Beyond the Pitch: Unveiling a New Era of Sports Governance
There are long-standing concerns about ownership and financial sustainability in sport. Owners have been criticised for questionable motives or for lacking knowledge of the game. Focussing initially on football, many clubs spend unsustainably on player wages trying to gain promotion or avoid relegation. Here’s some of the stats:
“Combined net debt of clubs in the Premier League and Championship is around £6 billion.”
“Championship clubs spend 125% of their revenue on player wages.”
“Clubs are facing annual losses greater than their turnover.”
Fragile finances and inadequate corporate governance, underpinned by ineffective regulation, enable reckless decision-making. These risks go beyond financial failure and have potential to harm the cultural heritage of the game.
Following a fan-led review of football governance in 2021, the Government has announced plans to introduce a Football Governance Bill in parliament next year incorporating:
1. Long-term Sustainability Focus: through an independent regulator similar to the FCA in the financial services sector, with a clear statutory objective and robust investigatory and enforcement powers. A licensing system will: ensure long-term financial stability; avoid the monopolisation of leagues; build international competitiveness; minimise the burdens on clubs; and ensure compatibility with other rules like UEFA. Capital and liquidity requirements will be introduced, as has been introduced recently by Ofgem in the energy sector.
2. Owners’ and Directors’ Tests: to ensure that only qualified and responsible individuals oversee football clubs. This aims to enhance due diligence on new owners and directors and introduce monitoring over time. It will consider requiring professional qualifications, an integrity test, declarations of conflicts of interest, and disclosure of director links with club owners. It seeks to ensure that individuals overseeing clubs are of good character with the skills to responsibly manage community assets.
3. A new Corporate Governance Code: based on UK Sport’s and Sport England’s Codes for Sports Governance to improve decision-making through proper scrutiny and challenge with independent non-executive directors, promote skills-based recruitment, and encourage diversity of skills and experience.
4. Improved Equality, Diversity, and Inclusion (EDI): introducing a mandatory EDI Action Plan which will be subject to scrutiny and approval during the club licensing process. Performance to be assessed against the plan annually with the potential for financial or regulatory penalties. There will be collaboration among football authorities for consistent campaigns and the creation of a single depository for reporting and collecting information on discriminatory incidents.
5. Stakeholder Engagement: to ensure full consultation with supporters in key decisions. A “Shadow Board” would consist of elected supporter representatives, independently selected and representing a cross-section of the supporter base.
6. Protecting the Local Community: to provide additional protection for club heritage, primarily stadiums. There will be a “Golden Share” in each club’s Articles of Association, to be held by a democratically run Community Benefit Society, potentially an existing Supporters’ Trust. This would oversee actions include selling the club stadium or relocating it outside the local area, joining non-affiliated competitions, and making changes to the club badge, the club name or first team home colours.
7. Fair Financial Distributions: to tackle the financial disparity between leagues, the licencing body will have “backstop” powers over financial redistribution. Additional funding will be provided to lower-league clubs, contributing to grassroots development. There is also a pragmatic solution for salary costs in relegation scenarios and a solidarity transfer levy, akin to stamp duty, paid by Premier League clubs on player acquisitions. The proposal also explores ways lower-league clubs can generate additional revenue, including the use of synthetic pitches and alcohol sales, advocating for flexibility and potential law amendments through small-scale pilot schemes.
8. Review of Women’s Football: to treat women’s football with parity a comprehensive examination of women’s football is proposed. Women’s football faces distinct challenges, including issues related to its value, financial structure, support from the Premier League, and league structure.
9. Better Protection of Players: to address the apparent gap in provision of aftercare both for those exiting the game at academy stage and post professional career, a holistic and comprehensive player welfare system will be developed, including proactive mental health care and support.
At BRAVE, we welcome the announcement of the Football Governance Bill – it represents a major step toward reforming the sport. We hope this approach will be adopted in other sporting environments where similar challenges are faced. It is interesting to see lessons from completely different sectors being applied to create better governance and to drive value through improved decisions. These kinds of reforms represent a historic chance to deliver much-needed change in the industry.
12 November 2023
Founding Partner, BRAVE