(Reposted with permission from Martin Cloake, original article https://martincloake.substack.com/p/the-fab-files-3-corporate-governance)
I have set out to explain the opportunities offered to fans by the Football Governance Act by using plain English and everyday examples to provide a starting point. You can read the first two articles in the series on this Substack – they are free to access. This time I’m going to look at corporate governance and why it is important to understand what that means.
I’m going to be honest – this was a bit of a tough one. But don’t worry, you’re not going to be asked to synergise any low-hanging fruit or optimise mission-critical thought leadership in order to paradigm shift disruptive innovation going forward. You might come up against people who use language like that as you get more involved in dealing with your club. Just remember they don’t know what any of that means either.
What corporate governance is about is who is running the show; who is putting the strategic business plan we examined in part two into action, and how. Corporate governance is a dry term often used to hide who is really making the decisions. But the Football Governance Act forces this “behind the scenes” machinery into the light. It defines how a club must behave and who is accountable for its actions.
The FGA defines corporate governance in Schedule 5, paragraph 7(2). This sets out that governance covers;
• The “Organs” of the Club: How the Board and senior management are set up and what their jobs are.
• Conduct: How these leaders behave and the rules they must follow.
• Community & EDI: For the first time, corporate governance legally includes how a club contributes to its local community and its approach to equality, diversity, and inclusion (EDI).
There is also another important part of the definition – The “Non-Financial” Test. The Regulator treats governance as a “resource.” So just as a club needs money, it must pass a “non-financial resources threshold requirement” to show it has the right people and systems to stay sustainable.
This is more significant than it sounds. Anyone who has studied the guidance that the regulator has issued to clubs will have noticed that it clearly believes that strong corporate governance underpins everything else a club is required to do. If good finances and effective fan engagement are the visible features of a good club, then corporate governance provides the unseen foundations.
So how is the regulator going to check that this is happening?
Well, there is what’s called a paper trail – in simple terms written statements from the club that set out how it is going to meet its obligations. But these statements are not just words on paper. They are legally binding commitments. The whole thrust of the regime is based upon two related ideas:
1. That the Regulator will allocate its (finite) resources on the basis of a ongoing assessment of risk.
2. Clubs that consistently meet their obligations, and keep promises that they have previously made, are likely to be regarded as a lower risk than those who don’t.
Every licensed club is legally required to submit a Corporate Governance Statement to the Regulator. And under Schedule 5, Paragraph 5(b), the club must publish its latest statement online for fans to see.
This statement must explain how the club is following the Regulator’s Code of Practice and what specific actions it is taking to improve EDI.
This Code of Practice is a document the IFR has to publish about how regulated clubs should be run.
What all this provides is accountability, something fans have long argued for, if it is used properly. Because the Regulator won’t just file these documents away. It will publish a Corporate Governance Report that highlights which clubs are failing to meet the standards and recommends improvements.
These reports will be much more than mere window dressing. The debate about the nature of Regulatory powers has tended to focus on the more punitive and dramatic end of the spectrum. But in reality the Regulator will want to focus the majority of its effort on the softer use of power, for example via identifying and promulgating best practice. Its reporting obligations around corporate governance are one of its most obvious opportunities to do so.
How can fans make use of this?
Ask the right questions: Use the published statements to ask questions such as: “Your statement says you are improving community well-being – where is the evidence of this in our local area?”.
Remember there is a requirement to consult fans. When the IFR sets a club’s “fan consultation condition,” it is legally required to look at that club’s corporate governance arrangements whilst doing so first.
Use the ultimate leverage: If a club ignores its own governance rules or the Code of Practice, it is committing a “relevant infringement”. This gives the Regulator the power to step in with sanctions, including financial penalties or even licence suspension.
To sum up
Good governance ensures that owners can’t just ignore the strategic plan or the fans’ views. It provides the checks and balances needed to protect the club as a community asset.
By understanding governance, fans move from just protesting about results on the pitch to influencing the structures that cause those results.
The next article will look at Heritage Issues, showing how governance and engagement combine to protect the club’s name, colours, and home ground.