part to play regionally and locally, not just at grass root levels, not only at the highest levels, but also across all sectors of the game, incorporating different age groups, different ability groups, women and girls football – independent regulation could enforce participation and funding. The funding should be viewed as investing in the development of the game as a whole, not just a perhaps unwelcome cost carried by the activities of the senior men’s team. Again, a different type of investor than football has typically attracted in the last decades may see greater value and synergies in this strategy.

An entirely different corporate structure, protecting the legacy assets whilst enabling investors to achieve their investment objectives

So far, I have suggested alterations to the capital structure of clubs or changes to articles of association to enable supporters (alongside independent regulation) to have a say in their club’s affairs and a degree of control over key aspects of the club’s future and the decisions of the current owners.

However, there is an alternative structure I think worthy of exploring. Essentially we have two forces at play both of which should have a common interest in creating more success for their own club and the development of the game more generally. However, as witnessed in recent times what the owners want and what the owners believe is in their best financial interests may not be consistent with the wishes of the fans.

Most supporters would accept the right of owners to generate an investment return (usually by means of capital appreciation as the value of a club increases) providing the resources are made available to give the club the best chances of success and that the club is run in a manner that is consistent with the ethos and the culture of the club as recognised (and to a large degree shaped) by supporters over many years.

Whilst success on the pitch is important, it is almost equally important that the club remains “true to its roots” – location, stadium, matchday experience, club colours, branding, values, local players rising through the academy to play for the first team, women’s football, commitment to the local economy, the community and commitment to the footballing family etc. These, aside from footballing heritage, levels of success and playing styles, are what identifies each club from another and provides the continuity, the relationship between supporters and the club over generations. For ease I will call these “supporter legacy assets”

Owners or investors on the other hand, will be looking at issues such as the stadium, redevelopment, the amount of capital required to invest in the squad to be competitive, the main income flows of matchday, commercial and broadcasting revenues matched against costs and the ability to trade players profitably to boost playing resources; how to grow the club’s fanbase locally, nationally and internationally, recruitment of the right director of football, manager and coaches. That might also involve (in the absence of effective regulation) looking at changing existing competitions and looking outside of the current promoters of competition (the Premier League, the FA, UEFA etc). They will also have different investment objectives to each other, different capital structures, different time frames to exercise an exit strategy etc – an entirely different set of objectives.

What if there was a structure that allowed for both the interests of the supporters to be protected and the commercial/investment interests of owners to be exploited?

In England and Wales there is a corporate structure known as a CIC – a community interest company. A CIC is a special type of limited company which exists to benefit the community rather than private shareholders. What if all the supporter legacy assets (as described above) and the control over branding, identity, what competitions the club entered, fixed assets such as the stadium (the freehold at least) were held in a CIC with a board and ultimate shareholder (the fans) entirely different from the current (or similar) shareholders?

What if the CIC provided a licence to the current owners/shareholders and future shareholders that gave them a similar economic benefit as they enjoy under the current traditional structure. The licence would sit in an entirely different legal structure to the CIC. That structure (company) would generate resources in exactly the same way as clubs do now – subject to the wider objectives of each CIC. The licence to use the club name, to acquire and trade players, to generate revenues just as now from broadcasting, commercial and matchday, to run the football club consistent with their objectives and ambitions would be tradeable. It would also, as a condition of the licence, provide the resources for the CIC to function.

It would be the licence that provided the investment return in exactly the same way as club ownership does now. The licence would have a capital value similar to the current valuations of individual clubs. Transfer of ownership of the licence could be conditional on the approval of the CIC.

Critically, the change is that control of all that is really important to supporters (other than winning trophies) remains in control of the supporters themselves – properly regulated and accountable to their fanbases. The economic benefit of club ownership remains (as it should) with the providers of capital – the shareholders.

What I am trying to demonstrate is that there are many different models available regarding the regulation, ownership and management of the game and individual clubs. Whilst the most recent Super League experience may bring about the desire for quick fixes (especially if no suitable punishments are forthcoming) in the Premier League, it is my view that as many options as possible should be explored.

Appetite for change

There is appetite for change in football, seemingly within Government, from many Premier League and Football League clubs and most definitely from many fans, individuals, groups and representative organisations. The six, themselves, demonstrated a desire for change albeit for entirely selfish reasons.

Thus change is likely to happen, but it is worth exploring every available (and perhaps new) model to get this right. Football has huge societal value at every level, we must ensure that that value increases, but that the future of football, especially its soul, is controlled by the fans, the supporters. Accepting what is first and perhaps grudgingly offered either by clubs, the Premier League or any other body would be foolish in the extreme – time for supporters to take a high level of control in the future of the game.

Part I

Part II

Categories: Everton, Opinion

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