Corporate Governance in Football Clubs - A small report. This paper is an attempt to assess the state of corporate governance in the football clubs considering the fact these clubs are working like an organization rather than only a club. The assessment tells us about the poor corporate governance guidelines in these clubs and their affects on sports. The analysis is done based on the available information on the Internet.

1. Corporate Governance in Football
Clubs
by
Akhilesh Gupta, PGPB 1, MISB Bocconi
ABSTRACT
This paper is an attempt to assess the state of corporate governance in the
football clubs considering the fact these clubs are working like an
organization rather than only a club. The assessment tells us about the
poor corporate governance guidelines in these clubs and their affects on
sports. The analysis is done based on the available information on the
Internet.

2. Table of Contents
1. Research Objective
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3
2. Research Methodology
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3
3. Football in England
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3
4. Listing of clubs in Stock Exchange
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3
5. Governance in Football Clubs
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4
6. Conclusion
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6
7. Annexure
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6
8. References
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7

3. 1. Research Objective
Good corporate governance is essential if football clubs are to be managed effectively
and to survive in the difficult economic circumstances surrounding the football
industry. The objective of this study is to analyze the Corporate Governance of the
football clubs that are traded in Stock exchange and how relevant are the Corporate
Governance guidelines of these clubs with each other as well as with local laws.
2. Research Methodology
Initially the list of football clubs in England was considered and then the list of clubs
that were listed in any of the stock exchange were selected. The Corporate
governance guidelines of these clubs were downloaded and compared with each
other. In parallel they were also checked for the adherence with the local government
guidelines laid down for corporate governance. As the clubs that were short-listed
belonged to UK, the UK Corporate Governance Code 2010 was considered as the
guideline.
Corporate governance in the UK is regulated by Company Law and by codes of
corporate governance such as UK Corporate Governance Code 2010 and The OECD
Principles. Whereas compliance with company law is obligatory, compliance with
best practice codes of corporate governance, such as the CC, is voluntary in the sense
that companies listed on the London Stock Exchange must either comply with the
code or else explain any instance of non-compliance in their Annual Report. Since the
Code was first introduced, the degree of compliance, as measured by the proportion of
companies adopting best practice, has increased considerably, representing a welcome
improvement in governance standards.
3. Football in England
Association football is a national sport in England, where the first modern set of rules
for the code were established in 1863, which were a major influence on the
development of the modern Laws of the Game. With over 40,000 association football
clubs, England has more clubs involved in the code than any other country.
England is home to, amongst others, the world's oldest association football club
(Sheffield F.C.), the oldest national governing body (The Football Association), the
first national team, the oldest national knockout competition (the FA Cup) and the
oldest national league (The Football League). Today England's top domestic league,
the Premier League, is one of the most popular and richest sports leagues in the world,
and is home to some of the world's most famous football clubs
4. Listing of clubs in Stock Exchange
The first club to float on the Stock Exchange was Tottenham Hotspur in 1983.
Manchester United followed in 1991, and by 1997, 21 clubs were floated. It was the
coming of the Premier League that made investors see clubs as potentially profitable
businesses, because TV companies were prepared to pay a premium for the 'content'
this new football 'brand' provided.

4. At one stage, football was one of the most buoyant sectors of a booming stock market.
But by early 1997, investors were beginning to realize their bullish forecasts were,
well, bull.
Now, just four clubs are left on the market. Rangers and Celtic are on the Alternative
Investment Market, while Arsenal is listed on the PLUS market. Manchester United
exited the London Stock Exchange in 1991 following the hostile takeover of the club
by Malcolm Glazer in May 2005 in a deal valuing the club at almost £800 million. In
August 2012, Manchester United made an initial public offering on the New York
Stock Exchange.
5. Governance in Football Clubs
In England, most of the big football clubs have to contend with financial issues. Due
to this, most of the football clubs are sold to rich foreign investors. Like for instance
Chelsea FC was taken over by Roman Abramovich (a Russian businessman) in 2003,
Manchester City FC was purchased by Thaksin Shinawatra (a Thai billionaire
politician and businessman) in 2007 and Mohamed Al-Fayed (an Egyptian
businessman) bought Fulham FC in the summer of 1997. Most of the times we talk
about a friendly takeover, but in some cases it was a hostile takeover.
Particularly in 2005, there was the hostile takeover of Manchester United FC by the
Glazer family (a wealthy American family) because of the financial issues of the
football club. These are indicators of poor corporate governance.
Good corporate governance is essential if clubs are to be managed effectively and to
survive in the difficult economic circumstances surrounding the football industry. In
2002, the Football clubs had to deal with the aftermath of the collapse of the ITV
digital contract. The analyses by Jonathan Michie and Christine Oughton, during their
study on “Corporate Governance in English Football Clubs” in 2005, reveal that while
there are some noticeable improvements in governance standards, many clubs would
benefit from following best practice guidelines on information disclosure, the
appointment of directors, board composition, induction and training of directors, risk
management and consultation with stakeholders. The standards of corporate
governance in football clubs are significantly below those of listed companies as a
whole and there is thus considerable need for improvement.
The clubs that are listed are not obliged under the AIM Rules to adhere to UK
Corporate Governance Code. However, the clubs were proactively trying to adhere to
the UK Corporate Governance Code and report the same in their annual reports. This
practice is highly appreciable of them and shows the intent of the clubs to run the club
in a professional way taking in to account the interest of shareholders, stakeholders
etc.… During my analysis I found that some of the clubs that were listed once upon a
time also followed the corporate governance guidelines.
Below you will find the analysis of Corporate Governance in different clubs that are
listed

5. Corporate Governance in Celtic Club
The governance guidelines written in the annual report of Celtic club is very detailed
and clear than that of the governance guidelines written down by any other club.
The 3-page report of Corporate Governance in the annual report of the Celtic club
describes the role of each director, procedures for training, appointment of audit
committee, nomination committee & remuneration committee etc.... in detail covering
all the major aspects of the UK Corporate Governance Code. This is the only club in
which I found well-written guidelines written for Board Evaluation and Investor
Communication.
Corporate Governance in Arsenal Club
This club is listed on PLUS stock exchange in London, UK. On reviewing the
Corporate Governance of the Arsenal Club I found that the details of the roles,
procedures etc… were not elaborative when compared with that of Celtic Club.
Corporate Governance Guidelines does not tell any information about the Investor
communication procedures, Board evaluation, and training of Board members etc.
There is a lack of clarity in the Corporate Governance guidelines that are written.
Formation of different committees is also not well documented.
Corporate Governance in Manchester United Club
Manchester United got listed on New York Stock Exchange in August 2012 after it
exited London Stock Exchange in May 2005. In general, under the New York Stock
Exchange corporate governance standards, foreign private issuers, as defined under
the Exchange Act, are permitted to follow home country corporate governance
practices instead of the corporate governance practices of the NYSE. Accordingly,
Manchester United follows certain corporate governance practices of our home
country, the Cayman Islands, in lieu of certain of the corporate governance
requirements of the NYSE. Specifically, they do not have a board of directors
composed of a majority of independent directors or a remuneration committee or
nominating and corporate governance committee composed entirely of independent
directors.
On analyzing the available data, I couldn’t find properly procedures established as per
the UK Corporate Governance Code. However, the required committees like the
Audit Committee, Remuneration Committee and Code Business Conduct & Ethics
that are required as per Law exists and a detailed explanation of the roles, procedures
etc. that would guide the committees to take right decisions are available. This section
is well described in comparison to that of the other clubs. There is no information
available about the nomination procedure of committees, training of Board members
and their evaluation.
Corporate Governance in Rangers Club
The Club got listed recently on 19th Dec 2012 in AIM – LSE. Almost no information
is available on the corporate governance in their websites. However, the Company
voluntarily complies with the provisions of the UK Corporate Governance Code as
applicable to smaller listed companies (that is, companies below the FTSE 350).

6. 6. Conclusion
The analysis of the reports available on the Corporate Governance of the football
clubs tells that the Football clubs that are listed are trying to adhere to the
requirements of the UK Corporate Governance Code even though it is not mandatory.
This shows the commitment of these clubs to implement best practices of Corporate
Governance.
However, the details provided in the Corporate Governance guidelines of these clubs
are insufficient and doesn’t consider many of the important principles of the UK
Corporate Governance Code, especially the training of the Board members, Board
evaluation, procedure for forming committees in detail.
A flurry of investigations, scandals and hostile takeovers, indicates the importance of
better corporate governance in football. The clubs are bought as a matter of fact for
pride than running it as a professional organization. The decrease in number of clubs
getting de-listed from the Stock exchanges is also an indicator of poor corporate
governance.
7. Annexure
A. The Main Principles of the UK Corporate Governance Code
Section A: Leadership
•
•
•
•
Every company should be headed by an effective board, which is collectively
responsible for the long-term success of the company.
There should be a clear division of responsibilities at the head of the company
between the running of the board and the executive responsibility for the running
of the company’s business. No one individual should have unfettered powers of
decision.
The chairman is responsible for leadership of the board and ensuring its
effectiveness on all aspects of its role.
As part of their role as members of a unitary board, non-executive directors
should constructively challenge and help develop proposals on strategy.
Section B: Effectiveness
•
•
•
•
The board and its committees should have the appropriate balance of skills,
experience, independence and knowledge of the company to enable them to
discharge their respective duties and responsibilities effectively.
There should be a formal, rigorous and transparent procedure for the appointment
of new directors to the board.
All directors should be able to allocate sufficient time to the company to discharge
their responsibilities effectively.
All directors should receive induction on joining the board and should regularly
update and refresh their skills and knowledge.

7. •
•
•
The board should be supplied in a timely manner with information in a form and
of a quality appropriate to enable it to discharge its duties.
The board should undertake a formal and rigorous annual evaluation of its own
performance and that of its committees and individual directors.
All directors should be submitted for re-election at regular intervals, subject to
continued satisfactory performance.
Section C: Accountability
•
•
•
The board should present a fair, balanced and understandable assessment of the
company’s position and prospects.
The board is responsible for determining the nature and extent of the significant
risks it is willing to take in achieving its strategic objectives. The board should
maintain sound risk management and internal control systems.
The board should establish formal and transparent arrangements for considering
how they should apply the corporate reporting, risk management and internal
control principles and for maintaining an appropriate relationship with the
company’s auditors.
Section D: Remuneration
•
•
•
Levels of remuneration should be sufficient to attract, retain and motivate
directors of the quality required to run the company successfully, but a company
should avoid paying more than is necessary for this purpose.
A significant proportion of executive directors’ remuneration should be structured
so as to link rewards to corporate and individual performance.
There should be a formal and transparent procedure for developing policy on
executive remuneration and for fixing the remuneration packages of individual
directors. No director should be involved in deciding his or her own remuneration.
Section E: Relations With Shareholders
•
There should be a dialogue with shareholders based on the mutual understanding
of objectives. The board as a whole has responsibility for ensuring that a
satisfactory dialogue with shareholders takes place.
The board should use the AGM to communicate with investors and to encourage their
participation.
8. References
1.
2.
3.
4.
5.
6.
http://en.wikipedia.org/wiki/Football_in_England
http://money.aol.co.uk/2011/11/07/millwall-fc-quits-stock-exchange/
http://en.wikipedia.org/wiki/Manchester_United_F.C.
UK Corporate Governance Code
http://ir.manutd.com/phoenix.zhtml?c=133303&p=irol-govHighlights
http://www.rangers.co.uk/investor-centre/board-management/corporategovernance
7. Academic Paper “The Corporate Governance of Professional Football Clubs
in England” by Jonathan Michie** and Christine Oughton

8. 8. http://englishlawpractice.blogspot.in/2010/10/hostile-takeover-of-manchesterunited.html
9. http://www.ukinvestmentadvice.co.uk/football-club-share.htm