I used to think that governance was a tediously dry topic that didn't warrant my attention until the banking crisis highlighted just how important it is. Previous corporate scandals (Polly Peck, BCCI, Maxwell, WorldCom, Enron, Alan Bond in Australia - in sports the IOC, FIFA and I think the EPL.) had highlighted the need for proper corporate governance and in in most developed economies goverrnance standards have become very tight in principle, albeit still far from perfect.
Aplogies for a bit of an essay here - but I think it's really important to understand just what all this is about, although I'm sure most of you intuitively know already.
Context:
Just in case some of you don't know, governance is the process through which companies and organisations are directed and controlled. In limited liability joint stock companies (plc's), shareholders (or principals) own companies but managers run companies as "agents" of the principals. There is an inherent conflict of interest here. This conflict is known as the "principal-agent problem".
Shareholders (should) want long-term gains but managers have an incentive to take as much out of companies as they can get away with. Therefore, in business it is well established that a Board of Directors should police this conflict of interest. Directors have to appoint and interact with management to ensure that shareholders' interests are protected. Directors also have a key role in determining strategic direction. In many institutions the Directors and Management have a good, harmonious relationship but this is not always the case. Standards of Corporate Governance are typically established by the accounting profession.
I found it interesting that Adam Smith, the doyen of right-wing free market economic philosophy was profoundly disturbed by the advent of the joint-stock company 200+ years ago (as was Karl Marx - two unusual ideological bedfellows in this context). He correctly identified that a new breed of capitalist would emerge - the professional manager who would extract as much as he could from good companies at the expense of owners. Smith far preferred partnerships, where owners and employees were largely the same and hence were aligned. The last 30 years saw growth in stock-options being awarded to managers in order to achieve similar alignment but it's generally agreed now that this had the unintended consequence of managers embarking on risky strategies (or economically useless share buy-backs) to inflate share prices in search for personal gain. Another modern breakdown of this model is the proliferation of investors (e.g., high frequency traders, some but not all hedge funds...) who actually have only a short-term investment horizon, with no interest in sustainable long-term growth.
Governance problems arose in the run up to the banking crisis. Banks' managements were making lots of money, but so too were their shareholders, so nobody complained. Directors were also doing very nicely. The principal-agent "policing" mechanism broke down. In most cases, shares were owned by investment companies on behalf of individual savers. These investment companies also paid their staff very handsomely so nobody was incentivised to cry foul. Even non-financially interested parties benefited: consumers whose asset prices were rising and who had easy access to credit, government whose tax receipts were rising and were overseeing a feelgood period…
So nobody other than financially astute naysayers were placing any pressure on the process to stop. The banking crisis can be seen as a failure of corporate governance on many accounts.
Commonly suggested means of ensuring Directors steer their companies properly is to ensure that their term of office is limited and that they are openly held accountable by a re-election process, and also that effective boards should have independent non-executive directors (NEDs) whose role it is to challenge the prevailing wisdom, ideally from the perspective of experience gained in other industries.
So, if shareholders were unable to police the conflict of interest what can be done? Well, recently shareholders have become more activist. At AGMs many banks and companies' CEOs have had their pay packages refused. This is the so-called "shareholder spring". Others argue that the conceptuial framework is wrong. Companies are also accountable to a broader set of stakeholders, i.e., people affected by a company's actions. These include shareholders but also stretch to employees, local communities, suppliers, government, regulators etc. This school of thought is known as "stakeholder theory". But, an organisation would be wasting its time focusing on anyone who has some kind of tangential stake in an organisation's activities, so it has been recommended that organisations identify and profile their key stakeholders and prioritise those with most legitimate, urgent and powerful claims on the organisation.
But are sports organisations different to companies? In some respects no. They are organisations set up towrads achieving a goal on behalf of stakeholders. But in many other important respects, yes. For a start they may not even be profit-seeking enterprises. They may not even have full-time professional staff, instead relying on volunteers. They may be more reliant on government funding and they may be heavily embedded in local communities, so their stakeholder universe may be more diverse (also including athletes, member clubs etc.). They may even have no owners per se. This is key.
If they are not owned by anyone then there is no obvious set of people to whom an organisation can be held accountable to in performance or financial terms. Shareholders of a profit-seeking company should always try and focus on keeping costs down to an appropriate level. After all, all residual income (profits) are ultimately owned and distributed to shareholders. But what about big global sports organisations such as the IOC and FIFA? It has been proposed that the combination of huge political power, huge revernues and the lack of a "residual claimant" (a shareholder with a claim on the organisation's residual income) all create an climate for opportunism and corruption to prosper. Institutional reform, most notably an internal ethics committee and limiting members' tenure, addressed this at the IOC to a fair (but far from ideal) degree of success but as yet FIFA's moves towards a similar solution appear only to have been a bit of lip service in the face of massive criticism.
Last edited by Stuttgart88; 25/06/2012 at 12:12 PM.
So, how does this relate to the FAI?
I'm against any knee-jerk assumptions. I think JD has every right to relax at night in Poland. I think the FAI has a thankless task in some respects and has actually done OK as far as I can tell relating to club licensing (Mons surprise notwithstanding). I think the UEFA Cup Final in Dublin last year was a feather in their cap and illustrates a fair degree of political savvyness in relation to UEFA. I think the FAI was hardly alone in getting caught out by the economic collapse of 2007.
Nevertheless I think important questions have to be asked.
- How transparent is the FAI?
- Is its structure appropriate?
- Who are its stakeholders?
- Has the FAI idfentified and prioritised these stakeholders by importance (legitimacy, power, urgency)
- Do these stakeholders hold it accountable, and how?
- Is the board refreshed and how often?
- Is there any external independent representation on the board?
- Who is JD accountable to and under what criteria?
- Is his €400k salary in line with European peers? Who benchmarks and approves remuneration?
- Who determines strategy?
- What is its strategy?
- Is decision making effective?
From a completely non-footballing viewpoint, and work related, I enjoyed that piece stutts. I'd disagree that Directors are the mediator between the shareholders and Management, the Directors, are company first, they see shareholders as a(very) needless pain in the backside, particularly IIs,that they could do without and operate a lot more freely without any intervention if they could.
From a footballing point of view, I know this is your little golden nugget, I'm all for the theoretical but personally I'm more of a practitioner, a do-er. It's great to have all these ideas, and ideals, but its better to actually do something about them. It some what remindes me of the PHD student, at college for 15 years, sitting in a darkened room, writing a thesis on conflict management and the misapplication of moral hazard and all that is wrong with it. Just like (a lot of members on this forum) this forum actually
Interestingly Stutts is allowed start new threads but (its) tricky isn't
I'm a bloke,I'm an ocker
And I really love your knockers,I'm a labourer by day,
I **** up all me pay,Watching footy on TV,
Just feed me more VB,Just pour my beer,And get my smokes, And go away
No, because it's the theoretical backdrop that informs understanding of these topics. Agency theory and stakeholder theory are very simple but very important concepts through which you gain an understanding of these issues and prompt you to ask the right questions.
To digress: Directors have both a backward and forward looking responsibility. In a plc is is categorically their role to represent shareholders' interests. In a backward looking sense to make sure that the orgainsation's management are acting in the right way and not extracting unnecessary reward and not taking too much risk, and forward looking to steer a strategic course for management to implement. This is established in all the world's major governance codes. Just because directors don't always efficiently carry out their role doesn't mean it isn't their role. In non-profit organisations I guess you have Trustees or similar doing the same.
Now, who here knows much about the FAI's structures / mechanisms etc? Is their constitution published on their website? If not, it should be.
A quick google search revealed this, the FAI's articles / rules. I haven't read them yet but will do so later.
So, on first step - availability of its articles / constitution - it appears to be doing OK so far. Come on FAI - I want to believe!
http://www.fai.ie/agents_info/FAIRuleBook2011.pdf
PS: C'mon lads - don't let this go the way of my Marathon thread in Other Sports, me having a several month long conversation with myself!
Last edited by Stuttgart88; 25/06/2012 at 1:20 PM.
Interesting topic. I suppose this is they key section:
RULE 3. THE OBJECTIVES AND PRINCIPLES OF THE ASSOCIATION
The objectives for which The Association is established are: -
1. To promote, foster and develop, in all its branches, the game of Association Football in Ireland, and to take such steps as may be deemed necessary or advisable for preventing infringements of the Rules of The Association and the Laws of the Game, or improper methods or practices in the game and for protecting it from abuses and to do such things as are conducive to the attainment of the objects herein before mentioned as the Council may determine.
2. The Association shall affiliate to UEFA and FIFA. Accordingly, the Association undertakes to:
(a) Observe the principle of loyalty, integrity and sportsmanship in accordance with the fair play rule;
(b) Comply with the Laws of the Game issued by the International Football Association Board (IFAB) and with the Futsal Laws of the Game issued by the FIFA Executive Committee;
(c) Respect at all times the Statutes, Regulations, Directives and Decisions of FIFA and UEFA;
(d) Recognise the jurisdiction of the Court of Arbitration for Sport (CAS) in Lausanne (Switzerland), as specified in the relevant provisions of the FIFA and UEFA Statutes;
(e) Refer in the last instance any dispute of national dimension arising from or related to the application of the Rules or Regulations of the FAI only to an independent and impartial Court of Arbitration, which will settle the dispute to the exclusion of any ordinary court, unless expressly prohibited by Irish Law;
(f) Ensure that its leagues, clubs, players, officials, match and players agents – through their statutes, licence, registration or any other written document - acknowledge and accept all the above mentioned obligations as well as agree to be bound by and observe the rules, regulations, directives and decisions of the FAI.
3. Principles
i) Members and Leagues shall agree to comply fully with any decisions passed by the relevant FIFA bodies which, according to FIFA Statutes, are final and not subject to appeal.
ii) Members and Leagues shall take every precaution necessary to ensure that their own members, Players and Officials comply with these decisions.
iii) The same obligation applies to licensed match and players‟ agents. Football Association of Ireland Rules effective from 2 March 2011 2
iv) Members of The Association shall not take legal action against The Association on any issue relating to the application of The Association‟s Rules, until redress through all relevant bodies of The Association have been exhausted.
Tallaght Stadium Regular
Nice piece stutts - Not sure how you have the time to write and post up such articles without abusing your employers goodwill but I wont cast assertions!!
Will need to give it some thought but just a quick one on stakeholders...
Would it be fair to say that IRFU are a key stakeholder of the FAI? What with sharing the debt on the Aviva and obviously having a vested interest in the FAI having the ability to repay its share (I dont recall the details of the financing arrangement so I could be completely wrong here). Would that be unusual for a "Major Competitor" to also be a Key Stakeholder..i.e. The IRFU needs the FAI to do well to fulfill its debt repayment obligations but no so well that it drains it from all the young budding Rugby players out there who become footballers!!! Maybe I am way off with that but its just a possible conflict that hit me......
I thought you were off the drink Ronnie?
"No, I drink to help me mind my own business....can I get you one? (c) Ronnie Drew
That looks like a fairly standard set of rules and objectives. It would be nice to see a broader, more definitive set of objectives though the statement "To promote, foster and develop, in all its branches, the game of Association Football in Ireland, " is quite a catch-all.
I have seen UEFA's rules and they are accompanied by philosophical statements along the lines of "it is our belief that football should be oraginsed along a meritocratic pyramidal basis with solidarity among all layers of the pyramid and a single thread connecting the most elite professional to the most humble amatuer". Like many sports bodies' Article's the FAI's document is almost a defensive, legalistic document. It'd be nice to see some vision expressed.
What about the FAI's structure? Well, they appear to follow a prescribed form from FIFA.
The bodies are the most important parts of an Association. Only the bodies, or persons who are authorised by them, can act with legally binding force for the Association. The Association shall ensure the separation of powers and respect the principles of corporate governance (e.g. checks and balances). Using the FIFA Statutes as a reference, these bodies are referred to below as the AGM, Council, Executive Committee, Standing Committees, General Secretariat, Disciplinary Committee and Appeal Committee
The key bodies appear to be:
The AGM which is the annual meeting of the Association, where rules are made or amended I suppose. The Rules spell out who is allowed to attend.
The Council, consisting of 61 stakeholders, mainly drawn from the various regional branches, leagues and other bodies. I know the FA was criticised for an archaic Council structure with about 100 representatives drawn from all kinds of staeholders dating back to the Victorian age. Are the FAI's Council members all relevant today (Defence Forces for example)? Is the Council make up representative of the important stakeholders in our game? What is the difference between the Schoolboys' FAI and the Football Association of Irish Schools? Does this suggest a disconnection between two rival factions in the schools set up? Is 61 simply too large a number to be effective?
The Council is effectively the Board of directors it would appear, the people who hold the FAI's management (Executive) to account. They must meet 4 times a year and has the power to remove the Board of Management or any individuals by a 2/3 vote. FAI employees can not be a member of Council - wisely avoiding conflict of interest. The Council is headed by a President.
The Executive Committee is the same as the Board of Management - i.e., the CEO and senior executives (presumably FD, head of HR etc.). The FAI Board shall have a maximum of ten members as follows:
a. The President of the FAI
b. The Vice President of the FAI , who shall chair the Development Committee
c. The Honorary Secretary of the FAI
d. The Honorary Treasurer of the FAI, who shall chair the Finance Committee
e. The Chairperson of the FAI National League Executive Committee
f. The Chairperson of the International Committee
g. The Chairperson of the Domestic Committee
h. The Chairperson of the Legal and Corporate Affairs Committee
i. The Chairperson of the Underage Committee
j. The Chief Executive Officer
It's hard to tell whether this board / executive composition is conducive to effective decision making, though it would appear that Chair and CEO's roles are separated - it's important to keep a CEO accountable and to prevent a power grab (like Blatter has done).
Standing or Ad Hoc Committees, delegated to focus on specific strands of the game / business I suppose. These Committees are League, Domestic, Underage, Legal & Corporate Affairs, International, Development and Finance, National League
General Secretariat - i.e., the main administrative body. Common enough, especially in FIFA, IOC parlance.
Disciplinary committees appear to be sensibly split into first-hearing and appeals, which should be independent. CAS is designated as ultimate dispute resolution arbiter, common practice. Many a sports organisation has collapsed because of litigation related to unfair disciplinary processes (British tahletics / Diane Modahl).
There is an Honorary Teasurer and Honorary Secretary role who each liaise with the FD and CEO respectively on behalf (I think) of the Council. They serve for a term of 2 years and can be re-elected once only.
General comments:
Is Council make-up appropriate?
I know other sports bodies insist on management and directors having a Conflict of Interest register. I don't see one here, though there is a Code of Conduct to be adhered to. Conflicts of interest can quite easily and innocently arise but if they do they must be mentioned and the individual concerned should abstain from relevant decision making.
I don't see any independent (external) representation on Council or Executive - something the FA has been severely criticised for not having too.
I'm a member of Triathlon Ireland. Their Objectives aare stated as being the usual promotion and edvelopment of the sport, but one bit I like was their objective also to safeguard the sport, i.e, to protect the sport from risks such as reputational and financial risks that might jeopardise it success. I'd like to see a bit more imagination expressed in the FAI's objectives.
The rest of the document seems to address specific rules realting to the operation of the game in general, none of which stands out as an issue in the context of corporate governance.
Just out of info, see below for what a half-decent appraisal of governance in football might look like:
http://www.bbk.ac.uk/hosted/manageme...l%20Review.htm
Last edited by Stuttgart88; 25/06/2012 at 3:35 PM.
Probably true and ties in with my point about Triathlon Ireland having a stated objective to safeguard the sport. Has the FAI left itself vulnerable here?
That said, there's a lot of research into the benefits of inter-organisational collaboration in a sports context (a mate of mine is an expert here). Alternatively, the IRFU could be seen as taking financial risk on the FAI too. The scorpion and frog story springs to mind, but I don't see that happening here!
With regard to your first point, yes my time on this issue is limited but I am doing this from a sense of duty! I see someone like Danny getting his teeth into this topic given the quasi-legalistic context of inspecting an organisation's ruleb book. Come Danny, you know you want to...
Last edited by Stuttgart88; 25/06/2012 at 3:32 PM.
One thing that struck me on reading the rule book on the train last night was that the make up of each of the key committees looks a bit cumbersome with representatives of local leagues, associations etc. That's not necessarily a bad thing per se but a key historical problem in running sport associations has been a lack of expertise in the matters at hand. There's just no way of telling from here whether the skills and experience of the committee members are appropriate for the job at hand.
The CEO has a seat on most of these committees. Again, that's not necessarily a bad thing. CEOs can often be accused of having too much power and influence, but in other circumstances (usually in smaller organisations staffed by part-timers or volunteers I'd say) it can be quite good for a strong CEO to take the lead on key issues. In smaller sports organisations it's very often the case that a CEO and the board are singing from the same hymn sheet, motivated by a passion for their sport, perhaps a niche sport. In larger organisations with higher revenues there's more scope for diverging interests between senior executives and the various stakeholder representatives. One would need to dig deeper and interview committee members to establish just how harmonious and fluent decision making is. Large numbers of committees with a large number of members means decisions may be hard to make.
It's also well established that the Board should have a strong role in determining strategy and direction. It gives them a sense of ownership which motivates them to see it through, and to defend it when under attack. Who leads the strategic direction of the FAI?
One good thing is that the WFAI is represented at least to some extent. There's a school of thought that more female representation on boards leads to less macho behaviour, and less taking of inappropriate risks.
In a nutshell though, apart from the concerns highlighted in this and other posts I think it's hard to establish exactly whether the FAI's structure is fit for purpose without a proper examination - seeing minutes of meetings, interviewing key personnel etc.
Can anyone tell me, who appoints the 10 man board that JD is answerable to? How long do they hold their positions for?
Board members are appointed by the Council, which consists of the board, various honorary members and representatives from all the sub-associations. As far as I know there are no term limits.
i think there are age limits for honorary positions - you need to be under 70 to be appointed and must retire at 75. The Executive are presumably full time employees with employment contracts etc., like in a comapny.
Sorry all - not trying to post-whore here but ideally we'll keep strategic +/- comments about JD's tenure on the JD Doesn't Know There's a Crisis thread, and the related but separate issues of how does JD influence strategy, how is he held accountable, who influences strategy, are decisions effectively made, do various stakeholders have too much constituional influence etc. on this thead. By a process of iteration we may actually establish if there are major structural weaknesses at the FAI, leaving policy issues aside.
Uncle Joe then makes good point, citing the view of a Portuguese coach in Ireland that schoolboy football has too much influence and they care too much about winning rather than skill development. S88 looks to see how much constitutional influence Schools stakeholders have.
Regardless of what the statutes say about the FAI's objectives.
DO we honestly, or any of them know where they want to lead Irish football.
To me they don't.
We have such a mish-mash of league set-ups and calendars not to mention the ridiculous nature of under-age competitive football and full size pitches at U12/13.
There's no-one at all out there with a vision of what we can achieve.
We need in my view to start it from scratch. Get rid of the local senior and district league fiefdoms. Have kids playing the game for fun again all the way til age 16. Have a national academy for the really good kids. A draft system for our national league etc.
There's a whole host of systems available to us if we try.
First things first, we need a new FAI.
DID YOU NOTICE A SIGN OUTSIDE MY HOUSE...?
Nice ryhming there BS.
Thing is I'm all for talking behind a keyboad(yes i meant that), but when all is typed and done, where does it lead us. No one on this forum is really working at grassroots level, it would be better perhaps posting this to the Junior League forum, that way the ants on the ground can answer all the questions but they can be the greenfield site for change.
I'm a bloke,I'm an ocker
And I really love your knockers,I'm a labourer by day,
I **** up all me pay,Watching footy on TV,
Just feed me more VB,Just pour my beer,And get my smokes, And go away
No one here is a football manager but it doesn't stop us naming our XI for the next Ireland game!
There used to be people of relative influence on this forum - Shane Kerins at Sligo and folk like that. Is anyone on the forum these days anything other than an interested party?
Bring back Tuff Paddy and DCFC Steve and get the media / politically savvy amongst us to do something.
Now thats what i like to hear stutts. i didnt realise that was shane kerins.
I'm a bloke,I'm an ocker
And I really love your knockers,I'm a labourer by day,
I **** up all me pay,Watching footy on TV,
Just feed me more VB,Just pour my beer,And get my smokes, And go away
Some really alarming stuff here from Miguel Delaney in today's Examiner, as usual on the mark.
http://www.irishexaminer.com/sport/s...ay-201655.html
Throughout the entire course of the AGM, there wasn’t a single question asked from the floor and barely a vote against any of the motions.
A handful of members said afterwards that there wasn’t the opportunity to ask anything but, in his press conference following the event, Delaney explained that they "invited questions in advance of the meeting".
---------
it is possible that the AGM has simply become a mass box-ticking exercise rather than a genuine meeting for discussion.
-----------
Ultimately, though, much of this should be colour to the main question: is the FAI doing its job correctly? Is it safeguarding and improving the sport in this country? When a series of financial issues, from debt to international attendances, were put to Delaney, he kept coming back to one main point. "I think the message today is that we’re managing our debt. The next 18-24 months are going to be difficult but, once we get through that period, we’ll be in decent shape. You heard the treasurer, the finance director, you heard me say... we owe our bankers €50m. That will be cleared by 2020."
If Delaney argues strongly when it comes to finances, though, one striking aspect of the AGM was the complete absence of debate or discussion about the point of all this money.
---------------------------
It was remarkable how Ireland’s Euro 2012 campaign was glossed over. A video was shown but clips of actual events on the pitch were sparse. At the time of those three defeats, one figure involved in Irish sport at elite levels told the Irish Examiner how, if they happened in most other bodies in most other countries, "the consultants would be called in to do a root-and-branch review of why that happened".
That doesn’t come down to the micro details of Giovanni Trapattoni’s management — which should, of course, be separate to the AGM. But it does involve the macro details of whether Ireland’s football structure is capable of producing players of sufficient technical quality. Other than a few points in speeches about the grassroots, this wasn’t raised despite the fact €377,000 was cut from such funding in 2011. If such issues are not asked about at the AGM, when are they asked about?
"You’ll never have enough money," Delaney said when quizzed afterwards. "I think the message today from the grassroots was that we still need the volunteers to support the association in terms of implementing the strategies that we’ve all agreed together: be it the underage review, the amateur review, the high-performance review."
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