Corporate Governance

Corporate Governance

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nIntroduction

nIn the recent past, football games have witnessed a rise in their popularity among fans across the globe. Similarly, the competitiveness of hosting world cup among nations has increased over the years. The world cup is the largest sporting occasion internationally which is held every four years. The world governing body for this game is Federation International de Football Association (FIFA), which is responsible for regulation and governance of the beautiful game on the global market (Gammelsæter & Senaux, 2013). In addition, it has the powers of selecting the host nation for world cup. Similarly, it has jurisdiction over other factors of global football as well as other global football matches. The influence and power of FIFA has increased over the years due to globalisation and commercialization of football. Research indicates that football has over 3.6 billion fans in the world hence it is the largest number of followers (Ferkins & Bottenburg, 2013). Despite this fact, FIFA has remained the centre of attention for poor governance standards. It has been involved in corrupt deals and allegations of lack of accountability and transparency. The process of bidding and awarding of rights to host Word Cup tournaments in 2018 and 2022 were marred with scandals of corruption and bribery. Most importantly, these concerns have been facilitated by the poor corporate governance structures and policies (Pielke Jr, 2014). Therefore, change of its corporate governance structures and policies can play a significant part in promotion of transparency and accountability in FIFA. Consequently, it would be able to reinstate the sureness and faith of sponsors, players and the shareholders in the beautiful game.

nThe body is headed by the president who leads FIFA executive Committee. Additionally, the president is voted on quadrennial basis through member organizations in the Congress. From 1998 to 2015, Josef Sepp Blatter has led FIFA for 17 years. During this period, the international fame of the game increased tremendously. Similarly, the revenue levels created by consecutive tournaments in the World Cup have grown (Ferkins & Shilbury, 2012). However, the increasing interest in the game and its financial achievements has been characterized by various allegations of cronyism and corruption. FIFA has been accused of corruption especially in the process of choosing the host countries for the upcoming World Cup games. In the meantime, various FIFA officials have been indicted of wire fraud, money laundering and numerous offences for individual gain associated to global football (Ferkins & Bottenburg, 2013). Subsequently, the US, Department of Justice has launched investigations against nine FIFA officers who are accused of corruption.

nOne of the major issues why FIFA has attracted widespread global attention is because of problems related to weaknesses in its corporate governance. Most importantly, the organization has in the past, ignored attempts and recommendations to improve its corporate governance (Dimitropoulos, 2011). Firstly, there have been challenges in the adoption of term limits of FIFA leaders and members of the Executive Committee (Ratten, 2011). Additionally, the corporate governance is poor because it does not have non-executive committee with members that are independent from interferences of the Executive Committee of the organization (O’Boyle & Bradbury, 2013). Similarly, FIFA has not embraced suitable practices and guidelines to eliminate conflict of interests among its officials. Finally, there have been challenges in the electoral process of FIFA since they lack credibility and transparency.

nCorporate Governance

nAccording to Ferkins & Shilbury, (2012), governance refers to the control and power that are exercised in running and management of any institution within a context of systems, duties, roles, regulations, relationships and processes. Therefore, directors and leaders of boards in any establishment are required to upload high standards of accountability for their resolutions with great consciousness in terms of social responsibility. Thus, the board has the responsibility of handling the culture and strategies of corporate via definition and shaping of its core values, beliefs and vision (Ferkins & Shilbury, 2012). Moreover, the board has a role to pay close attention on policies for management and personal roles in relation to their conventions and governing frameworks. Furthermore, the board has a responsibility of ensuring that all systems of governance such as organizational structure and decision-making are clear to all stakeholders, employees and managers (Pielke Jr, 2014). In this regard, it should stipulate control and operational processes as well as expounding the managerial design. In this regard, the members of the board play a key role in promoting integrity towards stakeholders and shareholders in the area of the international market.

nA research by Gammelsæter & Senaux, (2013) stated that principles of corporate governance promote the foundation of a successful institution via legitimate monitoring framework. Secondly, it ensures that there are an explicit division of roles between various committees in the organization. Moreover, the basis of good governance is founded on the boards integrity and power to accomplish their responsibilities (Gammelsæter & Senaux, 2013). On the other hand, the shareholders should have right to remove or choose members of the boards. They should also have the right to be informed about crucial decisions. Good governance also ensures that all shareholders have equal rights hence are treated equally and protected from insulting actions. It should also be based on transparency and disclosure meaning that the organization should be clear on issues related to governance, performance, ownership, and finance. According to a research by Geeraert, Alm & Groll (2013), the board has the duty to ensure that corporate governance practices, actions, plans, and strategies re observed. In addition, it guarantees implementation of new changes (Geeraert, Alm & Groll 2013).

nFIFA has the responsibility to offer the most sustainable and stable structures of good governance for the game. It should ensure that its employees, officials and member association sustain high standards of transparency and accountability. FIFA should adapt appropriate policies and structures in the world football aiming to ascertain that its values and operations follow the best standards of management as possible (Bean, 2016). Some of its major sponsors such as Visa, Anheuser-Busch InBev, McDonalds and Coke-Cola have called for change of its corporate governance.

nThe mission of FIFA is to develop football and create a viable future for all people. However, the cases of misconduct, misappropriation and poor financial practices for a long time have hindered the ability to fulfil, promote and adhere to these concepts (Ferkins & Shilbury, 2012). In 2015, large scales scandals were unearthed dealing with momentary bribery and corruption. Nonetheless, these cases could have been mitigated and avoided by stronger corporate governance structures and policies (O’Boyle & Bradbury, 2013). Reports indicated that existing checks and balances at FIFAs levels of management were weak hence they could not offer adequate regulation.

nReforms on Corporate Governance that FIFA should embrace

nOrganizations with good structures and policies of corporate governance are able to initiate the ethics of noble practices with regard to management accountability, remuneration, effectiveness and relationships with shareholders.

nSeparating Management Functions

nIn corporate management, it is important to separate the roles, functions and powers between the management structures. Organizations such as FIFA do not have a separate system of governance. Currently, the Executive Committee has direct roles and executive powers. In addition, it lacks a board of directors, which can supervise, direct or define strategies and policies of the organizations (Segaert, Theeboom, Timmerman & Vanreusel, (Eds.) 2012). Therefore, it is important for FIFA to have a board of directors, which is separate from the managers. Consequently, it would introduce the positions of Chairman who heads the board of directors and the CEO who heads the management structures. The members of the board are leaders and would be able to provide policies and supervise the managers (Pielke Jr, 2014). The FIFA CEO would be the head of the other managers. In addition, the CEO should have the role of implementing the strategies and policies as directed and defined by the board. The FIFAs CEO would accountable of the daily operations of the institution (Geeraert, Alm & Groll 2013). Similarly, he/she would be required to answer questions pertaining to the operations of FIFA to the board.

nThe members of the board of directors would be elected by the shareholders of FIFA across the world. Therefore, the shareholders such as the sponsors, continental associations and players would have final power in the election and oversights of the managers (Capasso & Rossi, 2013). The board of directors in this institution would play a crucial role because they outline the values, and purpose by which FIFA would perform its daily operations (Bean, 2016). Furthermore, the board have the capacity to identify and select relevant stakeholders for FIFA. In addition, it would establish tactics and approaches of linking various strategies for effective implementation of its policies.

nThe board of directors at FIFA should be headed by the chairperson. He/she has the responsibility of ascertaining that the board functions effectively and efficiently. Additionally, the chair should enhance regular participation of board meetings and that all members are engaged in the crucial discussions (Tomlinson, 2014). Significantly, the chairperson would be responsible of making decisions on the scope of every meeting as well as management of tie during board meetings. On the other hand, the board of directors in FIFA should also have both executive and non-executive members (Levermore, 2013). Non-executive directors participate in the board meetings on part-time basis since they are normally employed in other employments in different organisations. Sometimes they are senior persons in the public. On the other hand, FIFA should also have the executive directors who are full-time workers. They should be senior employees in the institution dealing with policymaking and useful commercial functions of key strategic importance (Segaert, Theeboom, Timmerman & Vanreusel, (Eds.) 2012). Other directors would focus on specific functions such as marketing or finances.

nFIFA CEO should be the steward of the executive wing of the institution hence would take part in the daily management. Apart from attending board meeting, he/she would act as the executive director of the firm. Additionally, the CEO of this institution would be chairing the executive committee involving other line managers. Research by Bean, (2016) noted that separation of responsibilities between the CEO and the chair is beneficial for organization such as FIFA because it promotes effective oversight and monitoring of managers. In addition, agency theory suggests that it offers independence of the board from other managers. It helps to eliminate conflict of interest if one individual holds both the roles of chair and CEO (Bean, 2016). Such corporate structures help to eliminate cases of corruption and bribery claims. Unlike the administrative theory, which opposes separation of powers between the CEO and chairperson, agency theory argues that separation helps to eliminate unambiguity and promote efficient corporate governance (Levermore, 2013). Finally, the board of directors in FIFA would not have executive authority.

nLimiting of Term of Office for FIFA executives

nIn corporate governance, limiting the term of office play a crucial role in good governance. Scholars argue that term limits are important for institutions because they help to reduce the level of power that an official can acquire over a given period. For instance, Chappelet & Mrkonjic, (2013) suggested that through term limits, it guarantees that emerging concerns can be raised when representing people. Therefore, it facilitates maintenance of wishes and views of the persons fresh and new. For a long period, FIFA did not have term limits for its officials such as the President, Secretary General and Audit officers. Subsequently, it causes authoritarianism, which promotes bribery and corruption among permanent office holders (Chappelet & Mrkonjic, 2013). There have been proposals of imposing a term limit of 12 years for top-level officials such as the president. Without restrictions on number of terms that a person can serve, there would be no pre-set expiry to a single individuals capacity to maintain an elected office. Permanent offices also promote inefficiency in the execution of duties (Dimitropoulos, 2011). When there is no term limit the incumbent is likely to solidify more power hence stay for long period. During elections, the incumbent normally have the more advantage hence they do not prioritize the interests of stakeholders (Levermore, 2013). Therefore, term limits provide checks and balances to ensure that elected officials are accountable to the people.

nA study conducted by Jorge, (2014), introduction of term limits in public offices such as FIFA president promotes better governance since it encourages fresh perspectives and ideas. Therefore, it guarantees that an official does not concentrate his/her attention in retaining a power and job at the expense of addressing the concerns and existing problems (Jorge, 2014). Moreover, the public officer would also make their decisions more prudently when in power because they understand that one day they would return to people with their title (Pielke, 2013). It also ensures that officers acknowledge that they are offering a service to the people since these offices are not a career.

nFIFA should also embrace the term limits for it helps to eliminate corrupt officials. In most cases when individuals serve for a long time, they are likely to engage in bribery and scandals (Capasso & Rossi, 2013). Fortunately, term limits makes corruption difficult since there is little time for officials to be influenced by other powers to engage in corruption

nStakeholder Engagement

nEncouraging stakeholder engagement in an international institution like FIFA helps in better corporate governance as it enhances inclusion and transparency. FIFA should establish a committee that bring together all stakeholders of football such as representatives from leagues, clubs and players (Ratten, 2011). Good governance calls for this kind of engagement because the institution is able to understand the interests and concerns of stakeholders thus enhancing their relationships. FIFA would be able to improve its operations.

nMoreover, such actions would promote satisfaction of stakeholders such as its major sponsors, which leads to more detailed understanding (Tricker, 2015). Similarly, it would promote positive reputation of FIFA over time. Furthermore, stakeholders engagement would help the institution to strategize on its operations. More significantly, it would increase its capacity to manage international tournaments such as world cups in different countries (Chappelet & Mrkonjic, 2013). When the board of directors engages with FIFAs stakeholders, the world governing body would be able to make appropriate decision regarding use of modern technologies in football matches.

nThe management of international tournaments would also improvement as stakeholders provide insights on how to improve. According to Peters & Handschin, (Eds.) (2012), stakeholder engagement in global organizations such as FIFA would provide a crucial role in promoting corporate accountability. Therefore, it would reduce cases of corruption and enhance corporate citizenship and sustainability. It also enhances respect of human rights as an important component of corporate governance (Peters & Handschin, (Eds.) 2012). Finally, FIFA would be able to deal with concerns raised by dissatisfied stakeholders in its management.

nConclusion

nFIFA has been marred by various cases of corruption and bribery involving its senior officials. One of the main reasons behind these problems is poor corporate governance structure and policies. Firstly, the institution was led by Executive Committee head by the president (Tricker, 2015). Most of the senior officials occupied positions without term limits. In most cases, FIFA did not engage its stakeholders in its governance. Therefore, in order to change this trend, the organization should adopt separate management functions, which have a board of director and managers (Jorge, 2014). The chair or president would lead the board while the CEO would ensure daily running of the institution. On the other hand, it should adopt term limits of its officials and stakeholders engagement.

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nReferences

nBean, B. W. (2016). An Interim Essay on FIFA’s World Cup of Corruption: The Desperate Need for International Corporate Governance Standards at FIFA. ILSA Journal of International & Comparative Law, 22.

nCapasso, A., & Rossi, M. (2013). Systemic Value and Corporate Governance: Exploring the Case of Professional Football Teams. Business Systems Review (ISSN 2280-3866), 2(2), 216-236.

nChappelet, J. L., & Mrkonjic, M. (2013). Basic Indicators for Better Governance in International Sport (BIBGIS): An assessment tool for international sport governing bodies. IDHEAP: Chaire Système d’information.

nDimitropoulos, P. (2011). Corporate governance and earnings management in the European football industry. European Sport Management Quarterly, 11(5), 495-523.

nFerkins, D. L., & Bottenburg, M. V. (2013). The governance of high performance sport.

nFerkins, L., & Shilbury, D. (2012). Good boards are strategic: What does that mean for sport governance?. Journal of sport management, 26(1), 67-80.

nGammelsæter, H., & Senaux, B. (2013). The governance of the game: A review of the research on footballs governance. Handbook of research on sport and business, 142-160.

nGeeraert, A., Alm, J., & Groll, M. (2013). Good governance in International Non-Governmental Sport Organisations: an empirical study on accountability, participation and executive body members in Sport Governing Bodies. Action for Good Governance in International Sports Organisations, 190-217.

nJorge, G. (2014). Fixing FIFA: The Experience of the Independent Governance Committee. Sw. J. Int’l L., 21, 165.

nLevermore, R. (2013). Failing to address gross corporate misconduct?. Routledge handbook of sport and corporate social responsibility, 52.

nO’Boyle, I., & Bradbury, T. (2013). Sport governance: International case studies. Routledge.

nPeters, A., & Handschin, L. (Eds.). (2012). Conflict of interest in global, public and corporate governance. Cambridge University Press.

nPielke Jr, R. (2014). An Evaluation of the FIFA Governance Reform Process of 2011–2013. In Managing the Football World Cup (pp. 197-221). Palgrave Macmillan UK.

nPielke, R. (2013). How can FIFA be held accountable?. Sport management review, 16(3), 255-267.

nRatten, V. (2011). Practical implications and future research directions for international sports management. Thunderbird international business review, 53(6), 763-770.

nSegaert, B., Theeboom, M., Timmerman, C., & Vanreusel, B. (Eds.). (2012). Sports governance, development and corporate responsibility. Routledge.

nTomlinson, A. (2014). The supreme leader sails on: leadership, ethics and governance in FIFA. Sport in Society, 17(9), 1155-1169.

nTricker, B. (2015). Corporate governance: Principles, policies, and practices. Oxford University Press, USA.