Business, Ethics And Abusive Owners
We are blessed to have been contacted by some terrific writers over the last few weeks, and here’s another of them. Please give a warm welcome to S J Maskell, who can only liken the relationship between football clubs and supporters these days as being akin to an abusive relationship.
It has long been my feeling that it is odd how football fans pay to be part of an experience that they are largely responsible for creating for themselves. A unique, communal experience that keeps them returning for more, no matter how much it costs; financially, socially, physically or even psychologically. It is created in the relationship between the fans and what happens on the pitch. It is visceral and reliant on a multiplicity of variables of action and reaction in both directions.
As a Portsmouth fan (let’s get that confession out of the way quickly), part of that tremendous Wembley crowd twice last season, I know the addiction and the effect it can have on you in your desire to recreate that collective high. I am a Pompey fan and can’t walk away, no matter how abusive the relationship, because the good times are impossible to give up. Believe me, though, the relationship has become abusive.
How has that happened? How has it come to the point where many of my fellow fans are considering walking away from the club that has been part of their lives for 20, 30, 40 or more years? In a word – ownership. The interference of a third party between the fans and the team – the owners. At the Supporters Direct Conference last June Christian Mueller from the German Football League seemed genuinely puzzled by the need for owners at football clubs. The current parliamentary enquiry into football has brought that question back into focus. It has made me wonder, who has the real ownership of our clubs?
The answer depends on whether you are concerned with business values or ethics. In the business sense, if you are a Leeds fan, nobody really knows who owns the club – not even Ken Bates. Chief Executive Shaun Harvey gave evidence to the government enquiry on Tuesday to the effect that he had no idea who the beneficial owners of the club are beyond being FSF, a holding company, owned by three discretionary trusts, managed by trustees out of Switzerland. Asked if the ‘people of Leeds were concerned about this’ he seemed to feel that as the team was doing well it wasn’t an issue. Harvey suggested it was the Board of Directors who were responsible for the running of the club. By implication then, that’s all the fans needed to know.
At Pompey we can identify with this of course, having been famously owned by a man that many are convinced doesn’t actually exist. Hell, even Peter Storrie, the CEO who enthusiastically ushered the Falcondrone consortium into the club, finally lost his faith. Given Harvey’s implication, maybe the Falcondrone consortium would have survived if Pompey had been doing well last season. After all, we were quite happy with the convicted gun runner/money launderer’s son when we won the FA Cup, weren’t we?
But the non-surprise is that FSF plan to make a profit from football. Leeds’ Board’s idea is to assist them by getting into the Premier League as quickly as possible, according to Shaun Harvey. Not a lot of change from Ridsdale’s Champions’ League plans there, then. Didn’t work for Sacha Gaydamak and Peter Storrie at Pompey either. The problem being, that with success comes an acceleration of growth in costs. It was the win bonuses for the FA Cup that finally did for Pompey. Well that and the drying up of Sacha’s funds, for whatever reason.
That’s the trouble with funding a club on money from an ‘ill-defined’ benefactor source – you never can rely on its coming in when you need it. Careful inspection of Pompey’s dealings over the two years of the Gaydamak reign may suggest money didn’t flow quite as it should. Perhaps the inquiry that is now underway will discover why. The fans had a good time on the back of it, however, so why should they worry?
They should worry because, if the owner lacks experience and understanding of ‘this highly specific sector,’ they may soon be joining the fifty two clubs who have played in the top ninety two who have suffered an ‘insolvency event’, as Dr. John Beech describes it in his submission to the government enquiry. In many cases this threatens the very existence of the club in question.
Like Pompey fans, those at Plymouth and Coventry are now aware of this. Property developers and hedge fund managers know very little of football. They don’t have to deal with paying customers in their ‘real’ lives. So to them – the figures matter more. Property is always an issue with football clubs, many of whom own nice bits of prime land in desirable locations. Plymouth, already in administration, are meeting problems with a potential owner who understands mortgages far too well, but then four mortgages on the club’s ground for twice what the ground is worth does seem somewhat excessive – even if the new principal bidder is no more concerned about the football club than the last owner.
Businessmen know about ‘sweating the asset’ but four mortgages is going too far, even by Pompey standards, where the main secured creditor managed to get a charge on every conceivable asset of the club before administration hit. Another property developer, he made sure to resecure himself on the club’s ground as soon as legally possible after he reacquired the club out of administration.
Coventry, meanwhile, teeter on the brink of administration. Hedge fund managers Sisu Capital sold players against the advice of the footballing members of the board, Ranson and Hoffman, in order to raise about £5m to balance the books and seem to have mortgaged anything of value to the same end. Promising players being sold at a fraction of their worth is a desperate measure that in the long term severely damages the value of the business due to its literal inability to compete. At Pompey, we sold our way to relegation and administration last season when two promising players were transferred in desperation; not to balance the books, but to raise cash. Time will tell if the tactic has worked at Coventry – but the signs aren’t encouraging.
The ‘Dualistic Split’ of business management from sporting management exemplified here only exacerbates English football’s problems. But at the bottom line, the abuse rests on the third element of the equation – described by Deloitte (2010) as underpinning football’s ‘stellar rates of revenue and growth’ – its ‘deeply rooted supporter commitment.’
To property developers, hedge fund managers and even caterers (Wrexham’s very own Sarah Palin – Stephanie Booth – with her catering-led bid to usurp the supporters trust and buy the club for the community and provide them with decent dinners), the fan is yet another asset to be sweated of its value. At Portsmouth this month the hasty arrangements for early bird season ticket sales spoke of little thought for fans and a great deal of concern about cash flow. Allowing only two weeks for fans to find £450 for their seats in a city like Portsmouth was guaranteed to cause protests, including the inventive use of supporter IOUs, not to mention the 30+% rise in match day tickets. As at Coventry, the owners appeared to have over-ridden their executive management on this one and in so doing severely underestimated their fan base. The club was forced to backtrack. Cash-flow would otherwise have suffered.
This particular asset is no longer passive after the treatment owners have meted out over the last two years.
Pompey’s justification for their price hike? ‘As a club we are still recovering from the financial distress of the last year which almost saw the club go out of business.’ Or rather, ‘We mucked up the money so we need the fans to dig us out of a hole.’ The ‘deeply rooted commitment’ is played on in so many ways. One of the mortgage holders at Plymouth is their Supporters Trust, who have been instrumental in helping keep the club going financially. They now look likely to lose their secured investment if Ridsdale can get the mortgages overturned to effect a sale to a property developer. Time and time again, owners fail and fans resurrect the club. Which is fine, until you realise that this tends to be in order for those same owners to get back into profit again. Taking advantage to the level of abuse indeed. It may be legal business practice but it is unethical in the extreme.
Yet the attitude of treating fans as mere turnstile fodder is endemic. Watching the performance of the FA representatives, David Bernstein and Alex Horne, at the parliamentary enquiry on Wednesday fair took the breath away at the arrogance on display. David Conn, reporting on their evidence on efforts to increase supporter involvement in the game’s decision making, said:
“Bernstein and Horne had nothing progressive to say…Supporters are already hugely involved at clubs, that debate has long passed … They are now waiting to see how this role can be embedded in an age of billionaire owners, as promised by the coalition government, not fobbed off with the customary condescension, which Bernstein came perilously close to, that fans will struggle to cope with the responsibilities.”
Such condescension belongs in a by-gone age. Yet at Portsmouth, as at Manchester United, the owners will not speak to the Supporters Trust, thereby wasting their most precious asset, the fans’ knowledge, enthusiasm and commitment. The record of many business owners in football suggests they are the ones struggling with the responsibilities of managing a very particular kind of business with a social value to their communities way beyond that of the financial bottom line. That’s something a Swiss Hedge Fund or a Hong Kong Property Developer will never even begin to appreciate or ever hope to really own.
Deloitte (2010) Annual Review of Football Finance, Deloitte Sports Business Group, Manchester
Follow Twohundredpercent on Twitter here.