Compliance And Risk Management In Regulated English Football Clubs: The Rise Of The Non-Executive Director

With the surprise dissolution of the UK Parliament for the coming General Election on 4 July 2024, voting on the Football Governance Bill (The Bill) has slipped into the next Parliament. That said, The Bill does appear to have strong cross-party support indicating that it is a question of 'when' not 'if' professional men's football in England will be subject to statutory regulation. The proposed body will be known as the Independent Football Regulator (IFR – or the Regulator).

Much has been written by prominent sports lawyers on the scope of the proposed regulator's remit, authority, and regulatory powers.¹ That is not the purpose of this short article. Rather this piece will look at the more practical governance implications of The Bill for Football Clubs within the proposed regulated top five tiers of men's football in England. By looking at compliance and risk management of other regulated sectors, such as banking, one can draw out some indicators of the dynamics the IFR may cause for professional men's Football Clubs (The Clubs).

Firstly, it is self-evident that the Clubs will have to comply with the regulations. For Clubs to be 'sustainable' they will need to be well run and "take sensible financial decisions and consider the long-term when taking risks." To achieve this, it is envisaged that the Regulator will have the power to set "a corporate governance code of practice for clubs." And that "Clubs will be required to report on corporate governance, setting out how they are applying the code." Furthermore, it is clear that The Bill will establish "senior management responsibility - where appropriate, recognising that the individuals responsible for making decisions at a club (senior managers, other directors, and owners) should be accountable for the actions of the club and its compliance with regulatory requirements." ²

One can deduce from the above that the era of the IFR will also see a significant change in how Clubs approach governance, risk management, and compliance. Other industries have been through this transformation, evolving a series of checks and balances within the corporate governance framework to further good governance and assist in compliance with laws and regulations. This has to start in the Boardroom. Checks and balances in the Boardroom have been achieved via the appointment of independent Non-Executive Directors (NEDs) to the Board.

Compliance with laws and regulations is a fundamental responsibility of NEDs. Effective NEDs should stay updated on relevant legal requirements and industry best practices to ensure the company operates within the boundaries set by regulators. By actively monitoring and reviewing compliance efforts, NEDs help safeguard the company's reputation and protect the interests of stakeholders. NEDs also tend to chair a sub-committee of the Board that assesses and oversees the corporate risk management framework, helping to identify potential threats and implement effective measures to mitigate them. By providing guidance on risk management strategies, non-executive directors enable the company to navigate challenges and capitalise on opportunities.³

There are very few NEDs in English football clubs. With a few notable exceptions, seats on the Board tend to be reserved for owners and investors in the Club as well as serving executives of the Club, ex officio. They are nearly all men. This is known by some as "the Football Way." Very few football clubs are run with the sort of corporate governance structures that one would expect to see in a well-run business and certainly not those of a regulated industry or publicly listed company. One can understand why. Many owners invest large amounts of money into Clubs and want untrammelled executive decision-making authority. Yet we know that this has, in part, created the poor governance that has spawned The Regulator.

Simon Hallett, the enlightened owner of Plymouth Argyle (PAFC), recently told Ankura: "the 'Football Way' is just wrong." Rather he runs PAFC with the sort of governance and rigour of a large business and acts as a Non-Executive Chair holding the CEO to account for the delivery of the Club's objectives.⁴ It is interesting that the Club has been promoted from League 2 (the English 4th tier) to the EFL (English Football League) Championship (the 2^nd Tier) in just four seasons. Indeed another 'well-run club,' Brentford FC, has a diverse Board with non-executives who are not investors.⁵ In this it has had some of the only female Non-Executive Directors in the Premier League, as Ankura discussed with one of them recently.⁶ Again, the Brentford men's team has outperformed expectations remaining sustainably in the Premier League for the last three seasons despite having one of the lowest squad wage bills in the League. And they have made a small profit to boot, which is very unusual in English Football.⁷ And all this is after a well-executed strategic plan to first achieve promotion to that level.

This paper is not a scientific study, but anecdotally it does seem that the argument that well-run clubs also do well on the pitch has some validity. Well-run, sustainable clubs are also one of the primary goals of the Football Governance Bill. Business has long learnt that the checks and balances provided by diverse, independent Non-Executives in the Boardroom directly contribute to better governance, balanced and informed risk-taking, and compliance with regulations and laws. Indeed, the very role of NEDs is "to provide objective and independent advice to the board and enable it to make better decisions in the interest of all shareholders and stakeholders". ⁸ It would be unwise to speculate here what the IFR will mandate in its coming corporate governance code, but one can only speculate that we will be seeing a lot more independent NEDs in English Football in the coming years.

Footnotes

1. Such as https://www.blackstonechambers.com/documents/The_New_Football_Regulator__.pdf

2. https://www.gov.uk/government/publications/football-governance-bill-supporting-documents/fact-sheet-the-independent-football-regulator-ifr

3. https://boardroomadvisors.co/do-non-executive-directors-have-control/#:~:text=Risk%20management%20is%20a%20critical,effective%20measures%20to%20mitigate%20them.

4. https://angle.ankura.com/post/102ilkg/the-business-behind-sport-simon-hallett-majority-owner-and-chairman-of-plymouth

5. https://www.brentfordfc.com/en/company-details

6. https://angle.ankura.com/post/102j1tl/the-business-behind-sport-monique-choudhuri-board-director-at-women-in-football

7. https://swissramble.substack.com/p/brentford-finances-202223

8. https://www.thecorporategovernanceinstitute.com/insights/guides/the-non-executive-director-explained/

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