What do corporate governance, reporting and audit have in common with football? Apart from the fact that the audit and football season reach their exciting climax at a similar time of year, you would imagine not a lot. But delve a little deeper, and it soon becomes clear that there are many comparisons.
Football clubs, auditors - and the firms that they audit - are dealing with many of the same issues: all have faced their share of negative headlines in the last few years; while being clear on purpose, culture, stakeholder engagement and resilience has proved universally challenging. In short, all have experienced issues of trust which need to be urgently addressed.
And for both industries, reform is proving frustratingly slow.
In line with a 2019 manifesto pledge, a Fan-led Review of Football Governance: securing the game’s future (“the Review”) conducted by Tracey Crouch MP reported its findings and recommendations in November 2021. However, despite the Government announcing on 25 April 2022 that it was backing all key recommendations in the report, including the establishment of an independent regulator, there is no clear commitment on a timeframe for change, beyond the publication of a White Paper sometime this summer.
Similarly, it’s been nearly 4 years since Sir John Kingman’s independent review of the Financial Reporting Council, and once more it looks unlikely that the corporate governance and audit reform package that this set in train will make it into this year’s Queen’s Speech.
While we await progress on the audit reform agenda, it’s worth reading across these industries to see what lessons can be learned:
Independent regulators
One of the key recommendations arising from the Fan-led Review, which is now supported by the Government, is the establishment of a well-resourced, independent football regulator, with objectives, scope and powers clearly set out in legislation.
From our perspective, independence and accountability are the two key pillars of an effective regulator and so we look forward to the creation of the new audit regulator ARGA to deliver this rigour for companies and their stakeholders.
Stakeholder engagement
Football has a unique advantage over most other industries when it comes to one set of stakeholders - fans. As Ms Crouch puts it: “Proper fan consultation can be an asset to the club by opening decisions to constructive input from a uniquely important stakeholder. Equally, fans who are kept informed by clubs may be more understanding and less unfairly critical of decisions made by club executives”. For this reason, the Review recommends establishing shadow boards at football clubs to ensure appropriate engagement with this set of stakeholders.
While not many of our UK corporate entities are lucky enough to claim they have “fans”, acknowledging the important role that stakeholders - such as investors - have in achieving successful outcomes for companies is crucial. Of course what also differentiates football fans from investors is that fans tend to be loyal and less likely to switch allegiances - ironically, they will remain “invested” in their club in a way that corporate investors never will. It is therefore even more important for companies to engage with their stakeholders, and conversely for investors to look under the bonnet of any company in which they have an interest.
While not many of our UK corporate entities are lucky enough to claim they have “fans”, acknowledging the important role that stakeholders - such as investors - have in achieving successful outcomes for companies is crucial.
Outcomes and metrics
The Review and its recommendations borrow heavily from the Financial Conduct Authority (FCA) and it is interesting to see the continued evolution of this regulator in its latest 3-year strategy 2022-2025 and business plan 2022/23. One of the most striking areas of development announced in the business plan is around metrics and reporting. Measuring outcomes - particularly when they cannot easily be quantified - is notoriously difficult, and the FCA acknowledges that this remains work in progress.
But for both ARGA and the new football regulator to be effective, it will be necessary to demonstrate this transparency and accountability to all interested parties.
With the football season due to end on 22 May and the Queen’s Speech scheduled for 10 May, we don’t have very long to wait before we know for sure which teams and what legislation will be relegated. But with two such important components of the long-term success of UK PLC, the case for urgent reform for both remains compelling.
