The Value Of Shareholder Democracy At Rangers & Watford

12 By Mark  |   The Ball  |   December 18, 2009  |     24

When Rangers chairman Alastair Johnston extolled the virtues of shareholder democracy over supporter-led democratic ownership at his club’s recent annual general meeting, he could never have imagined how utterly his arguments would be undermined by other events during the meeting. Not even the latest shenanigans (for that is what they are) at Watford could provide such a compelling manifestation of the flaws of such a system, although even as I type they are trying very hard.

The controversy at the Rangers meeting surrounded the appointment to the board of ‘corporate recovery specialist’ Donald Muir, seen by many Rangers fans as a clear sign that manager Walter Smith was right when he said in October that Lloyds Banking Group were effectively running the club as it struggled with multi-million pound debts.

Muir has insisted that he is an employee of Murray International Holdings, the group of companies owned by former Rangers chairman and, crucially, still majority shareholder (vast majority, in fact) Sir David Murray. Murray’s inability to continue to subsidise Rangers through his other companies has left them in a parlous state – though not yet parlous enough to be worse than Celtic on the pitch.

So Muir being a Murray employee rather than a bank one is not the issue, Muir being a corporate recovery specialist is. Muir unexpectedly added to his unpopularity by declaring that he was lifelong-buddies with former Rangers and current Birmingham City boss Alex McLeish. Rather than making him seem more of a true Rangers man, this friendship has caused some to believe that Muir attempted to sell Rangers’ Steve Davis to Birmingham to aid this corporate recovery.

Muir’s re-election to the board was roundly defeated on a show of hands among shareholders attending the AGM. This vote came at a meeting where Johnson cited shareholder democracy as the best method of producing the right mix of financial viability and accountability, while dismissing the prospects of supporter-ownership of the club. Johnston’s speech had been a masterclass in the use of language as a shield against reality. If it had been televised, it would surely have needed subtitles, and not because of any impenetrable Glaswegian lilt to Johnston’s voice. Examples:

“(Murray’s) well-intentioned personal ambitions for the club came into conflict with the business exigencies of his company” (Trans: The money ran out);

“Renewing our credit facilities to give the club the financial wherewithal to continue to operate” (Trans: The last lot of money’s run out);

“One has to present a ‘sustainable business plan’ but the devil is the view one takes on the ambitions of the club as compared to the objectives of the bank in protecting its credit exposure…there was rigorous debate…we all eventually agreed.” (Trans: The money ran out…we asked for more…the bank said ‘only if you do things our way’…we’re doing things their way).

And so on, for… oooh… ages, but on the issue of a “Barcelona-style” supporters-ownership model, he was unequivocal. He told shareholders: “Right now you are exercising your rights of ownership. That’s why we are all congregated here at this meeting. As shareholders, you have been asked to vote for directors of this club. You are asking questions of your elected representatives.”

The vote was not a ringing endorsement of this view. Former chairman John McClelland “conducted the election”, which amounted to nothing more than judging the numbers of raised hands in the room. This was beyond him. Despite an overwhelming number of hands raised against Muir’s re-election, McClelland declared an “uncertain” result and called for a card vote, which would have produced a more “certain” result, not least because Sir David Murray’s “card” had 90% of the “votes.”

The meeting wasn’t having that and, surprise, a second show of hands revealed a “certain” result against Muir. Their “rights of ownership” duly exercised, shareholders were then told that the issue would go to a card vote anyway. And with Murray’s 90%, Muir sneaked home. And that, apparently, was why they were “all congregated here at this meeting.”

It says little for Johnston’s judgement that he should laud shareholder democracy in such circumstances. Either he knew what the vote on Muir would bring, in which case he perhaps ought to have trimmed his speech a tad. Or he thought Muir’s re-election was the formality these things often are. Whatever he thought, he got it badly wrong. And it is this judgement Rangers fans will be reliant upon in the forthcoming weeks and months of financial upheaval. Good luck!

The virtues of shareholder democracy won’t be obvious to Watford fans at the moment. The state of the club’s finances is now a matter of very public, somewhat broken, record.  Simply, though not simplistically, put, Watford lost money and then more money in the last few years. And before the true horror story could be revealed in December 2008, chairman Graham Simpson resigned. Since then, successor chairman Jimmy Russo has only partially succeeded in getting the finances on an even keel, partly through lending the football club’s parent company Watford Leisure plc £4.88m, a significant amount of the income from his and his brother’s salad-supply business, Valley Grown Salads, and partly through extensive cost-cutting, including redundancies.

The Russos have been communicative about this, guiding fans through the process with an openness that would have made Simpson blanche and emphasising that the club’s financial shortfall had only dropped from £8.5m to £5.5m, after Watford’s parachute payments from their last fifteen minutes of Premier League fame ran out. However, thanks to shareholder democracy, the Russos were forced off the Watford board at this week’s AGM by…Simpson, backed by the club’s silent majority shareholder, Lord Michael Ashcroft, the Conservative Party deputy chairman who has spent more time this year avoiding questions about his UK tax status than doing anything whatsoever to help Watford, despite owning 37% of the club via his company Fordwat Limited.

Not surprisingly, after all they’ve tried, only to be told to ‘foxtrot oscar’ by the men who created the financial mess in the first place, Russo and VGS want their money back.  As Watford need that money for day-to-day operations they are unable to comply, so the Russos have confirmed their intention to appoint administrators. Ashcroft and his Fordwat company have, at the last minute, broken their monastic vow of silence to offer to underwrite a £7.5m rights issue, which would pay off the Russos and leave money to spare to try and fill the financial black hole which is Simpson’s remaining legacy.

However, the rights issue gives Fordwat an opportunity to regain and strengthen its control of the club, while diminishing the value of the Russos’ 29.9% shareholding and falling short of solving the club’s medium-term financial crisis – simply keeping them out of administration for now. The Russos have rejected this, at the very best, partial solution. And administration beckons. The ‘voice of reason amid all this is, apparently, Watford ‘legend’ and former manager Graham Taylor. But some of his pronouncements on the current situation make you wonder what his village is going to do for an idiot while he attends board meetings in his newly-appointed capacity as interim chairman.

This may sound harsh on Taylor, who has always been a passionate, considered and honest appraiser of the game. But his protestations of ignorance, as to why the Russos have decided they want their money back if they are being kicked off the board, ring hollow – unless he really doesn’t know what’s going on. His view, though, is held by an increasing number of Watford fans, and not just because so many have so much respect for his view, given what he did for the club over the years.

The Russos’ possibly spent too much time telling fans how they’d saved the club from administration three times. And when they eventually got their loans secured, they were secured against Vicarage Road itself, which naturally set alarm bells ringing in Watford fans’ heads. The Russos charged what looked like considerable interest on their loans, which brought accusations that they were simply looking to make money. And now that they’ve rejected a way out of administration, they are the enemy.

These views are understandable, but don’t survive detailed examination. The interest on the loans was lower than commercial lending rates and covered losses incurred by the money being out of their own firm’s account for months. And such has been that state of Watford since Simpson’s reign that there was little other than Vicarage Road against which to secure their loans. Unless fans expected the Russos to throw their firm’s money away trying to solve a situation of someone else’s making, their anger at the brothers is excessive.

By the time you read this, the situation will have advanced, possibly to the administrator’s office. Because the Russos have set this process in motion, they are getting the flak. Ashcroft has only provided a solution that will make him stronger and the Russos weaker/poorer. And Graham Taylor still doesn’t know what’s going on. The virtues of shareholder democracy.

  • December 18, 2009 at 2:25 pm



    Your article has both its pros and cons.

    You clearly have a handle on the financial situation at WFC, however your uneducated slant at Graham Taylor leaves a lot to be desired.

    Taylor knows the club better than anyone. As you state, Russo has every right to his money back and as a fan i have been grateful for the work he has done. Taylor has merely asked for his patience in the situation for the good of the club.

    Further, Russo was recently quoted as saying he would match any investment by Lord Ashcroft, yet he has bottled it at the last. If Russo is serious he needs to further invest to up his stake to the required level.

    Neither the russos or Ashcroft et al are blameless in the situation and should stop their over-blown game of chicken with our club.

    Anyway, i think your village is missing you…….

  • December 18, 2009 at 2:35 pm


    So who was threatening us with administration?

    It wasn’t the bank as we cleared the overdraft so was it just scaremongering to lower the share value so he could buy it cheaper?

    And the loan was 3.5% above Barclays base rate.

    Also Simpson bought back the freehold, so luckily the Russo’s have aground to secure their loans and hold the club to ransom.

    This is a case of a couple of small fishes trying to swim in a big pond.

  • December 18, 2009 at 8:49 pm

    Best casinos

    Bringing money from another country to purchase a house here?

  • December 18, 2009 at 9:41 pm

    Albert Ross

    Hornet318 – I suspect that you have little idea of commercial realities if you seriously think any bank would consider lending at base rate to any company – let alone a football club – whose main reason for needing the loan was to fund the sort of losses Watford have been putting up. The existence of the likes of the Sterling Consortium a few years back, lending money to hard-up clubs at interest rates of up to 30% ( at a time when banks were lending much more easily argues against that.

    The point seems to be that the Russos haven’t got the sort of money to fund the lavish excesses of the recent past, and those who might be thought to have the money to do so aren’t, despite owning a large chunk of the club. Close to £5million is hardly back pocket money unless you’re worth a few hundred million. All this is proving is the maxim that if you want to make a small fortune, you start off with a big fortune and then buy a football club….

  • December 19, 2009 at 11:21 pm

    The Value Of Shareholder Democracy « Scissors Kick

    […] of the flaws of such a system, although even as I type they are trying very hard.” (twohundredpercent) Possibly related posts: (automatically generated)shareholder voting as a signal of confidenceAll […]

  • December 21, 2009 at 5:33 pm


    All this is proving is the maxim that if you want to make a small fortune, you start off with a big fortune and then buy a football club

    How many actual examples of this phenomenon can you name?

  • December 21, 2009 at 10:12 pm

    Mark Murphy

    Thanks for your comments. I knew criticising the legend that is Graham Taylor wasn’t going to win me any popularity polls. But I stand by what I wrote about him – especu=ially the bit about his passion and honesty, whic appears to have been missed

    As you rightly suggest, Pete, Taylor knows the club better than anyone. All the more reason then that he should have known what was going to happen to the Russos at the AGM.

    Whether he agreed with the Russos repayment demands or not, he must have understood that they would be extremely dischuffed at the treatment meted out to them. And calling Jimmy Russo a “bad man”…dear me.

    I do agree with your last “no-one is blameless” sentiments, though. AND I do admire Taylor greatly, as I tried to convey in the article. I just think he was horribly wrong last week.

    If that didn’t come across in the article, that’s my fault.

    Hornet 318, you may be able to correct me if I’m wrong, but wasn’t Simpson able to buy the VR freehold thanks to considerable loans from the Russos?

    And you are right too about the Russos being small fish in a big pond. Which is why Ashcroft’s insistence that the Russos took all the financial risk this year was so wrong.

    ejh: Tom Hicks, George Gillett, Malcolm Glazer, Arkadi Gaydamak…no…NO!!!! Alexander Gaydamak…NOT his Dad, certainly not.

    And my village isn’t missing me…I’ve never left it…

  • December 22, 2009 at 2:43 pm


    Have any of that list actually blown their fortunes on football? (Or is that your point? I’m not always good at irony-spotting.)

  • December 22, 2009 at 11:09 pm

    Albert Ross

    ejh – the point I’m making is that other than a very few (mostly in the Premiership) pretty much every club in league football (and a large portion of non-league) have to be subsidised by their owners to keep them going, and at a much higher level than before. Remember Aldershot being “saved” by a 19-year old for £250K – which proved to be not quite what was going on? The debts that finished off some of those clubs are almost pittances compared to the multimillion debts that clubs from League 1 upwards, occasionally even League 2, are running up – who in their right minds would buy a football club thinking it would make money?

    There is a point to this other than just saying the above: part of the problem is fan expectations. If a club tries to set a realistic budget that will see it break even, it as often as not finds that the manager will moan about not having cash to spend, and fans saying that the owners lack ambition, should back the manager, where’s the money etc. Very few are prepared to accept that their club might have to operate without someone having to dig in their pockets for a six or seven figure sum every year, especially if this means bumping along in lower mid-table while the less economically prudent sides aim high and then crash and burn.

  • December 23, 2009 at 1:22 pm


    Well, up to a point, but that’s a different thing entirely from people losing the better part of their fortunes on football clubs.

    I also wonder how much it’s true. Do football club owners actually subsidise clubs? To what degree? They habitually lend money to those clubs, but they do lend rather than give and they do so at interest. Doesn’t mean they necessarily get it back, of course, just as people don’t necessarily get back, when selling a club, the price they paid for it. But I’m deeply sceptical about the general proposition that football is subsidised by club owners. I think it’s subsidised by club owners inflicting debt onto clubs.

  • December 23, 2009 at 9:44 pm

    Albert Ross

    ejh – you do have a point on the debt issue, and that is one of the problems that seems to come up time and time again with clubs in crisis: that somewhere is a huge debt owed to someone involved with the ownership of the club, often secured on the ground which then complicates any takeover or buyout. This can then allow the whole process of Administration to be manipulated.

    Really I think the mystery is why people who presumably have made significant amounts of money as businessmen feel the need to get involved with football clubs at all. There are few obviously profitable clubs, investments are high risk, and the aggro is considerable. Whether it’s as debt or otherwise, I suspect a lot more money is going into clubs below the top few in the Prem than is coming out. Why?

  • December 24, 2009 at 11:28 am


    Because successful people have big egos?

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