What can be done about rogue owners?

This post was originally written for Charlton fanzine Voice of the Valley.

Who can keep rogue owners of football clubs in check or at least prevent their worst abuses? There is no easy answer to this question. One reason is that when a club is in difficulty, possibly facing administration, anyone who seems to have sufficient funds is going to look like a saviour. A bad owner is arguably better than a club going out of business altogether as ultimately he can be replaced, although in the meantime he may take the club to the brink and inflict long-term damage. Fans may leave and find other things to do on match days.

The first body is to consider is the English Football League (EFL). Its primary to task is to run a series of football competitions. It is not set up to be a fans’ representative body, nor is it well suited to be a regulator. However, it is has been obliged to undertake some regulatory functions, often after external pressure, because of the reputational damage that can be caused by rogue owners.

Its principal mechanism for doing this is to check on the suitability of owners when they first acquire a club. This is task is undertaken through the owners’ and directors’ test, formerly known as the ‘fit and proper persons’ test. Strictly speaking, this is a Football Association test administered by the EFL. The objective of this test ‘is to protect the image and integrity of The League and its competitions, the well-being of the Clubs, and the interests of all of the stakeholders in those Clubs, by preventing anyone who is subject to a “Disqualifying Condition” being involved in or influencing the management or administration of a Club.’

So what counts as a ‘disqualifying condition’? The matters covered include the long-standing one of being involved in another club; being disqualified by a sports governing body or professional body; having an unspent conviction for a series of offences (including their equivalent abroad); and company disqualification. In principle, this should exclude anyone as an owner or director who might be regarded as ‘dodgy’.

However, there are important limitations to these rules, as is shown by recent events at Bolton Wanderers. Ken Anderson, who took over at Bolton in 2016, was previously disqualified from being a director for eight years. Anderson, who bought Bolton for £1, was disqualified from being a company director in 2005 for transgressions relating to eight companies including diverting or seeking to divert company funds into a personal account, VAT discrepancies and failing to cooperate with receivers.

The Professional Footballers' Association had to provide a loan to the club in December to cover wages for that month and November. Bolton Whites Hotel Ltd., of which Anderson is the only director, is subject to an outstanding winding up petition from HMRC over unpaid taxes.

The accounts for Bolton's parent company, Burnden Leisure, show that Anderson was paid £525,000 in consultancy fees for the 2016/17 season. Burnden Leisure also paid £125,000 for consultancy services to Athos Group, which is 'owned by a family member of K Anderson'. Bolton were in League One that season and £525,000 was significantly more than the amount paid to the director of any club in the league that season. 20 clubs in the Championship and eight in the Premier League paid their chief executive less than that.

Damian Collins, the chair of the Commons select committee that deals with sport, said that football owners' and directors' tests should take into account a person's track record, even if disqualifications had expired. He commented, 'The FA should have the power to make a subjective decision based on the track record of the director, as is the case in broadcasting.'

The EFL does state that ‘direct action’ can be taken for: ‘A very serious single act or persistent serious acts … where the individual’s conduct is clearly damaging to the standing and reputation of the wider profession and the game of football.’ Of course, this does involve a subjective judgment about whether such damage has occurred. The EFL’s position is that the policy has been adopted, but it is understood not yet to be in force because the details of how it will work, and the necessary rules, are still being developed. In other words, there are still gaps through which a rogue owner can take control of a club.

The EFL has a supporters’ charter. It states that ‘We are committed to enhancing the consultative reach of our members among their fanbases and local communities, though effective supporter dialogue and EFL Trust projects. In June 2016, following the Government’s Expert Working Group on Supporter Ownership & Engagement (EWG), in which the EFL played an active role, clubs introduced new regulations requiring clubs to engage with their supporters in a structured and regular manner.’ In other words, external pressure forced it to take action.

Under these rules, clubs are required to meet with a representative group of supporters at least twice a season to discuss significant issues relating to the club. This seems to be a rather minimal requirement, although most clubs hold more frequent meetings. The framework for each club’s specific consultation strategy is to be documented within its customer charter. For its part, the EFL will meet with the supporter organisations at a national level and club groups on an ad hoc basis whenever needed, as it did with Charlton fans, with a further meeting held in January, although the results of that process are not known at the time of writing.

An alternative form of fan engagement, as happened at Charlton, is to have a ‘fan on the board’. In practice, a club may have a number of boards and the fan representative may not on the most significant of them. Others can speak much more authoritatively than I can about how this worked at Charlton. From an external perspective, it was at least a good public relations strategy which reinforced a sense of solidarity between fans and directors in the years following the return to The Valley. More generally, what a fan director can do, even in terms of communication, is going to be limited by the rules of commercial confidentiality which all directors have to abide by.

There is quite considerable support for the idea of an independent regulator and this is certainly an idea worth exploring. However, I do have some reservations about this idea. If we look at the track record of independent regulators of the utilities such as electricity and water, it has not been that impressive. Some companies, e.g., in water, have been able to extract monopoly profits and the protection offered to consumers, particularly in relation to prices, has fallen short of what was hoped for.

There are two underlying problems here. One is that the resources provided to the regulators are generally dwarfed by those of the companies they are seeking to regulate and this would certainly apply in the case of football. Second, there is what economists like to call an ‘asymmetric information’ problem. What this means that the information needed to engage in effective regulation is generally in the hands of those being regulated and extracting it is difficult, costly and time consuming. An additional problem in the case of football is that the regulator would be likely to be swamped with complaints outside their remit, e.g., about decisions by match officials.

Some fans have formed ‘phoenix’ clubs when decisions have been taken about their club that they do not like. The classic case is AFC Wimbledon which reached the Football League. However, the transfer of the Wimbledon ‘franchise’ to Milton Keynes was a particularly bad decision by the football authorities which enraged the fan base which happened to be relatively prosperous. Other phoenix clubs have found it a big challenge to battle their way up through the non-league pyramid. For example, FC United, formed by fans alienated by the takeover of Manchester United by the Glazer family, is currently nearly the bottom of the National League North and has faced financial challenges.

A solution that finds favour is fan ownership of clubs. Most clubs have a range of professional expertise available among their fan base. However, the real difficulty is that almost all clubs outside the Premier League lose money and the losses are particularly large in the Championship. Portsmouth was rescued by the fan-owned Pompey Supporters Trust. This made Portsmouth the largest fan-owned club in England until August 2017 when the Trust sold it to The Tomante Company, an investment company owned by former Disney CEO Michael Eisner.

Many fans look approvingly on the Bundesliga ownership model. Under German Football League rules, football clubs will not be allowed to play in the Bundesliga if commercial investors have more than a 49 percent stake. However, this rule is being undermined to some extent. RB Leipzig was founded, when Austrian energy drink giant Red Bull rebranded fifth-tier team Markranstäd. The only members allowed to vote are a handful of employees of the parent company. Another exception was agreed upon in December 2014, when software billionaire Dietmar Hopp was given the green light to take majority control of Hoffenheim after investing consistently over two decades.

It has been suggested that the rule is in breach of EU competition law. As a legal framework, it could be transferred to the UK. However, this perhaps overlooks some of the special cultural factors at play in Germany. The German word ‘Verein’ translates as club or association, but this does not fully convey the meaning of the term. Germany is in many respects an ‘associative state’ in which organisations are given a special respect and status.

Jock Stein famously said that ‘football without fans is nothing’. However, financial facts sometimes suggest otherwise. Bournemouth now derives just four per cent of its revenue from match day, although admittedly it is an extreme case. The atmosphere generated in stadiums does appeal to international television audiences.

Investigations by Commons committees have sometimes pushed the football authorities to take more steps to deal with rogue owners. There have been sporadic interventions by government, although the turnover and relatively junior status of sports ministers has not helped. The Football Association claims to be responsible for the governance of the game as a whole, but its website states, ‘The legal duties associated with being a director of a football club are the same as those of any other company.’ This is strictly correct, and the guidance offered to directors is concerned with current law and practice. It does not provide guidance on how football clubs have a special role in their communities and their importance to the identities of their fans. A director of a football club is a trustee of a cherished asset.

Football is likely to be continued to be plagued by rogue owners. Once they are in place, it is difficult to dislodge them. This emphasises the importance of having sufficiently stringent regulations to screen them when they first take control. Leading football journalists are sympathetic to the case for such controls and supporters organisations need to continue to apply pressure to secure change, but it is likely to be a long road.