The recently passed Football Governance Bill paves the way for a new independent regulator – a response to growing calls for greater transparency, accountability and long-term sustainability across the game.
One of its key responsibilities will be to establish “a new corporate governance code specific to football clubs, requiring clubs to report at specified intervals on how they apply the principles of the Code and explain why this is suitable to their individual circumstances.”
While football’s code will need to reflect the unique dynamics of the sport, there are useful lessons to draw from existing frameworks such as the UK Corporate Governance Code – relevant to listed entities and drafted by the Financial Reporting Council – and the Code for Sports Governance, which is mandatory for organisations that are in receipt of UK Sport and Sport England funding. By looking at these, we can start to anticipate the themes and requirements that might shape the future of football governance.
Neither code is likely to be the exact template for the intricacies of the football industry and the likely lobbying of inclusions to come, but it is worth highlighting some of the general themes in these codes and therefore, what might be included in the Football Governance Code.
Code for Sports Governance
The Code for Sports Governance, introduced by UK Sport and Sport England, sets out the standards and requirements for good governance in organisations seeking public funding for sport and physical activity. The key difference between this code and the football industry, is it is focused on organisations who receive public funding and therefore, the level of expected transparency is different. However, the five key principles are very much at a high level extremely relevant.
Key principles include:
- Structure: Includes requirements on the ultimate authority of the board, composition of the board, committee structure and a requirement for independent NEDs. The board should include a balance of skills, backgrounds, and perspectives.
- People: A major focus on commitment to diversity and inclusion in decision-making, ensuring leadership reflects the community the organisation serves. It also requires rigorous recruitment processes and a balanced mix of skills and experience at board level.
- Communication: Organisations must be transparent in their activities, governance structures and decision-making processes by publishing annual reports.
- Standards and conduct: High standards of integrity, ethical behaviour, and accountability are expected. Conflicts of interest must be declared and managed appropriately.
- Policies and processes: There must be clear policies for risk management, financial control, legal and regulatory compliance.
UK Corporate Governance Code
The UK Corporate Governance Code provides a framework for good governance practices among listed companies. It uses a “comply or explain approach”, ensuring companies can provide a clear rationale where they choose not to comply, if that is the case. This is very similar to the above wording in the second half of the briefing note goal for the establishment of a code. I would therefore expect this to be a general principle for applying the football governance code, explaining how you apply principles and explaining why not.
Key principles of the UK Corporate Governance Code include:
- Board Leadership and company purpose: Every company should be led by an effective and entrepreneurial board, which is responsible for the company’s long-term success.
- Division of responsibilities: Clear division of responsibilities between the board, chair, non-executives and leadership.
- Composition, succession and evaluation: The board should have an appropriate combination of skills, experience, independence, and knowledge of the company and sector. Promotion of diversity, inclusion and equal opportunity is a baseline requirement.
- Audit, risk and internal control: The board is responsible for managing risk and maintaining robust internal controls. Transparency and responsible reporting are essential.
- Remuneration: Executive pay should be aligned with company performance and shareholder interests, set through formal and transparent procedures.
As shown above, whilst not identical, both have similarities in their overall themes and principles, some of which I would expect will be translated into the football governance code. The areas I think we are most likely to see some inclusions are Structure and composition of boards, policies, process and internal controls and communication and transparency are most likely to be included in the Football Governance Code. In three broad areas.
Structure and composition of boards
It is likely that the code will set out guidance and requirements on the minimum number of directors, while also ensuring an appropriate mix of skills at board level. This may include a requirement for formal training in some aspects of football governance and administration.
Both the Code for Sports Governance and Corporate Governance code place strong emphasis on diversity and inclusion. The Code for Sports Governance is particularly comprehensive, requiring organisations to publish clear ambitions for leadership that reflects its community, an action plan to improve diversity and inclusion, and regular review of progress against that plan. A previous iteration of the code specified a minimum 70:30 gender balance requirement. While the Football Governance Code is unlikely to be as prescriptive, it is expected that improving board diversity will be a key focus.
It remains to be seen whether the regulator will consider requiring fan representation on club boards. Such a move would undoubtedly generate strong opinions on both sides, and careful consideration will be needed to balance these perspectives.
Standards and conduct in office are likely to form a theme of board membership.
Policies, process and internal controls
A relatively uncontroversial area of focus is likely to be the professionalisation of the back office, with requirements for appropriate policies and internal control processes to be in place. Boards may be required to make a public declaration that controls are adequate for their club.
The code may include responsibilities for ensuring compliance with legal and regulatory requirements and risk monitoring processes. There is likely to be a focus on financial hygiene factors such as year-end financial statements, budgeting, requirements for external audits and tax filings.
The regulator may also consider the need for guidance around audit and risk committees, with delegated responsibility for reviewing key financial controls, management information and risk processes.
Communication and transparency
A central consideration will likely be transparent communication with key stakeholders. This could include clear reporting on compliance with the code and the regulator’s guidelines, helping stakeholders gain a thorough understanding of the club’s governance. It may also set out principles on communication with fanbases, including guidance on timing and content.
Conclusion
It is still very early days for the regulator, and considerable work will be required to develop an appropriate governance code, including consultation with stakeholders on its implementation. However, existing governance codes offer useful insight into what might be included, and many clubs are already covering some of these elements.
League requirements around financial reporting, transparency on ownership and oversight mean that most clubs are well-positioned to adapt. The area to see most change may be the composition of club boards, including the diversity of skills, backgrounds and opinions, which may form part of the code. How far the regulator will go with these governance changes will be interesting to see.
