Bolton and Bury – time for a footballing New Deal?

The demise of Bury and its expulsion from the EFL was a very sad case indeed. Bolton Wanderers, one-time Premier League regulars, too hold significant issues which are placing the club in peril. However, these have abated somewhat since Bolton has been bought by Football Ventures Ltd.

However, the principal issue in this was the mismanagement of the club by its owners.

The EFL, whilst having controls via ownership tests, didn’t have strong enough oversight on this matter. And a club in existence for many decades now has to work its way up to the higher levels of the game.

What then can change, to stop this from happening again?

Is there time for a “New Deal” in football, in that the corporate governance must change?

The format as it stands now is that British football clubs are registered companies like all others. They have to register with the state, pay appropriate taxes, and follow all state regulations and corporate legislation.

So they are prone to be bought like other firms in other industries, via means of standard mergers and acquisitions (M&A) measures. The model football clubs employ is akin to BP, Shell, BA/Iberia, Glaxo Smithkline, HSBC, or any other noted British firm. Whilst football clubs don’t provide the exact monetary returns of these firms, they all have shareholders and owners who appoint executives with the day-to-day running in mind.

In this capacity, fans hold no legal right to a say in governance, and are viewed as customers and not shared custodians. Supporter groups can lobby and petition owners, but seldom hold a direct say in the club’s governance and strategy.

This has lead to Bury’s issues – as the owners were not schooled in footballing matters. Or they didn’t appreciate nor care for the wider obligations in this context.

If owners hold both legal and practical charge, and without challenge outside of the footballing and legal authorities, it lends to heightened effects of poor ownership.

The need for a footballing New Deal is based on football being a unique industry, requiring a defined and tailored club business model.

 

I’m a business studies graduate but by no means a corporate lawyer or business restructuring expert. These are my views all the same on this matter though:

 

Organisational structure

 

Clubs could be companies limited by guarantee. This is a business model used by charity groups, with no share capital nor need for dividends. It emphasises the voluntary nature of such organisations, and could ensure that all monies are used sustainably and in a club’s interests.

 

Fully public accounts

 

This would ensure transparency and is something done by clubs registered in Stock Exchanges. However, this should apply for all clubs privately held too.
Fan representation at board level – Fan groups should have board decision-making powers. This could be by proposing motions, or in voting for them at the highest levels.
Public engagement meetings for all club members – Clubs should meet regularly with fans to discuss methods and strategies.
Fan profit-sharing – If a club succeeds, then club members could then receive a reward whether monetary or otherwise.

 

Ownership structure

 

 

Owners only can hold 51% of the shares. The rest must be between fan groups and other bodies. Fans and/or fan groups to hold a minimum of 35% of the total equity. Bundesliga clubs have more inclusive and collectively-rooted models. And Real Madrid and Barcelona hold numerous socios who hold the right to elect club Presidents and influence club strategies. If this can work for the two biggest clubs on Earth, it can happen in England also.

 

Football is a unique industry – and needs a unique platform

 

The issue here is that there isn’t accounting for different industrial models and practices.

All industries have different needs and thus structure themselves accordingly.

The oil and gas industries can utilise fully the standard corporate governance model, as they need capital to explore and exploit energy sites and to build and maintain pipelines and associated infrastructures.

The same is true of any large global sector, such as financial services, retailing, food production, ICT, etc.

However, customers of these firms don’t hold the same emotive attachments as football fans do to their clubs.

And the competitive dynamics are different. Clubs do compete with each other, but not in the same capacity as banks or retailers. Manchester United fans, if they’re unhappy with the running of their club, wouldn’t support Man City or Liverpool in consequence.
Football clubs also are community vessels, and were founded as such in the mid to late 19th century. It’s why even up until this day that many value supporting their local club – or always sticking with a club once chosen.

Football support is as much about an emotive connection more than anything else.
Collective ownership may lessen bad ownership cases.

 

Football owner profiles

 

Most people who buy football clubs do so as playthings or holdings. They often are wealthy from other ventures, and hold ownership to grow their overall portfolio, or to use it as leverage in acquiring loans.

They also may use it to accrue soft power, or to enhance their PR.

Not many though have ever become rich from owning football clubs alone.

So with the financial rewards being far smaller, club owners are more incentivised to be accommodating with their fans in governance.

There is less at stake, and generally speaking, their fortunes aren’t on the line.

If looking at wealthy owners in PL history:

• Lord Sugar made his money before he bought Spurs

 

• Jack Walker at Blackburn was a steel magnate

 

• Abramovich at Chelsea held a share in Gazprom

 

• Kroenke at Arsenal’s holding group owns teams in all of the US major sporting leagues. And his wife is part of the Walmart-owning family

 

• Mike Ashley at Newcastle United is a noted retailer owner, with the Shiekh at Man City being a prominent part of the UAE Royal Family

 

This prospective model won’t solve all issues but would provide transparency and greater fan input.

It would also lessen the scope for unchecked oversight, and further, reinforce the community feel of clubs.

A New Deal for football must acknowledge the unique and distinctive structures of the football industry. Perhaps this has been missing over the years, leading to some noted points of club mismanagement.

Arsenal finance facts, truths, and myths

Much is known of the club’s financial state, and factors surrounding its revenue generation and spending.

But what are the facts involved here? And are all of the key points in the public domain actually true?

Below is a listing of the key points involved, surrounding revenues, and the club’s ownership:

 

We’ve paid off the stadium

 

This is false.

It would be better to state that the debts we have, at this point, are not significant enough to hamper our spending and other commitments. This does not mean however that all stadium financing obligations have been met.
Around 2013, at the time we signed Mesut Ozil, we were in a position to loosen our belts due to several years of income accrued. We had CL football, bigger PL TV money, and larger commercial deals. We simply earned more money to ensure that our liabilities had a lesser burden.

To use an analogy, it’s like a person has a mortgage for their home, but gets a better paying job, and thus can spend more on other items as well as mortgage repayments. It doesn’t mean that one has no debts, but the debts can be better accommodated.

The initial years were tough somewhat, in that we had to ensure we gained as much revenue as possible. This is why Wenger – perhaps – said that the first trophy is the top four. In some ways, in fairness to him, it was. The stadium debts needed to be balanced with consistently high income – and the best way to do this was via consistent CL football.
But we have a structured debt package which acts as a mortgage, lasting 25 years when taken in 2006. This will thus end in 2031, with another 12 years to go at the time of writing. This roughly equates with £20m a year, and about 5% or more of our stated income.

There seemingly is no facility to pay it off early or in a lump-sum, so we’re stuck with it in the meantime.

 

Stan Kroenke/KSE drain money from the club

 

True, in part.

Stan Kroenke did publicly take two £3m payments for advice, which was noted in two AGMs. However, this hasn’t been repeated since.
But now that the club is fully owned by KSE, this could happen at will and without disclosure in the public domain.
So we won’t know if this will resume, or at higher rates than previously stated.

The amounts taken though were small and were within his rights as an owner to do. And we don’t know the nature of the advice given, and thus cannot comment fully if the payments were justified or not.

 

KSE withheld money for signings

 

False, as far as we know.

This was a common claim in Wenger’s tenure.
But neither Arsene Wenger nor KSE has ever corroborated this.
Wenger controlled transfers and when asked by the media or fans, he continually said that money was available.
He did though never say that no money was at hand for spending.
And if this was true, then it won’t be disclosed given the fallout that will happen. Questions would inevitably be asked about how the club could have no transfer funds if revenues were consistently amongst the highest in world football.
Even in the last two years, Arsenal has broken its record on Lacazette, Aubemayang and Pepe, in totals reaching £180m or more.

This point ultimately is very moot – and only Arsene Wenger, Ivan Gazidis or KSE would know the full truth.

 

KSE doesn’t pump money in like it should

 

False.

Arsenal has never been a bankrolled club.
It has always operated within a model of sustainability and the self-sustaining paradigm.
KSE bought the club with this premise in mind, as it required only due stewardship and not excessive cash injections.

Stan Kroenke, along with his wife who owns a large part of the US retailer Walmart, is a billionaire. Fans assume that he will act in the manner of the Man City owners due to his wealth alone. His intention though was never to “splash the cash” and be our sugar daddy, and billionaires like Mike Ashley at Newcastle United hasn’t “splurged” either.
When analysing the actions of other wealthy owners, it’s a misconception is that they have only spent on transfers. In many cases, infrastructure improvements, new stadiums, debt repayments and even civil infrastructure have been financed by them.
The Man City owners have spent a lot on buildings and homes in Manchester itself. Part of this is the gaining of community support, as an essential part of the City of Manchester. It may be cynically perceived, as it could be seen as buying favour. Either way, such works don’t come cheap, and the City Campus and Etihad Stadium expansions have contributed to their high owner inputs.

At Arsenal, we’ve built housing too. The Highbury Square project demonstrates this amongst other lots the club has procured and constructed. But this has been paid for in large part from the ground’s running. City’s spending is more on social housing, whilst Highbury Square is marketed as a mid to high-end development. The social aspect then leads to more money and the concept of community buy-in, which KSE didn’t really need to do once they gained a majority shareholding.
Moreover, the ground and training ground are being upgraded continually to ensure they’re state of the art and fit for purpose. The club doesn’t need this level of input and this most likely is what makes it attractive to KSE.
It’s like being a 6-bed house in a good area, and which requires little maintenance and upkeep. It’s just about ensuring changes are made where required, and nothing is broken or goes mouldy.

Many clubs are run sustainably. Manchester United is, since the Glazers have leveraged debt on the club, but don’t input money for transfers or other infrastructures. Their massive commercial income, as well as high match-day revenue, all account for their transfer spend capability.

Additionally, Liverpool isn’t bankrolled by FSG, and neither is Spurs by ENIC.

Money is a key factor in footballing success. But it can never be the sole factor. Good ownership and sound decision-making are also important, and Arsenal needs more of this to compete at the level we should.

 

Arsenal’s commercial deals show poor management

 

Neutral.

It is true that the other top six clubs gain more commercial income.
But I think, with speculation admitted here, that this is deliberate. Match-day income is very high in both PL and world terms, and the club relies on this to a large extent. It’s only due to weak on the field performances that have cost revenue in relative terms. City, Liverpool, and even Spurs have caught the club up, and it’s due to them being better teams of late. City’s treble, Liverpool’s Champions League win, and even Tottenham’s consistent top-four finishes have ensured they’ve gained more TV and prize monies than us.

The club could do more to resolve this, as every little bit helps. But it may not be due to bad management, but relying on more stable revenue streams. TV money is often based on performance, as whilst PL clubs gain a base level, there also are incentives rooted on league placements. And the CL pays out far more in prize money than the EL does.

There are also cases in which Arsenal’s high match-day revenue has beaten off more successful clubs financially. Even when Chelsea won the league in 2015 and 2017, Arsenal posted higher revenues, albeit Chelsea scored greater commercial income. So it’s moot really, and a composite of factors lend to relative and absolute financial performance.

 

Arsenal’s wage bill is too high

 

True – somewhat.

This was a concern, though the departures of Jenkinson, Welbeck, Cech, Ramsey, Koscielny, etc. have led to savings in this capacity.
Though Tierney, Pepe, Luiz, Saliba, and fees related to Ceballos, have all eaten into savings made from the aforementioned departures.

The club’s hierarchy has said that wage planning has not been efficient, though the Ozil deal was more about securing a prime asset during a difficult period. The new regime has said they will reconsider wage packages, so it remains to be seen how this unfolds.

One has to also assume that Aubameyang, Lacazette, Pepe, and Luiz aren’t on small salaries either. So the wage bill has been a legitimate concern of late, and the club will be judged on how it handles this in the near future.

 

The club only had £45m to spend in the summer

 

False.

According to the club’s MD – Venai Venkatesham, the club has never stated the exact total of its transfer budget.

It’s something that is pretty much concocted by the media, without any real backing by the club itself.

It is true, due to a lack of Champions League football, the club’s revenue generation has fallen. But it would be ill-advised in any capacity to state the nature of one’s transfer spend. It would mean unbalanced dealings with agents and clubs, and not getting full value for players.

 

Wenger never had much money to spend

 

False – as far as can be noted.

Our current structure has, to a large extent, separated Wenger’s job spec.

Wenger was the head coach (Emery), controlled recruitment and headed football operations (Sanhelli), and facilitated the long-term footballing strategy (Edu). Ivan Gazidis, as Venkataesham does today, headed the commercial and administrative operations and was the club’s representative at Europe-wide bodies (UEFA, G14, etc.)

Wenger had to report to the Kroenkes of course, and whilst having control of all footballing matters at the club, had a stronghold on transfers.

The summer of 2015 was noted for us not spending at all, bar Petr Cech of course.

But there is no evidence at all that we lacked money (which by 2015 would have been a travesty given the stadium build and revenues we were accruing) or that KSE was telling Wenger not to spend. Wenger himself continually said that there was money – why he didn’t spend to the level required or desired is just unknown.

There is no evidence that KSE ever told Wenger not to spend as required, or that there was a deliberate push to contain transfer spending.

 

KSE don’t spend big on players – transfer spending is minimal

 

 

False.

Since 2017, we’ve broken our transfer record three times.

Lacazette, Aubameyang and Pepe all have been record fee signings.

In terms of absolute spend, perhaps only City, Liverpool, Chelsea and Man United have outdone us. And considering United’s revenues exceed our own by some distance, and Chelsea and City have been bankrolled, this is the best we can do.

Since KSE first bought a majority share in the club, we’ve signed Alexis, Ozil, Cech, Giroud, Koscielny, and Mertesacker, who all were in some form were/are key players in our side. They also had achieved big at international level or with other clubs, and were considered world-class in some cases. So none can say they have been slouches, as they all have won domestic leagues/cups, Champions Leagues, Copa Americas, and World Cups between them.

So nobody can deny that we haven’t bought quality – it’s more about not spending money when required or on the right players desired at the time.

 

The #WeCareDoYou movement caused KSE to spend big this summer

 

Neutral.

I think it made KSE aware of fan discontent with their ownership.

And the manner in which it was worded and crafted was not just emotive, but constructive.

But the Pepe, Ceballos, Luiz, and Tierney deals were probably in the offing for a while before the window started. And it just was opportune for KSE to continue working on them, as this online movement commenced.

As fans, we don’t and cannot know about the dealings behind the scenes. Speculating as to actions or inactions is moot since it’s just that – speculation. It’s seldom good, ever, to base firm actions on unsubstantiated points.

#WeCareDoYou is highly welcome indeed. But we just cannot gauge how much it triggered KSE into action, or what the actual response or effects of it were.

 

Some may say the points above try to defend KSE in their ownership of Arsenal.

This isn’t KSE apologism here.

But there are some cases which are true or false, and others that we just don’t know about.

Most Gooners may have heard the above points aired, and may even believe them. There is a difference though between speculation and fact, and fans on many occasions often allow their judgements of clubs to be rooted in conjectural matters. This not only confuses perceptions but also creates an unduly negative vibe between fans and the club.