Friday 13 May 2016 5:16 pm
Businesses and government must play the part of an activist investor to clean up corruption in sport
While last week’s anti-corruption summit in London was inevitably seen mainly in the light of the Panama Papers, there is another scandal bubbling under the surface that urgently needs the attention of the international community – corruption in world sport. The Institute of Directors has been one of the most vocal critics of the governance of Fifa in particular, which has lurched from crisis to crisis, seemingly unable to get its house in order. Football may be the beautiful game, but sports governance is an ugly mess. With reputations and vast sums of money at stake, it is no wonder that several sponsors have pulled back from the governing body of world football. Companies have to be conscious of where their cash is ultimately going. If it is ending up in brown paper envelopes, the taint will not be limited to the individuals involved.
The recent doping scandal that engulfed the International Association of Athletics Federations (IAAF) and the parade of damaging revelations at Fifa have revealed serious deficiencies in the way international sport is run. While Sepp Blatter seemed intent in running Fifa as a personal fiefdom, the IAAF is battling with a more traditional boardroom crisis – how was the doping scandal which resulted in Russia’s suspension from international competition allowed to take place, and who will take responsibility?
The problem is accountability. The most closely comparable organisations to international sports federations are multinational corporations, but the latter have much clearer purposes and owners. Corporations are established to make profits, and their ultimate owners are shareholders. Employees and management have a substantial stake in a company’s future, but the directors are only in post with the consent of the shareholders, and can be removed. Sports federations do not have shareholders and there is no way an individual member can challenge management in the way activist investors can with listed companies, as we famously saw at Alliance Trust last year.
Given that the mechanisms for national federations to control the international bodies are weak, we have to look more widely for businesses and governments to exert their influence to prevent further corruption scandals. As witnessed last week, governments have the power to bring international attention to the issue. Companies, as sponsors, have the power to withdraw their financial support. Sports governing bodies have a lot to learn from business, especially with respect to transparency and corporate governance. This is not to suggest that every global business practices outstanding corporate governance, but it is right to say that good corporate governance is evident in most global marketplaces and standards have risen substantially in the last decade.
Whilst last Thursday’s summit may not have been a watershed moment for tackling corruption in international sport, it is far better than ignoring the issue. Only by playing the part of a noisy activist investor can businesses and government bring about long-term sustainable change in international sport.