Writer: J P Fear
Date:Wednesday April 12 2006
A ‘Fit and Proper Person’ Test and the Law All governing bodies have the power to impose sanctions on ‘participants’ whose behaviour is in breach of the rules. It is important therefore to critically analyse the means by which this authority can be challenged. Key to this issue is whether the relationship between sporting governing bodies and those who participate
In sport, be it sportsman or woman or a club, is regulated by public or private law. As Gardiner suggests, the importance of this public/private distinction will be in the procedure used when seeking a remedy to a dispute (Gardiner, 1998, p. 199). If the relationship is one of public law, the decisions made by the governing body will be open to judicial review. If the relationship is one of private law, then any action will be a civil action initiated by writ or originating summons.
According to the Human Rights Act 1998, which incorporated Article One of the First Protocol of the European Convention on Human Rights, the protection of property is defined as follows: Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. Depending on the future trends in the execution of the Act, the Article may have relevance when considering the possibility of compelling an existing shareholder to sell on the basis that he or she is no longer considered ‘fit and proper’. There may be grounds to judge that the shareholder in question was being deprived of the ‘peaceful enjoyment of his possessions’. The likelihood of the Human Rights Act being applied may be small, but its relevance may grow in the future in a sporting context. It would therefore be sensible for the FA to regulate on the basis that the Act may apply when devising fair and transparent procedures. Nevertheless, the FA remains within its rights to sanction the club of the shareholder were it not to comply with FA regulations. Legal judgements in this country have largely endorsed the view that the decisions of the FA are not open to public law remedies and there seems to be no inclination amongst the judiciary to rule differently. With regard to the Human Rights Act the individual would have to persuade the courts that the FA was a public authority, and it would also have to demonstrate that the disciplinary power that has been exercised against them amounted to a violation of a right protected under the terms of the Act.
Existing Rules on the Ownership of Clubs British Sky Broadcasting was prevented from purchasing a controlling share in Manchester United. However, this decision was made not by the football authorities but by the government on advice from the Monopolies and Mergers Commission (now the Competition Commission), a public body operating to advise the Secretary of State for Trade and Industry, on the basis of a combination of competition grounds and public interest issues. The football authorities, though, have made rulings on the ownership of clubs in their own right. The FA, the Premier League and the Football League and UEFA all have clear rules preventing more than one club being owned by the same person or company.
The FA acts, or at least is supposed to act, as a neutral governor whereas the leagues represent the vested interest of the clubs that compete within them. Naturally directors and shareholders of clubs would be less supportive of such an initiative. As John Nagle of the Football League suggests, The league is the servant of its member clubs and therefore is representative to a degree of the owners of those clubs. It is highly unlikely that the Football League would ever be receptive to such a test.
However, the FA has often been reluctant to charge and sanction participants for breaches of its own regulations. The BRTF states that those being regulated should be made aware of their obligations and given support and time to comply by the enforcing authorities. In effect the test should adhere to the principles of natural justice.However, football should not require investment from the sources such a test would block. It seems ridiculous to suggest that football should want to attract individuals of dubious integrity because of the good they do, or the money they provide:
That was the mafia defence wasn’t it? Oh, they’re very good benefactors. They look after this, this and this, Robin Hood type figures … I dare say if Al Capone was around right now he’d do a great job for a football club if he thought that could redeem him, but should he have that chance?
Although a number of major shareholders have had a malign influence on the running of many clubs, that influence has as much to do with a failure of corporate governance structures than with the lack of a specific regulation aimed at individual shareholders. It is questionable whether it is actually possible to effectively regulate the ownership of shares in football clubs. Furthermore, it is possible to own shares in a club, even a majority shareholding without having any role or influence in the running of the company. As a matter or law, shareholders are investors who appoint the board but may have little or no involvement at all. An effective code of corporate governance for football, similar to that required by the Rugby Football League, could act as a safeguard against individuals gaining disproportionate control and help ensure that football clubs are effectively governed.
Through the 1980s and 1990s, the FA lacked effective leadership, long-term planning and strategic focus and was characterised by inertia, a reactive decision making process and inadequate enforcement of existing regulation. As David Mellor remarked, The FA want football to be seen as the national game, they want public money to be put in, but they don’t want to be properly accountable, they want to be seen as special, but they don’t want to take the responsibilities. Indeed, even when the FA has commissioned reports to investigate the state of the game’s finances and make recommendations, the organisation has been either slow to implement such recommendations or unwilling to implement them at all. For example, Sir John Smith recommended a code of conduct in his report in 1997. The FA introduced a code but ignored the carefully crafted recommendation that it should be based on the principles of consultation, agreement, voluntary implementation and compliance. The code of conduct of the FA exists but it exists in written form only as a dormant set of ideals at the back of a handbook rather than as a living and working document for those.
As Sir John Smith remarked, If it is an appropriate code and if it is voluntary, and one that is approved by the vast majority of people in football and therefore they are likely to comply with it, then that’s very useful. But I was somewhat aghast when the code was published to find that it was devised somewhere in the centre and then pushed out to clubs and said well, this is it. If you read the recommendations around the code of conduct, it was said very, very firmly that that’s not the way to do it. You find people to agree the need, you then get people involved in football to come up with the wording or at least given the opportunity to comment and that helps create a culture of compliance. It seems remarkable that the FA should commission a report and ignore the carefully researched recommendations that are made, yet this is what happened with Smith’s report. The FA is certainly taking its role as the regulator of the game more seriously now than over the last fifteen years, a point recognised by as stern a critic of the FA as David Conn. There have been changes in the decision making procedure at the FA with the introduction of a main board to provide a focus for important financial and commercial decisions (The Football Association, 2000, pp. 4-5). The improvement of corporate governance at football clubs is also being seen as an increasingly important issue, and the FA has acknowledged their own role in promoting it. In their response to the Commercial Issues report, the football authorities stated, It is necessary for the Football Association, the FA Premier League and the Football League to continue to work together to ensure that the clubs are properly financially structured and all transactions are executed without deception or fraud. They continue, When a club has serious financial difficulties it is often too late to provide real help.
Secondly, and perhaps more significantly, any code of practice should seek to ensure that clubs adhere to the sort of guidelines on corporate governance contained in the Stock Exchange’s Combined Code, whether or not the clubs are listed on the Stock Exchange. This would impact positively on the governance of clubs in England.
There are two key tasks at the top of every public company - the running of the board and the executive responsibility for the running of the company’s business. There should be a clear division of responsibilities at the head of the company which will ensure a balance of power and authority, such that no one individual has unfettered powers of decision making.
The board should include a balance of executive and non-executive directors (including independent non-executives) such that no individual or small group of individuals can dominate the board’s decision taking. It is important that no one individual within a club has totally unfettered powers of decision making. Football needs to honour the corporate governance codes relating to directors whereby there should be a proper balance of power and authority amongst the Board of Directors … for smaller clubs where a large board is not practical or affordable alternative ways of establishing independence among the directors/major shareholders should be identified and confirmed in place.
It is our shared belief that best practice, of which there is much throughout the football industry, has never been articulated formally … the key objective, then, has to be to promote best practice within clubs, to promote confidence that the club is being properly run in the interests of all the stakeholders.
However, this is only tacit recognition by the authorities that improvements in the way clubs are governed are required. Serious proposals, converted into action are required. If one examines the minimum standards required by the Rugby Football League in the running of their clubs, the inaction of the FA becomes even more apparent. There exists a set of stringent minimum requirements to which both Super League and Premiership clubs must adhere. END OF EXCERPTS
Date:Wednesday April 12 2006
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