Fan-led Review: Governance Models In Other Countries
It would not be possible to consider all overseas models of football club ownership. Here is a brief history of the development of the English ownership model and information about selected overseas models.
Brief History of English Football Club ownership
Most of the earliest clubs started in the mid/late 19th century as not-for-profit members clubs. Each member paid a small fee and the clubs were run democratically, one member one vote. The need to finance stadia as the popularity of the game increased prompted the conversion of the membership clubs into limited companies to be able to raise more money. Blues were the first club to do this.
Most working-class club members couldn’t afford to buy shares, so these tended to be bought by local businessmen, although it was not common for any single individual to have a controlling interest. By the 1960’s, as with Clifford Coombs at Blues, it was not uncommon for a single businessman, with sufficient wealth and usually a passion for their local club to buy out other shareholders. Although power lay in the hands of one individual, this was normally benign, because of the owners’ passion to help their club rather than to make money.
All this changed with the advent of the Premier League when both British and overseas businessmen saw an opportunity to make money. This has led to the ownership structure we have today – large/ medium sized clubs mainly in the Premiership and Championship owned by wealthy businessmen or companies often from overseas, and, in the 3rd and 4th tier, a mixture of overseas owners, local owners and fan ownership.
The historical development of football club governance/ownership in Germany meant that, prior to 1998, football clubs were owned exclusively by members’ associations (as in the early days of English club ownership). This meant that clubs were run as not-for-profit organisations, and private ownership was not allowed under any circumstances. In October 1998 the German Football Association (DFB) allowed football clubs, as member’s associations, to restructure so that their teams could be operated separately as public or private companies provided that the majority of a club’s voting shares (i.e. 50% plus 1 share) are retained by the clubs’ members association.
It is important to note that 50% + 1 does not refer to financial control. It refers to voting control. So for example Borussia Dortmund’s members association only owns financially 5.53% of the shares in the company that runs the football club, but the voting rights attached to those shares means they can outvote the other 94.47% financial shareholders when it comes to making decisions about how the club is run. Some exceptions exist to the ‘50+1’ rule where an investor can show that it has “supported the sport of football within the parent club substantially and continuously for more than 20 years”. For example, Bayer Leverkusen (116 years), Wolfsburg (65 years) were originally set up as works teams.
Red Bull Leipzig have circumvented the regulations by creating a small members association all of whom are Red Bull employees. So Red Bull the financial owners also have voting control. This has made the club a pariah amongst most German fans.
Sweden also has a history of using the 50%+1 rule, and in the mid-90’s mirrored the changes in Germany allowing the creation of limited companies. The take-up was less enthusiastic partly because there’s less capital available and partly because the members wouldn’t have it.
The 50+1 model of ownership and approach to football club governance has come under threat in both Germany and Sweden in recent years.
In Germany, in 2009, Hannover 96 put forward a motion to change the 50+1 rule, but this was overwhelmingly rejected, with 32 out of 36 clubs voting against the proposal. In 2018 Christian Heidel, sports director of Schalke, said ‘We have to consider together whether the 50+1 rule is up-to-date, or if there are opportunities for improvement. We will not find a solution that will make everyone 100 percent happy, but I think it’s good to reconsider ’50+1′ ‘. (NB Schalke are owned by its members of which there are 155,000).
In Sweden, the Swedish FA themselves backed a proposal to remove the ‘50+1’ rule and allow clubs to engage in other forms of club ownership; fortunately, the SFSU, the umbrella organisation for democratic, not for profit supporters’ groups in Sweden, organised a campaign to counter such a proposal and were successful in ensuring that ‘50+1’ survived in Swedish football.
The consensus in both countries is that “50 +1” despite its drawbacks is a useful insurance against the excesses of owners and selling out to the highest bidder.
Instead of operating as an association of independently owned clubs, Major League Soccer is a single entity in which each team is owned by the league and individually operated by the league’s investors. Teams and player contracts are centrally owned by the league. Each MLS team has an investor-operator that is a shareholder in the league. The league has 30 investor-operators for its 27 current and 3 future teams. In order to control costs, the league shares revenues and holds players contracts instead of players contracting with individual teams.
In 2000, the league won an antitrust lawsuit, Fraser v. Major League Soccer, brought by the players in 1996. The court ruled that MLS’s policy of centrally contracting players and limiting player salaries through a salary cap and other restrictions were a legal method for the league to maintain solvency and competitive parity. Some flexibility was introduced through ‘The Designated Player Rule’, nicknamed the Beckham Rule, which allows Major League Soccer franchises to sign up to three players that would be considered outside their salary cap.
The rule is one of two mechanisms by which MLS teams may exceed their salary cap, the other being allocation money supplied by the MLS to clubs based on complex criteria defined by the MLS.
On 31st December 2020, the clubs in the A-League completed their separation from Football Australia, the governing body for Australian Soccer. While the governing body retains certain regulatory controls, the clubs will now have the freedom to develop the football competitions as they see fit. The clubs believe the separation from the national governing body will help the competition’s long-term viability.
The owners, mostly wealthy business owners or global consortiums, will now have more say in how the competition is run and can seek outside investment. Although FIFA supported the changes, former Football Australia chairman Steven Lowy said handing more power to the elite competitions would not be in the best interests of the game and would come at the detriment of the grassroots level.
There is no mention if the clubs supporters had a say in this.
The historic development of ownership models in the older European leagues have followed different paths. In some, the supporters’ voice is significantly stronger than others. Opinions on whether one model is better than another depend on your perspective. Broadly, financial investors prefer a model more like England and now Australia with unfettered freedom to do exactly as they choose with ‘their’ club. Supporters prefer a model which gives them the right to influence decisions at a strategic level and to maintain the traditions of ‘their’ club.
In the recently formed leagues particularly the USA (MSL founded 1993), the question of tradition and fan involvement does not seem to play a part in the dynamic of how football is run. However, it doesn’t mean that the governance of English football has nothing to learn, particularly in the area of salary capping.
The Blues Trust believes that the current ownership models in English football do not work and that greater power needs to be given to Supporters in determining how their club is run and its future strategic direction. It also believes that the economic models, intrinsically linked to the current ownership models, encourage financial profligacy and that controls such as a salary cap should be introduced. It further believes that a more equitable distribution of wealth within the game needs to be introduced to preserve the pyramid.
What do you think?
Do you believe that the English game has anything to learn from how governance works in other countries?
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