State of the Game 2003

Football clubs still ignoring risks
Code of conduct needed to improve corporate governance

13 December 2003

The majority of football clubs responding to an annual survey on corporate governance do not have the necessary risk evaluation and business planning procedures in place to manage the risks facing their clubs, and to plan accordingly. Only 48 per cent of clubs indicated that their Board of Directors approved a three-year business plan and only 26 per cent of clubs stated that they carried out specific risk assessment studies. This is one of the findings of The State of the Game 2003 report, launched by Birkbeck's Football Governance Research Centre on 12 December at the Clore Management Centre.

The report does find some areas of improvement in corporate governance over the past three years, for example, more clubs are aware of their legal obligation to disclose information to shareholders, however, overall the governance standards of football clubs floated on the stock exchange are below those of listed companies in all business sectors.

One of the main conclusions of the research is that professional football clubs would benefit from a code of corporate governance. "The establishment of a best practice code, tailored specifically to the football industry, would help clubs improve their governance structures and procedures, which would in turn improve their corporate performance," said Professor Christine Oughton, Director of the Football Governance Research Centre at Birkbeck.

"Such a code would be fairly simple to design and the cost of implementing it is likely to be low. Moreover, unlike most other forms of regulation where predominately third parties benefit from the regulation, the primary beneficiaries of a code of corporate governance for professional football clubs would be the clubs themselves. Supporters and other stakeholders would also be likely to benefit."

Despite the fact that there is considerable room for improvement in corporate governance, English football clubs still enjoy customer loyalty that is "unprecedented in other lines of business". The devotion of football fans to their club makes the demand for tickets, and other club products, relatively insensitive to price changes. "Fans will not switch allegiances when the price of tickets or merchandise rises, or when the services at the ground fall below standard," said Professor Christine Oughton.

The report also records the effect of the collapse of ITV Digital on clubs' finances: some 65 per cent are 'quite' or 'very' concerned about the levels of debt in their club, and 71 per cent find it 'quite' or 'very' difficult to maintain the solvency of the company. "Clubs need to find new revenue streams if they are to become sustainable enterprises," says Professor Oughton. One way to achieve this, the report argues, is to form partnerships with stakeholders in the wider community.

Professor Oughton continues: "Supporters' trusts aim to strengthen the links between supporters, clubs and the local community, and they continue to contribute to the financial viability of clubs. There has been considerable growth in the number of supporters' trusts and an increase in the number of trusts acquiring collective shareholdings, attaining representation on the board of clubs and developing new links with community groups."

Local authorities also have a greater part to play. Out of the 39 per cent of trusts with links to their local authority, only 29 per cent received any form of support from the local council. "Overall our results indicate that while the growth of trust activity has been significant, there is clearly room to develop further the bonds between club, trust and community, to the mutual benefit of all three," says Professor Oughton.

The State of the Game 2003 also stresses the importance of good corporate governance, highlighted by Leeds United's announcement of record losses. The Chief Executive of the Professional Footballers Association (PFA), Gordon Taylor, says in the report's preface: "In my preface to last year's State of the Game report, I warned that football clubs needed to ensure proper corporate governance and business planning to remain on a sustainable footing in the face of the financial pressures that would be facing them. I have to say that this has proved all too true. Many clubs have struggled. Where necessary the PFA has stepped in to give what assistance we could, as have the supporters at many clubs. But what we need is for clubs to undertake proper risk assessment and financial planning, and to pursue partnership with their supporters and local communities in order to avoid these crisis situations from emerging in the first place."

For a copy of The State of the Game 2003 report, email Bridget Holroyd at b.holroyd@mbs.bbk.ac.uk

Contact:
Catherine Doherty, Media and Publicity Officer
External Relations, Birkbeck, University of London, Malet Street, Bloomsbury, London WC1E 7HX
Tel 020 7631 6569
Fax 020 7631 6351
Email c.doherty@bbk.ac.uk

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