Corporate Regulation within Football & The Missing Piece of the Puzzle

Professional football is a sport that transcends ninety minutes of entertainment. It has deep-rooted history and importance within local communities having a distant impact on the public. Currently, the major English leagues utilise the ‘Owners’ and Directors’ Test’ under section F of the Premier League Handbook as well as appendix 3 of the EFL Regulations in order to determine aspects of prospective directors and owners that would disqualify them from becoming custodians of an English football club.

The FA’s policy on financial regulation is designed “to meet standards greater than that required under law so as to protect the reputation and image of the game.” However, recent developments suggest that the major English footballing organisations cannot be trusted to keep themselves in check.

The State of Football Finance

The circumstances that faced Bury FC leading to their collapse and ejection from the English Football League after 125 years of participation can be attributed to insufficient financial investigation regulations employed by the English Football Leagues.

The Super League Attempt

The Super League by nature was a threat to football as the world knew it, posing vast moral, economic, and competition-based issues. The proposition threatened to overlook footballing institutions such as EUFA and the FA and as we now know, has been met with overwhelming criticism.

The attempt highlighted the notion that football as a business is changing rapidly, and that legislation must be adapted to keep pace.

The Missing Piece of the Puzzle

The ideology and morality of modern football is the missing piece in current corporate regulation. Historically, the focus on who can and cannot control a football club has been overwhelmingly based on economic and competitive criteria – with very little consideration for the appropriateness of a proposed owner/director based on their political or moral background.

The laws surrounding football clubs’ corporate hierarchies intend to uphold the honesty, ethics, and fitness of those controlling widely beloved football clubs. However, social principles and morality are often becoming involved in conversations surrounding football and fans are now more concerned of the virtue of those who control their club.

Controversy surrounded the takeover of Newcastle United in which the club’s ownership was transferred to a consortium dominated by Saudi Arabia’s Public Investment Fund (PIF). The PIF’s direct association with the Saudi government posed such an issue due to the accusations against the Saudi Arabian government of perpetrating human rights abuses.

Similar scenes have been present following Paris Saint-Germain’s recent exit from the Champions League knockout round, in which the PSG ultras the ‘Boulogne Boys’ have performed demonstrations and made public demands that their club is released from the ownership of Qatar Sports Investments.

This changing perspective on football ownership regulation is even visible in some aspects of the current breakdown of Roman Abramovich’s ownership of Chelsea FC – this being a symptom of the government’s sanctions against the oligarch for his ties to the Kremlin in light of the tragic ongoings within Ukraine.

Some have argued that allowing individuals with unsavoury associations to take control of English football clubs can have a distinct negative impact on those clubs. Claiming that this impact includes the distortion of the welfare and identity of the club.

The shortcomings of the current self-imposed tests employed by the major professional English football leagues exemplify the lack of consideration that morality and social standing is given when considering how appropriate a proposed owner or director is for a club. This implies the need for additional distinctive regulation upon the hierarchies of clubs.

Alternative Methods of Regulation

Identifying additional criteria for fit directors/owners is not a sole solution. It is important for football to be kept in check utilising a range of methods:

An Independent Regulator

An April 2021 fan-led review suggested an independent regulator for English Football (IREF) established by an Act of Parliament. This would mainly be expected to enforce measures to ensure “financial stability”, as well as “improving decision making at clubs” with a new corporate governance code for professional football clubs. This body would be able to utilise its vast powers to punish the boardrooms of any clubs that intend to harm the football leagues in terms of the community and environment, or potentially damage their own club in terms of reputation and stakeholders.

Fan Ownership

Fan ownership is a common arrangement of corporate hierarchies of football clubs throughout countries across Europe. The most noteworthy example of fan ownership is within Germany. These clubs operate under a 50%+1 rule by which the league demands that the community around a club own a majority stake in that club.

The benefit of community ownership is that it provides financial resilience and sustainability, as recent research shows that three-quarters of community-owned assets report being in good financial health. Alongside this, it encourages economic and social development for local businesses within communities. Given this ownership model’s innate rootedness in its surrounding community, the arising economic activity tends to have outsized impacts on the local area.

This being said, these methods of regulation being imposed upon English football could be difficult to achieve and may be met with hostility from owners that wish to keep their clubs in their sole possession without any scrutiny.

Conclusion

Despite the stumbling blocks facing the football regulators, it is clear to see that the public sentiment regarding the beloved game of football is changing. People are becoming much more aware of who is involved in the sport at its highest levels. This awareness results in the need for corporate regulation of football clubs to read between the lines and consider the fitness of owners and directors in a much more conscious sense, not just based on the depth of their pockets.

This blog post was created by Cameron Reed, a third year MLaw student at Northumbria University. He is currently working in a Business firm within the Student Law Office. After finishing his degree, Cameron is looking to obtain a training contract and qualify as a solicitor in a commercial firm. Cameron is very interested in how the law impacts sport, especially within football.