The 200% Podcast 13: FOUL!
The Power Of Discretion And Why Guidelines Are… King
Steven Gerrard, The Media & Liverpool’s Structural Issues
The Twohundredpercent Podcast LIVE!
Where, Exactly, Do Queens Park Rangers Go From Here?
End Of Season Ennui
The 200% Podcast 12 – General Election Special
Saturday Night On Channel Five For The Football League
The Decline & Fall Of Leyton Orient
Rape, Disrespect & Fury: The Oyston Family & Blackpool FC
Is It Time For A New Football Club For Newcastle?
Tranmere Rovers & Cheltenham Town Stare Into The Abyss
A new year is the perfect time for a fresh start, and Rob Freeman has been looking at ways that football could clean up its financial act once and for all in 2010 with five eminently implementable rule changes that would improve the game for all of us. The chances that any of them will be acted upon are, of course, remote, but that doesn’t mean that we shouldn’t throw them into the ring to be discussed.
Financially, football is doomed. This may seem like a bold statement, but it’s certainly not the first time you’ll have heard it. It definitely won’t be the last, but with all the threats of points deductions, transfer embargoes and Fit and Proper Persons Tests (FAPPTs) in place, clubs are still continually spending beyond their means. From the top of the game downwards, clubs are being run by people doing everything they can to get as far as they can, and as soon as they think they hit trouble, they know that there’s usually someone prepared to come along and step into the breach. No real loss, no comeback, no punishment.
Ironically, the club most people would blame for it all, would be Chelsea. Ironic, because last week Chelsea announced that they are now virtually debt free, having been over £700m in the red this time last year – most, if not all of which has been converted into shares by owner Roman Abramovich. An easy enough route for Chelsea to take, but it can only realistically be done with so-called “soft debt” – debt owed to the owner(s). Of the other 19 Premier League clubs, only Aston Villa (£75.5m according to their last published accounts), Fulham (£174m) and Wigan (£43.1m) have a majority of “soft debt” – however in the Latics’ case, they also owe £23m to Barclays Bank, an alarming amount to owe should they fall from football’s elite.
Other clubs have tried to follow in Chelsea’s wake by bringing in a similar “sugar daddy”, whether it be a real bankroller, a new owner who can’t back up their spending with actual money in the bank, or owners who look like the real thing, but don’t even spend their own money in acquiring the club in the first place. Chelsea were by no means the first to try to spend their way to the top of course, but they were by far the most successful. Jack Walker’s money helped Blackburn win a single Premier League title, Elton John’s millions helped Watford reach an FA Cup final. On a smaller scale Dave Whelan bankrolled Wigan to the top flight, but Lionel Pickering and Jack Hayward were two of the many whose promised success did not come when they opened their bank accounts into their club funds.
At the end of last season, David Conn, writing in the Guardian, listed the financial statuses of the 20 Premier League clubs based on their most recently published annual accounts. Every single one of them was in debt, fourteen of them posted a pre-tax loss, and Everton’s profit ran to a measly £26,000. Between them, they had lost £225m in their most recent financial years, and between them, they were in over £3billion in debt – almost double the amount that the Premier League as a whole will receive from the current three-year domestic TV contracts – their biggest source of income. Wigan’s accounts made no attempt to hide the fact that without the backing of Dave Whelan, the club were insolvent. Portsmouth have just been served with a winding up order, and then we have Hull City. Hull City arrived in the Premiership with just £1m worth of debt, yet the price of competing (or rather, just staying up) saw former owner Adam Pearson return with the club a reported £27m in debt, and faced with the task of paying £18m of that off by the end of the season.
Outside the top flight, things are just as precarious. Newcastle may have lost some of their top earners, but are being kept afloat by Mike Ashley’s loans and stadium sponsorship – again, more soft debt. Middlesbrough’s situation is a lot less clear. Their most recent accounts (for the year up to December 2008) were due at Companies House by September, however, these are late, and still have to be filed. One thing that was logged with Companies House a fortnight ago was Barclays Bank registering particulars of a mortgage for the value of £77m (presumably for the Riverside and the club’s training ground), with the shares of the club being listed as security. Elsewhere in the division we have Crystal Palace failing to pay their players on time, and being the subject of two transfer embargoes relating to the non-payment of player bonuses and an instalment for the transfer fee of Alan Lee to Ipswich. Other clubs have soft debt and hard debt as a result of being relegated from the top flight, running out of parachute payments and even chasing the riches of the Premiership.
Outside the Championship, and there are still finance issues, ranging from Stockport and Bournemouth being in long term administration, Accrington Stanley being subject to a transfer embargo for being behind with tax payments, the ongoing sagas of Notts County (now faced with their second winding up order of the season), Chester City and the matter of their owners, Weymouth almost going out of business, King’s Lynn being wound up, and much, much more.
Often in these cases the same names come up time and again. In Mark’s review of the year, Peter Ridsdale’s name came up in reference to the taxman taking Cardiff City to court for £1.2m in unpaid taxes – Cardiff’s finances don’t appear to have recovered from when Ridsdale’s business partner Sam Hammam left the club. And Wimbledon fans will certainly remember how Hammam was the original architect in their club leaving SW19. Another name that comes up time and again is Ridsdale’s eventual successor at Leeds, Ken Bates. John Batchelor’s name is one that is almost expected to hover into view when a lower League Two or Blue Square Premier team is looking for a new buyer. Notts County fans pointed to Peter Trembling’s time at Everton, when saying how great their future under their new owners Munto Finance would be. Former Deputy Chairman of Notts County Peter Storrie seems to be a convenient enough scapegoat at Portsmouth (a club he arrived at in controversial circumstances), but West Ham fans will remember his Bond Scheme with less than fondness.
All of these people pass the Fit and Proper Person’s Test as suggested by the FA and the Football League, whether they are seen as Fit and Proper by the fans of the clubs that they have been involved with, yet clubs continually find themselves controlled by the same people, with very few appearing to learn from any “mistakes” they may have made in the past. When launched, the FAPPT was heralded by then-Football League chairman Brian Mawhinney, who claimed that it was the most important step taken in terms of bringing “new standards of corporate governance to football”. Ironically, the FAPPT was introduced at a Football League AGM in Chester in 2004, yet the current incumbent of the post of chairman at the Deva Stadium only fails the FAPPT because he is disqualified from being a director. In fact, the only man in football who fails the FAPPT, but isn’t barred from being a director of any other company in the country is Marlon King, not because he is currently imprisoned, but because he was found guilty of sexual assault.
In other words, the FAPPT is essentially toothless. Presumably the reason it is toothless is because for the League to have implemented it, it needed to be voted on by the clubs (and therefore the very people that have to pass the FAPPT), and for the FA to implement it, it needed to be voted by the FA committee – five of whom have to pass the FAPPT. Meanwhile, the punishment for what the Football League calls “an insolvency event” doesn’t get handed to the individuals who were responsible for the club running insolvently, it gets passed on to the club, – essentially the fans and any prospective new owners. This season, there are two clubs currently in administration – Stockport County and Bournemouth), yet the only club running with a points deduction is Southampton. As it stands handing a 10 point non-appealable penalty for entering administration is no incentive for exiting administration in the most honourable way, in other words, by settling the debts, rather than agreeing to pay a small percentage of them. Yet, Southampton’s new owner Markus Liebherr did just that, yet the penalty stays. Punishing Liebherr for making Southampton debt free. Punishing the Saints fans for having to see the club see the effects of being so skint for so long in the first place.
The other side of the coin is the argument that the fans were happy with the success that overspending brought, but that isn’t always the case. What success brought the administration that Bournemouth and Stockport are in? And then we have Luton. The fans campaigned for years against bad owner after bad owner, yet got handed the biggest shafting of all time. First of all in November 2007, the Football League’s 10 point administration penalty helped condemn then to relegation to League Two, then followed it up by adding a 20 point sanction for the way that the club exited administration – as well as a little extra kick in the teeth for “previous insolvency events”. These previous events weren’t deemed worthy of penalty at the time that they had originally occurred, and had also happened over a ten year period. Hypocritically, the League’s own FAPPT only looks at “insolvency events” over a five year period, and wouldn’t consider then retrospective to the test being introduced. Just to help Luton on their way out of the League, there was another 10 point penalty and £50,000 fine applied by the FA for various “financial irregularities” concerning payments to agents. The four directors responsible were fined a total of £19,750 – but as the FA are powerless to impose fines on people outside the game, these fines are unlikely ever to be paid. The six agents were censured as to their future conduct, and incurred no financial penalty for the money they had received in contravention to the FA rules.
So, no real punishment for individuals and draconian ones for the clubs, so it is unsurprising that clubs continue to be run into the ground and way beyond their means, because the clubs will always be bought out, and the authorities will continue punishing the entities, because they need to be seen to be taking action. Is this not wrong? Does this not need to change? Don’t we need to actually bring club officials and spending into line? Don’t we need to change the way football works financially? I can think of five ways to help – in order to make the individuals (rather than the fans) more accountable for their actions, and to at least try and prevent club officials trying to write off debts, rather than just punish their clubs when they do:
1. Strengthen up the FAPPT. Short of being disqualified as a director, having an unspent conviction or being on the sex offender’s register, it’s nigh on impossible to fail the FAPPT. In terms of conduct with football clubs, you have to had two insolvency events at clubs within a five year period to fail the test. This should be widened, so that there is no limit in terms of how long a period an individual has been involved in the game, and that any individual who has ever been disqualified as a director cannot be a Fit and Proper Person to run a football club. It should also take into account any behaviour from before the FAPPT was first released. While this would not widen the net a lot, it would stop Stephen Vaughan re-emerging at a club – in fact, thanks to his time at Barrow, he would have failed the test when Chester entered administration in May.
2. Remove the 10 point penalty for administration, and make indivduals responsible for their actions, by getting them to lodge a financial bond that is only returnable upon Fit and Proper behaviour. Prior to the introduction of the points deduction in 2002, administration was seen as a bad thing, with the threat of losing the club concerned. Then Leicester City entered administration, but still managed to keep a promotion campaign going, ultimately reaching the Premier League, having managed to jettison the vast majority of their debt. Since then, eleven football league sides (Rotherham on two occasions), three Conference Premier sides, and six Conference regional sides have gone into administration. None of the owners have received sanctions from the football authorities, and indeed the chairman of the first side after Leicester to enter administration (Ipswich Town’s former chairman David Sheepshanks) sits on the Football Association board. Admittedly, many owners lost out financially, but that is not always the case. In many cases, the owners going into administration have retained ownership of the club for little or no loss. In that respect, the only people who are guaranteed to be penalised by a points deduction are the only people who have no control over it – the fans.
To replace the points deduction, the FA should introduce a scheme that gives club owners and directors an incentive to live within their means, and a means of punishing those who cannot, and use administration to reduce debt. With this in mind, I would include, as part of the FAPPT a pledge that the official signing it will do their utmost to run the club within its means and not look to use insolvency events to reduce debt, and asset strip for personal profit. With this, they should have to post a returnable bond (the amount of the bond would depend on the level the club is playing) that is only returned once the official leaves the club, as long as they haven’t had an insolvency event, or asset stripped the club. Owners who have not had insolvency events, but have had actions that have caused transfer embargoes (usually late payments to players, other clubs, and as from this season, the taxman) would see part of their bond withheld. This may hopefully change the attitudes of the likes of the Accrington Stanley officials were in no rush to get the transfer embargo the club was under (for late payments of £75k to the taxman and £50k to the PFA) lifted, as it meant that they had to keep their squad at a set number, as though they were incapable of managing their club efficiently without the punishment being in place. In cases where the bond (or part of it) would not be returned, and would instead go towards FA grassroots campaigns. Upon an insolvency event, the official should have to re-apply to meet the conditions of the FAPPT, and post a new bond.
There would be one exception to this – a representative of a Supporters Trust would not need to post a bond in order to pass the FAPPT. However, in cases where the Trust runs the club (as opposed to be majority owners, as was the case as Notts County), because the bond is not there to be returned, and because the Trust representatives are elected by fans – then the ten point deduction should remain as an potential punishment.
3. Remove the seemingly arbitrary points deduction for failing to exit administration without a Company Voluntary Arrangement (CVA), and make it easier for clubs to agree a CVA by giving the taxman the same priority as football creditors. This might seem the easiest to do, but it is ultimately the most ambitious. Until Leeds went into administration in 2007, every League club that had ever entered into administration at one point (and at that point, we’re in the region of 40-50 clubs over the decades) had exited administration with a CVA. A CVA is an agreement between the company and the creditors to pay a percentage of what is owed over a set period (usually five years). Since 2007, Leeds, Luton, Rotherham and Bournemouth have all failed to reach a CVA because of one creditor: HMRC – the taxman. And there’s a reason for this. Until 2003, when a company entered administration, the taxman was always considered a supercreditor. In other words, despite whatever was agreed in the CVA by the creditors, supercreditors receive everything they’re owed. The taxman now has a policy of only voting in favour of CVAs when there are no other supercreditors. Which is bad news for football clubs in administration, as creditors that hold “football debts” (i.e. other football clubs, the FA, the Football League and other football authorities and the PFA), are considered supercreditors, because the club will not be allowed to continue competing (and essentially trading) unless football debts are paid off in full. This is important, because it stops Club A buying player X from Club C for £3million on a four year contract, only to pay the first instalment of £600k, and then go into administration and look to pay 10%, 5% or even 1% of the remaining £2.4million while retaining the players services. On paper, this appears to be difficult, because the Enterprise Act of 2003 removed the status of the taxman of a supercreditor. However, surely the football rules that state that all football debts have to be paid, could be widened to state that the taxman also has to be paid in full, in order to continue competing.
4. The club plays in the English League system, and is situated in either England or Wales, so the company that owns the club should also be registered in the UK. No, that’s not a bit of Little Englander inside me trying to get out, but surely a company that does all of its business in the UK should be paying UK taxes. Arsenal are considered one of the most continental style clubs in the English game, yet they are one of the few clubs in last season’s Premier League that are registered in the UK. Other clubs are registered in Jersey, the Isle of Man, the British Virgin Islands, Bermuda, and even the Cayman Islands via Delaware. However, in the last accounts filed by Arsenal (for the year ending 31st May 2009), they state that their entire turnover originates in the UK. Now, if a club like Arsenal, who play several competitive matches across the continent generate all their turnover in the UK, where is the justification for an English Premier League club to be registered in Jersey, other than it being a tax haven? Clubs are forever going on about their work with the community, and the FA’s bid for the 2018 World Cup is very community centric (as long as you’re prepared to suspend that belief when the Franchise Bowl is included as a potential venue) – shouldn’t the FA be encouraging its member clubs contributing financially to the community the same way that it’s supporters do?
5. Bar the transferring of the ownership of the stadium the club plays in, to anyone bar the football club or the local authority. Surely a no-brainer, and in fact an idea that was floated by the football authorities a few years ago, but never got voted in. Brighton & Hove Albion, Wimbledon and Wrexham are just three clubs that would have benefitted from such a rule that would be simple to implement, and at the same time something that could only really be opposed by someone with an eye on asset stripping, or using as security to spend beyond the clubs means. The ideal situation appears to be the setups at Ipswich Town at Newcastle United, where the ground is owned by the club, but the land the ground is built on, is owned by the local council. Mike Ashley may not have seen the assetless situation of St James’s Park as beneficial while he was trying to sell the club, but it certainly protected the club from the sort of would-be owners who were only interested in buying the club if they owned the prime city centre based land the club was situated on.
Five small improvements (at least I think so, anyway), each one designed to make the individuals, rather than the clubs face the punishment of their actions. Will these ever happen? I doubt it – because as long as the individuals who have a say in the rules of the way the game is run, they will continue to ensure that the clubs, rather than the individuals will take the punishment. Just in case.
Ian began writing Twohundredpercent in May 2006. He lives in Brighton. He has also written for, amongst others, Pitch Invasion, FC Business Magazine, The Score, When Saturday Comes, Stand Against Modern Football and The Football Supporter. Ian was the first winner of the Socrates Award For Not Being Dead Yet at the 2010 NOPA awards for football bloggers.
Excellent article. If only these 5 principles had been in place two years ago Luton would still be in the Football League. Unfortunately the modern game is riddled with chancers and conmen who are only interested in making a fast buck and then scarpering leaving a bloody mess behind them. Equally unfortunately those we entrust to protect us from these ‘characters’ are asleep at their posts. The FAPPT is nothing more than window dressing in it’s current form.
I agree wholeheartedly with proposals 1 and 5 – and 4 sounds sensible. Re 3, I also like the taxman being a preferred creditor like the football creditors – after all, we all lose out if the taxman is not paid in full. However, I disagree that clubs should not be punished – I don’t think you can divorce the club management actions from the effect of the overspend on the club. It doesn’t always buy ‘success’ – but it might have prevented relegation instead. My suspicion is if you didn’t punish clubs, there would be succession of overspending ‘figurehead’ directors who overspend, take a personal punishment, and the club just carries on like no overspend ever happened. In the end, it is the club which gained an advantage from the overspend, so I think it’s right that the club is penalised. If fans want to prevent it, they need to get involved themselves to ensure the club acts responsibly.
Exiting without a CVA (ie liquidating) leaves the creditors completely stiffed – all the more galling when the same club restarts in the same division but with no debts! I think if the club exits without a CVA, they should be demoted – in non-league it’s 2-3 divisions… I think an agreed CVA should be a lesser penalty than with no CVA, even if it’s not a huge % payout – because it is at least agreed – but at a certain % level, it could also be automatic demotion.
oftenscore6: “However, I disagree that clubs should not be punished – I don’t think you can divorce the club management actions from the effect of the overspend on the club. It doesn’t always buy ’success’ – but it might have prevented relegation instead. My suspicion is if you didn’t punish clubs, there would be succession of overspending ‘figurehead’ directors who overspend, take a personal punishment, and the club just carries on like no overspend ever happened. In the end, it is the club which gained an advantage from the overspend, so I think it’s right that the club is penalised. If fans want to prevent it, they need to get involved themselves to ensure the club acts responsibly.”
While I appreciate the sentiment – not every club that has entered administration has done it through overspending on on-pitch matters. In fact, looking at the list of clubs that have gone into administration since 2002 (Ipswich Town, Franchise, Wrexham, Camrbidge United, Rotherham United, Boston United, Leeds United, Luton Town, Bournemouth and Darlington), only two of those stick out as being ones who overspent on players or wages. The rest hadn’t exactly seen much in the way of on-pitch profit – Wrexham’s owners were even trying to close the club and sell the ground for personal gain! People like those in charge cauing the debts at Luton, Boston and Darlington didn’t appear to be doing it for the fans sake – that’s why the individuals need to know that they would be first in line to be punished. I’m not suggesting that a bond system would be small amounts of money either. A minimum pf £1m for directors and/or investors at Premiership level, and at least six figures for League Two. Yes, it may put of some genuine would-be owners, but I’d rather lose ten genuine would-be owners in order to off a single John Batchelor.
“Exiting without a CVA (ie liquidating) leaves the creditors completely stiffed – all the more galling when the same club restarts in the same division but with no debts! I think if the club exits without a CVA, they should be demoted – in non-league it’s 2-3 divisions… I think an agreed CVA should be a lesser penalty than with no CVA, even if it’s not a huge % payout – because it is at least agreed – but at a certain % level, it could also be automatic demotion.”
Agreed to a large degree. And this had always been the case until Leeds’ administration. The clubs that have failed to agree CVAs have all been because of the taxman vetoing. If the taxman is agreed as a supercreditor, there’s realy no excuse for failing to agree a CVA, and the league should go back to the pre-Leeds rule of having to exit with a CVA.
Aren’t there two big potential problems with all of this?
a. How much of it would be legally enforceable in the event of an offended party taking legal action against any sanctions imposed on them? Think of the recent Briatore case, or Tottenham’s successful action years ago against their explusion from the FA Cup. Both rules and sanctions would have to be consistent with the wider structure of British and European law – are you confident that they would be? (Would it, for example, be possible to restrict club ownership to UK-registered companies? I’m not asking rhetorically – I really don’t know. But it’s not clear to me that it would.)
b. What do you do about the syndrome – identified in your article – by which club owners are reluctant to accept measures which affect clubs owners and club ownership, precisely because it affects people like them? Are they going to agree to any of this, and even if they do, are they going to enforce any of it? The Chester City farce would suggest not and so, for that matter, would the removal of Wimbledon to Milton Keynes, which was of course entirely against the existing rules.
The points deduction situation is a thorny one and there needs to be some review of it – but the problem is that the reason it was brought in was of course to discourage clubs from “Doing a Leicester”. Given that there needs to be a discouragement for that, how about saying that clubs entering Administration will be deducted ten points, unless doing so will result in their relegation. That way, the disincentive remains to those that would seek to benefit from overspending and jettisoning debt, while not penalising those for whom admin has been used to protect them from bad owners (eg Wrexham, Luton).
You mention Rotherham as a repeat administration offender. You can add Bournemouth and Darlington to that list, as well. A week out of its second period of adminstration in recent years, having paid creditors just 1p in the pound, Rotherham splashed out £150k on a striker. That can’t be right and is tantamount to chaeting and fraud, in my view.
They are all entirely sensible ideas and should be brought in as soon as possible.
Sadly, as you state, turkeys don’t vote for Christmas.
Why not a condition of promotion from any league that the club be currently solvent, and have not had an ‘insolvency event’ in the past season?, so teams cannot do a Leicester and the cases of Wrexham and Luton do not get punished too severely. Doesn’t something like this exist between the Bundesliga’s two leagues?
Of course this rules out Notts County and Bournemouth for promotion, but don’t take my position as a Rochdale fan as a contributing factor in my idea(!)
Rob, re “not every club that has entered administration has done so through overspending on on-pitch matters”, every club / business has a budget which will cover both on-pitch and off-pitch matters. The on-pitch part may not be huge and may not bring success, but if they spend more than they earn, what’s the difference? If they don’t get the projected income or overspend on off-pitch matters, they have to make cuts somewhere else. But instead, some act like ostriches, carry on spending and hope for a sugar daddy rescue / fold and reform in the same division.
I think if the FA required the bonds you suggest, quite a few clubs would struggle to find directors at all! Many good directors are not there just to provide finance (some do not provide any at all), but invest their time (which may be unpaid) in providing business acumen and advice, or managing or overseeing parts of the club/business.
“quite a few clubs would struggle to find directors at all!”
I suspect the likes of Ken Bates would *still* find some way of Leeds paying his “personal” bond for him anyway.
“a. How much of it would be legally enforceable in the event of an offended party taking legal action against any sanctions imposed on them?”
I think the only one is likely to be the ensuring that the club is based in the UK – but if that had to be extended to the EU, I wouldn’t have a problem with that. It’s more designed at removing clubs using paper trails and offshore tax havens, than anything else. Outside of that, most industries have rules and regulations that individuals and companies have to comply with, as well as the law. Even within football – the League ordered Bournemouth to pay their unsecured creditors within two years, when the legal norm is closer to five.
“b. What do you do about the syndrome – identified in your article – by which club owners are reluctant to accept measures which affect clubs owners and club ownership, precisely because it affects people like them? Are they going to agree to any of this, and even if they do, are they going to enforce any of it? The Chester City farce would suggest not and so, for that matter, would the removal of Wimbledon to Milton Keynes, which was of course entirely against the existing rules.”
Like I say, it’s precisely the reason none of this would be implemented. As far as my point with Wimbledon is concerned, it would have prevented the sale of Plough Lane. Without which, one of the most “compelling” reasons for the move – that the owners had done everything they could to find a new venue in London (except look for one) – disappears in an instant.
I’m not convinced that clubs “doing a Leicester” is an issue. It’s a one-off (so far) and even then, there are vastly different circumstances in Leicester’s administration compared to most – not least including the involvement of Eric Hall. Neither Notts County nor Bournemouth have had an “insolvency event” this season, by the way. Both are under transfer embargoes for one reason or another, but neither have had insolvency events.
“every club / business has a budget which will cover both on-pitch and off-pitch matters. The on-pitch part may not be huge and may not bring success, but if they spend more than they earn, what’s the difference? If they don’t get the projected income or overspend on off-pitch matters, they have to make cuts somewhere else. But instead, some act like ostriches, carry on spending and hope for a sugar daddy rescue / fold and reform in the same division.”
I think we’re talking at cross purposes in terms of off-pitch matters. You appear to be thinking of clubs spending beyond their means just trying to get as high as possible, which, while it does happen, isn’t really what I was thinking of. Points deductions are no penalties at all to the likes of Stephen Vaughan (with the six figure cleaning bill he racked up in a matter of months) Mark Guterman and Luton’s owners over the last decade, yet even with fans protesting and pleading with the football authorities to do something about the so-called custodians of their clubs, what happens? Three clubs with almost 100 points deducted between them in three seasons. A shambles, and absolutely no deterrent to individuals looking to follow in their footsteps. If I shoot someone, it’s not the people at Smith & Wesson that get arrested. If you’re considered fit and proper enough to be responsible for owning a club, you’re fit enough to take responsibilities for your own actions.
“I think if the FA required the bonds you suggest, quite a few clubs would struggle to find directors at all!”
I’d rather lose 100 genuine honest to goodness directors to keep one asset stripper away. But, maybe a lack of directors, would lead to a rise in Trust owned-clubs. John Armstrong-Holmes may have announced that Trust run clubs are a failed social experiment, but then he would, considering that not only did Notts County struggle under his watch, but he also recommended that his members sold their club to a bunch of people that don’t exist. The people at Exeter, Wimbledon and FCUM are more than happy with how their clubs are being run.
“Many good directors are not there just to provide finance (some do not provide any at all), but invest their time (which may be unpaid) in providing business acumen and advice, or managing or overseeing parts of the club/business.”
There’s nothing stopping any individual giving unpaid time and advice to a club without being a director.
“I suspect the likes of Ken Bates would *still* find some way of Leeds paying his “personal” bond for him anyway.”
Maybe the “likes of Ken Bates”, but actual Ken Bates would fail a retrospective FAPPT, as anyone who has read the chapter of Tom Bower’s Broken Dreams about Bates time at Chelsea will tell you.
Some interesting points but personally I can’t see the clubs involved wanting to introduce many of them. I really don’t want to come across as a Big Chief Poo-poo, but…
1. Would this have stopped the likes of Bill Archer, no. What about foreign investors with somewhat murky pasts (Gaydamak, Usmanov) – it’s hard to legislate against rumour. Sadlym when clubs are at their most vulnerable, supporters don’t care where the money comes from to get them back on their feet.
2. I’m of the opinion that spending beyond what you’re good for in football is cheating. I think the 10 point penalty is fair. Relegation, even from the League, is not the end of a club – any true fan would support their team even if they were in the Ryman Div 1 South – football tribute bands like FCUM are heart-warming testimonies to this. Asking for a bond would deter investors and make digging a club out of a hole even harder – now an investor would have to clear debts and pay up for a bond they have no control over – doesn’t leave much to strengthen the squad.
3. I agree but I’d like every creditor to be seen as a super-creditor. After football interests and the tax man have been paid off in full, usually the only remaining creditors are local businesses. If football clubs want to be seen as a valuable part of the local community they should have to pay their way in it.
4. Seems perfectly acceptable to me, but then I’m not paid to do the accounts for for football club. Given how widespread this is, you’d never get the clubs to agree to this.
5. A good idea – but sadly, given the position most clubs are in, would never be agreed. For most clubs the stadium is their only tangible asset – they’d have nothing to guarantee loans against – and it would drastically reduce their value – again detering investors.
Sorry to be so negative, it was a very interesting read. Look forward to seeing more.
Sp3ktor, local businesses choose to do business with their local football club. Why more don’t do adequate credit checking on them is presumably through loyalty or lack of funds or time.
HMRC are the only “creditor” who has no choice, and that’s partly why they have been so abused.
As always many good points raised but I will add this thought and my take on a solution (which agrees with Matt Boorman – cause I always get on with Rochdale)
It is important not to see the 10 point deduction that clubs get as a penalty for that club. It is a recompense to the other clubs who have not over spent but it makes more sense to take the points off a tally rather than awarding the other 23 clubs in a division 10 bonus points for playing fair.
Considering the deduction a penalty suggests that the offence is a personal one – that the club does it in isolation – but it is not it is a crime against the rest of the football community which is recompensed accordingly.
That said I do not like it. It makes a game of administration and punishes the wrong people. My solution would be – should a club go into administration – to put a block on that club going up for a period of four years from that point and a block on them going down for two years (after an initial three months, to avoid the convenience of administration) creating the clubs as jam cars (for those who remember TCR)
Using Leeds as an example they would have been relegated after going into administration a week before the end of the season to avoid a club using the protection which is offered for the integrity of clubs as a convenience but had they had the serious need to go into admin in January (and this spate of call offs could cause clubs to do that) they would have been insulated at the foot of the division.
They would then be ignored for promotion and relegation purposes. They could win League One but the 2 and 3 clubs would be promoted, they could finish 24th but the clubs 20, 21, 22 and 23rd would be relegated.
This gives the club a shield of protection that at the end of a period of administration that they would be a similar entity than they were when they went in but it circumnavigates the idea of using it as a way to advance your club. A half decade without the ability to be promoted would see that opportunists would not prospect.
Okay; so Leicester are the only team to do a Leicester so far – but perhaps some other means of disallowing teams to gain an advantage on the field could be implemented (ie not just a ten point penalty). If Rotherham go up this year it is on the back of multiple administrations which even saw them lose their ground (which was all due to overspending to sustain their ill-fated Division One place); Darlington were another side that continually abused the system to try to gain promotion until they ran out of rich idiots. Possibly finances should be checked as being solvent, and certain financial conditions met (I don’t know what exactly, I’m not an economist) before a promotion place is granted – it might even stop sides like Stockport being promoted and then falling back into admin; again I seem to remember something of this nature in Germany.
Some of the respondents have argued for the retention of the automatic 10 point deduction for clubs entering Admin on the basis that it is a punishment/deterent for clubs who overspend.
However this does not differentiate those clubs who got into difficulty without overspending. In the 2 years before they last went into Admin Luton took in far more in transfer fees than they spent, yet the board still couldn’t pay the clubs debts. No-one has ever been able to explain where all the money from transfers went and the football authorities simply didn’t care.
The Leicester example was a one-off which could have been far more effectively dealt with by banning teams in Admin from being promoted. Under current rules a team in Admin could still be promoted if they finished 11 points ahead of the team below them, unlikely I know but still possible.
Very few Directors, I would imagine make decisions on the basis that they will fail and go into admin. It is the risk/reward balance that needs to be restored. A lot of the wage inflation that is at the root of footballs financial problems is related to clubs attempting to get into or maintaining a presence in the Champions League/ Premier division.
Therefore, Champions League entry should be dependent on success in winning the league league cup FA cup or fair play league. This would hopefully spread champion’s league entry around and punish clubs who inflate player salaries to stay in the top 4.
The difference between the Premier League and Championship should be less in terms of TV income, this can only be achieved by sharing the money around more.
Finally Club’s constitutions should be on the German model where fans own 50%, this puts off nefarious owners who require 100% control to run their webs of intrigue.
“Agreed to a large degree. And this had always been the case until Leeds’ administration. The clubs that have failed to agree CVAs have all been because of the taxman vetoing. If the taxman is agreed as a supercreditor, there’s realy no excuse for failing to agree a CVA, and the league should go back to the pre-Leeds rule of having to exit with a CVA.”
Quite. And if the Taxman was a preferred creditor, the clubs who currently don’t pay the taxman would probably do so – thus there would be less chance of a club receiving a winding up order, going in to admin or requiring a CVA in the first place.
Cracking article by the way, Rob.
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This post was mentioned on Twitter by twoht: Rob Freeman’s 3,500 word manifesto on football financing is here: http://bit.ly/8epbsU – Don’t be scared by the length. It’s very, very good…