Sports administration and good governance: theory and practice in South Africa *.
This paper is a follow up to papers delivered at the past two IASL Congresses. The first of those earlier papers examined the role of ethics as a regulator of sport. The second discussed the relationship between sport and recreation and the laws protecting the environment. This paper builds on those earlier themes and looks at the need for sports administrators to conform to good corporate governance practices. While examples will be drawn from many parts of the world most attention will be given to South Africa. In the past SA has been seen as a useful case study for investigation into racism and political change. Today SA has characteristics of both developed and developing countries and it provides opportunities for studies in corporate governance particularly in the context of professional sport.
This paper begins by asking why good corporate governance is important in society and narrows that down to an examination of why good governance in sport is important. There is a definition of good corporate governance and a distinction made between ownership and one hand and governance and management on the other. The old and the new models of corporate management are compared. The point is made that sports bodies are different from commercial trading companies while at the same time sharing characteristics of trading corporations. They share the pursuit of profit in the age of professional sport but at the same time, and unlike trading corporations, sporting bodies are deeply embedded in the life of the society and call forth deep emotional attachments. This duality is illustrated by an examination of the governance and administration of cricket, rugby and soccer. These three sports illustrate the problem arising from the fact that what was once a game is now a livelihood. Given this the question is then asked: are the accepted principles of good corporate governance and administration applicable to sports bodies? The answer is yes but the conclusion, based on the evidence, is that the old model of corporate governance in South African sport is being broken down only very slowly.
"Greater transparency and accountability in both the public and private sectors, considered essential elements of good governance, are needed to ensure equality and equity in the access to, and participation in, economic, political and social activity in all countries." "Corporate Governance," in Asia: Lessons From The Financial Crisis (UNDP, Malaysia, 2002)
"The man accused of master-minding German soccer's match-fixing scandal testified yesterday that he paid players to throw games and told the court of his frustration over his failure to rig a game in Turkey." The Star 21st October 2005 at page 23.
"major company collapses in recent years, such as Enron and HIH, have led to questions about the quality of corporate governance of business enterprises."
Council Brief, October 2005 at page 3. "Soccer s era as the country s biggest sport has finally dawned, eclipsing rugby not only in terms of the number of spectators and audiences but as a destination for sponsors' millions." Sunday Times Business Times 13 June 2004 page 1.
"Sport is too much a game to be a business and too much a business to be a game." Journal of Business Ethics, Vol.20. 1999, at page 52.
"Millions pumped into SA rugby despite elections." The Star 17th February 2006.
In the South Africa context Basson and Loubser have observed: "For the management and administration of a sports body as an association or society and for sporting events to take place, there is a need for tasks to be carried out by certain people other than the referees, coaches, players and spectators: the administrators. They are the ones who have to see to it that the aims of the sporting body are attained and that events take place, whether these be competition, recreation or other forms of entertainment." They cite in their support Rice (1) and go on to add: "The commercialization of sport has led to an increased need for professional sports administrators. Despite the fact that sport or types of sport have become professionalized, many sports are still being run by amateurs who are expected to manage sports professionally. In South Africa, particularly, the situation still prevails that, in spite of the huge popularity of sport in this country and its very wide scope, there are actually only a small number of professional administrators, i.e. people who are paid for their work and who are employed exclusively to work in the interests of sport. This situation is likely to change rapidly." (2) It is significant that this is the sole passage in a very bulky loose-leaf service in which the need for professional administrators is mentioned, and that mention is a mere two brief paragraphs. Equally significant is the absence of expressions such "good corporate governance" (or even "good management"), "financial reporting and accountability", "good practice", "the fiduciary obligations of Directors" and possibly the most significant omission, no reference to "business ethics." The foregoing expressions are common currency in any discussion of modern corporate governance and administration. (3)
Why is good corporate governance important?
Widespread interest in trying to ensure good corporate governance in business can be traced back to at least the corporate excesses of the 1980's as exemplified in the film Wall Street where the central character, Gordon Geko, extolled the virtues of the slogan "greed is good." (4) That slogan seems to have been embraced by some in the business world and a series of scandals form the background to investigations and reports into corporate governance in the 1990s. (5) Those investigations and reports have been seized on by business publications which carry regular features exposing incompetence. (6) In addition to, and often building on, these reports and Codes many countries have enacted legislation which, amongst other things,
is intended to snare corrupt business practices. (7) In 1991 a leading journal in Australia carried a lengthy item the opening paragraph of which read: "Directors of public companies are yet again about to have their legal obligations and duties increased as the authorities try to make up for the failure of regulators to prevent the corporate crashes and rorts of the 1980s."8 In the USA, as a direct response to the collapse of companies such as Enron, Congress enacted the 2002 Sabanes-Oxley Act. In 2005 the Business Roundtable, an association of the CEOs of the leading USA companies and a body which has long sought to exert influence over corporate governance, published its "Principles of Corporate Governance." The 1990's in South Africa saw the release of the King Report On Corporate Governance and this was followed by a second King Report in 2004. In the United Kingdom the Hampel Committee on Corporate
Governance issued its report in 1998 and this was translated into the Combined Code on Corporate Governance. That 1998 Code was replaced in 2003 with a new Combined Code on Corporate Governance. "The United Nations Development Programme (UNDP) initiative on corporate governance was launched in 2000 in wake of the worst economic and financial crisis to hit nations in Northeast and Southeast Asia." (9) In New Zealand the Securities Commission released its report on Corporate Governance Principles for New Zealand in 2004 and the Law Society summarized the contents of the report under a headline which read "The final word on corporate governance?" (10)
There are other examples of investigations into and reports on corporate governance and it is significant that all of them share a common agreement that the elements of good corporate governance are accountability, transparency and openness. (11) Furthermore, and as a necessary byproduct of openness and accountability, there is growing awareness of the need to step away from the concept of the "Imperial CEO" who ruled and personified his company. (12) Not only is there agreement amongst a wide range of countries as to the broad elements of good governance but there is agreement also as to the principles of good corporate governance. The agreed principles may be summarized under nine headings: ethical standards; Board composition and performance; Board committees; accountability, reporting and disclosure; remuneration; risk management; auditing and financial information; shareholder relations; stakeholder interests. These principles, in many countries expressed in Codes, are expected to be observed by companies listed on the various stock exchanges. While the Codes are not mandatory, a common approach is to expect companies to have a statement in the annual report that the Code has been complied with or to provide an explanation as to why the company has not complied. In the United Kingdom this "comply or explain" policy has been in operation for over a decade "and the flexibility it offers has been widely welcomed both by company boards and by investors. It is for shareholders and others to evaluate the company s statement." (13) Underlying the specific principles of good corporate governance is a philosophy captured in this passage: ".... effective corporate governance systems are crucial for the stability of market-oriented economies. Greater transparency and accountability in both the public and private sectors, considered essential elements of good governance, are needed to ensure equality and equity in the access to, and participation in, economic, political and social activity in all countries. (14)
Why is good governance in sport important?
Five points can be made.
First, the comments by Basson and Loubser make the obvious point that good governance and good administration is essential for the successful conduct of any sporting organization and any sporting event. Whether it be a footrace, a swimming race, a bicycle race, a game of field hockey, an international swimming tournament, a national soccer final or the Olympic Games, effective administration and organization is essential. The absence of efficient organization carries with it possible harm to participants and legal consequences for the organizers. (15) Second, inadequate governance and administration is harmful in other ways. Basson and Loubser emphasise that the age of professional sport demands professional administration. What Basson and Loubser do not emphasise is that professional sport connotes money. The amounts are staggering as revealed, for instance, in the announcement by FIFA of sponsorship deals for the World Cup. (16) Even before this announcement it was reported that, in South Africa, "booming sponsorships take soccer into number one spot, eclipsing rugby" with sponsorships of over R300 million in 2003. (17) Sports bodies are money--spinning businesses for all the shareholders and "shareholders" includes amongst others, participants (18), agents (19), advertisers, sponsors20, broadcasters. (21) manufacturers of sportswear (22); the management of the various sporting organizations, spectators and politicians. Each "shareholder" has an interest in the responsible and accountable management of these vast sums. (23)
Third, when there is demonstrated incompetence in the conduct of the affairs of sports bodies then an immediate consequence is damage to the image of the sport. The scandals surrounding the Salt Lake City Winter Olympics, match-fixing and doping scandals in soccer (24), cricket, weightlifting (25), athletics, horseracing and even pigeon-racing (26) as well as the ever-present questions about the conduct of professional boxing bring the sport into disrepute with often long-term consequences.
Fourth one long-term consequence is that both participants and spectators will turn away from the sport and, if that happens, sponsors will also turn away. (27) As will be discussed below there has been a decade of scandals swirling around the affairs of the South African Rugby Union (Sarfu). One leading columnist described the scandals as "boardroom tomfoolery" and alleged that "South African rugby is in wretched health". The columnist went further and asserted that the "tomfoolery" had drawn attention away from "the domestic playing front where standards and interest are abominable." To underline the declining interest in Rugby in South Africa, which he linked directly to the "tomfoolery" of the Board, the columnist quoted a former Springbok coach who claims that "no fewer than 300 South Africans are playing rugby overseas" which he interprets as "an alarming statistic." (28) Fifth, maladministration in sports, in particular in the iconic sports of any nation, will likely call forth a political response. This may range from criticisms from the Minister of Sport (29), to criticisms from the Head of State (30), to calls for government intervention (31) to reports that the government will appoint a representative to a new body to run the affairs of soccer (32) to an announcement that government is willing to contribute to the salary of a top foreign soccer coach to ensure that South Africa does well when it hosts the soccer World Cup in 20l0. (33) The political dimension to sport is noticeable in many countries but FIFA does not accept this and has threatened to ban Kenya because government demanded accountability from the officials who administer soccer in that country. (34) This despite a former secretary of the Kenyan Football Federation noting that "one thing should be clear. Unlike associations in developed countries, African football associations rely a lot on government support. It is difficult to divorce the running of the game from the government which finances the national team and provides the infrastructure." (35)
Political influence in sport is very noticeable in South Africa. Indeed, political influence is unavoidable given the Constitution within which the Bill of Rights enshrines the right of all citizens to equality and equity in access to and participation in the economic, political and social life of South Africa. Expression to this is given in, for example, the Mission Statement of the South African Football Association (Safa) which commits Safa to "engaging in pro-active dialogue with the government to generate a partnership in recognition of football as a national asset." (36) In similar terms the Constitution of United Cricket Board of South Africa (UCB) sees the role of the UCB as being "to strive to become representative of the South African Society" (37) and further, "to implement the recommendations of the Vision created by its shareholders," (38)
Models of corporate governance
The traditional model is one in which the shareholders elect the board of the company and the board selects the management. In this model the board had a chairman and the management was headed by a chief executive office, the CEO. This model maintained a critical distinction between the owners of capital (the shareholders) and the managers of the business (the directors). The operation of the corporation was broken down into two functions: governance and administration. By the former is meant the policy-making function, commonly performed by a Board of Directors. By the latter is meant the day--to-day running of the affairs of the business performed by managers. (39) That simple dichotomy conceals some serious issues. To begin with the description "manager" is ambiguous. (40) One use describes the manager of the business side. The other describes the manager of the team. What this discloses is the two sides to sports bodies: the business side and the community based recreational side. In modern professional sport it is very difficult to keep the playing and administrative sides separate because they are each an aspect of the business activities of the sport. Many problems arise when the administration arm interferences with the playing arm. This is especially true when the chairman and the CEO are the same person as was commonly the case when sport was non-professional and was managed by volunteers. In that model the concept of the board appointing the management was a fiction. The board did not select the management: management selected the board. Furthermore , the fusion of the chairman and the CEO resulted in what has been called the "Imperial CEO", a person who ruled the corporation and personified the company. (41)
Keeping governance and management separate in law and in fact is very difficult in the era of the "Imperial CEO." Rugby and soccer in South Africa have long been an illustrations of how difficult it is to keep governance and management separate. There have been many allegations that successive Rugby bosses have been dictators and bullies. (42) The "most powerful individual in South African soccer by far" is nicknamed "The bon Duke". (43) A succession of national soccer coaches have complained of constant interference from the national administration with one recent coach describing how he "received calls from within the administration to tell him which players to pick." (44)
That the two arms of modem sport must be treated separately has been recognized in South African soccer where there has been a recent announcement that the national team Bafana Bafana, will become a separate entity. In the words of the president of the South African Football Association (Safa) when announcing a radieal restructuring. "We needed to move Bafana Bafana away from the general administration of Safa. People always blame Safa when the team underperforms but now there will be accountability." (45) Bafana Bafana will now have a "top international coach with the freedom to groom the national team without interference." (46) The new structure to run Bafana Bafana will be a commercial entity wholly owned by Safa. Safa will concentrate on amateur soccer development. (47)
The status of sports bodies
The foregoing comments raise several issues. The first is the status of those bodies whieh govern and administer sport. Are they constituted in the same manner as trading companies and, if so, does that mean that the guidelines and practices applicable to trading corporations also apply to sporting bodies? The answer is in two parts. The first relates to the "two souls" of sports bodies such as soccer clubs. "Football clubs are indeed a complex mixture of top-level money-spinning business activity and a long standing recreational activity deeply rooted in almost even social and geographic context." (48) Any sports fan will understand the dilemma which is neatly captured in the observation that "sport is too much a game to be a business and too much a business to be a game." (49) Witness, for example, the uproar which accompanied the announcement that the English club Manchester United had been sold to an American millionaire, Michael Glazier. (50) "Football Clubs are at the heart of their communities", said the UK Minister for Sport, adding that "In Government we need to harness the power of football, [and] help in our work on the social inclusion agenda." (51) The sale of Manchester United proved that "football clubs look like any other business company nowadays and are often incorporated as commercial companies and sometimes even floated on the stock exchange--but, unlike business companies, retain a strong link with the community." (52) In South Africa for decades sports were run through unincorporated entities such as voluntary associations and were administered by amateur, part-time volunteers. With the emergence of professional sports it became necessary to create business entities, commonly companies. This move highlights the tension identified earlier between sport as a community-based social recreation and sport as a highly lucrative business requiring business management and raises the question whether sports bodies are complying with regulations which prescribe good corporate governance. In South Africa those issues can be best explored through the three national sports of cricket, rugby and soccer. Each is deeply embedded in the national consciousness, so much so that successive Presidents have closely identified themselves with the success of the teams (53) and have publicly criticized teams when they lose? (54) Intense public debate is engendered when teams fail to perform up to often over-inflated expectations. (55) What this shows us is that sport is part of the economic, political and social life of a society. This is reflected in the comments of the UK Sports Minister noted earlier and is echoed in the expressed objectives of sporting bodies in South Africa such as that of the United Cricket Board which aims "to strive to become representative of the South African Society," (56) and in the Mission Statement of the South African Football Association which commits Safa to "engaging in pro-active dialogue with the government to generate a partnership in recognition of football as a national asset." (57)
The iconic sports of South Africa
Cricket, rugby and soccer in South Africa have been subject to investigations stemming from allegations of corruption, mismanagement and fraud. In the case of cricket the most dramatic illustration of deep-seated problems was the scandal surrounding the late Hansie Cronje. At the outset Cronje denied allegations of match-fixing as captain but then admitted the truth. The scandal was not confined to South Africa and it enmeshed players in Australia, India and Pakistan, (58) There was an official enquiry, a report, and firm action by the International Cricket Council (ICC) which established a new ICC Code of Conduct (Corruption) Commission. South African soccer administration was exposed as corrupt in 2004 with one frontpage headline declaring "Match-fixing scandal rocks SA soccer" (59) with subsequent revelations that clubs were accustomed to bribing referees and players (60), a scandal to which police investigators gave the file name "Operation Dribble." (61) Allegations of poor corporate governance practices and corporate misconduct in South African Rugby Union have been aired for over a decade and are dealt with below.
There have been other problems with cricket in South Africa other than the match-fixing scandal. In 2004, for example, there were reports alleging that the rules of the United Cricket Board of South Africa (UCB) had been breached by its then Chief Executive . It was reported that the Chief Executive was a shareholder in a technology company which was awarded a valuable contract by the UCB. The core of the allegation was that the contract was never put out to tender and this was contrary to the constitution of the UCB. (62) The UCB is described in Article 5 of the UCB Constitution as being "a voluntary association having a corporate identity separate from that of its affiliates and is entitled to own property ... and to sue and be sued in its own name, and notwithstanding any change in the composition of its membership from time to time shall have perpetual succession." There is no doubt that the UCB is a legal entity on the same footing as an incorporated trading company. Pursuant to Article 12 the UCB "shall be conducted on a non--profit basis" and is "prohibited from carrying on any business undertaking or trading activity", except when that undertaking or activity is integral and directly related to the "sole object" of the UCB. That "sole object" must be a reference to Article 7.1 which expresses the aims and objectives of the UCB as being "to promote, advance, administer, co-ordinate and generally encourage the game of cricket in South Africa." While the UCB is conducted on a non-profit basis Article 11.1.6 of the Constitution empowers the UCB to "incorporate its professional activities into a separate entity for the carrying on of professional cricket and all commercial activities relating to" all national cricket teams, brand building and protection, merchandising, sponsors and official suppliers relating to professional cricket, media rights and marketing of professional cricket and the conduct of tours, tournaments and competitions relating to professional cricket. That separate entity, the professional arm of the UCB, is Cricket South Africa (Pty) Ltd. While purportedly separate, that body is effectively controlled by the UCB. For example, the highest authority in the UCB is the General Council. While the General Council has the particular function of managing the non-commercial activities of the UCB those non-commercial activities are listed in Article 13.1.3 as including "the appointment of the Board of Directors of Cricket South Africa (Pty) Ltd, the professional arm of the Board." Moreover amongst those who serve ex officio on the Board of the professional entity are the President, the Vice President, the Treasurer and the Chief Executive Officer of the UCB. Finally, the non-commercial UCB is a shareholder in, and has monitoring powers over, the activities of, Cricket South Africa (Pty) Ltd. (63)
The role of the UCB is to "govern," (64) to "strive to become representative of the South African Society" (65) and to "implement the recommendations of the Vision created by its shareholders." (66) This is a succinct expression of the broad governance role of a sporting body. The affairs of the UCB "shall be administered by the Management Committee, subject to the general control of the General Council." (67) The day-to-day affairs of the UCB are conducted by a Chief Executive Officer who also sits on the General Council, the Management Committee and all other committees (except selection committees) in an ex offico capacity. (68)
Soccer offers further evidence of the fact that sport is deeply rooted in the community conscience. As noted earlier the governing body of Safa is committed to engaging in pro-active dialogue with the government to generate a partnership in recognition of football as a national asset. (69) Safa is also committed to "contributing to Africa's ascendancy in world football through the hosting of major events in Africa, while aspiring and striving to become a leading football nation." (70) The aim of hosting major events was achieved when South Africa was awarded the rights to host the Soccer World Cup in 2010. The aspiration to become a leading football nation suffered a serious setback when the national team, Bafana Bafana, failed to qualify for the 2006 World Cup in Germany and made a dismal showing in the African Nations Cup in Egypt in the same year. (71) These dismal showings generated widespread reactions. Newspapers carried banner headlines with such proclamations as "The Bafana Disaster: nightmare likely to continue" (72) and "Bye-Bye Bafana!" (73) and "Bafana go from riches to rags." (74) There were nostalgic recollections along the lines of "When Bafana were Africa's soccer kings." (75) In addition to the contributions of former coaches and contemporary commentators both politicians (76) and the general public (77) voiced their belief that the "national asset" was not well administered. A leading national weekly claimed that "Safa is peopled by some babes in the wood--inexperienced and unsuitable to host or compete well in the 2010 World Cup." (78) Notwithstanding that there had been thirteen coaches in twelve years, there were demands that this current unsuccessful coach also be removed. (79) This was done.
Attention was then turned to the administrative side with such headlines as "Problems with Bafana start at the top" (80) and one former Bafana coach describing "a crumbling infrastructure and chaotic governing body." (81) There was a demand that the governance and management structure of Safa be overhauled: "Soccer circus must come to an end." (82) There was no shortage of free advice: "How to fix Bafana an idiots guide to Safa's mess" read one headline (83) and letters to the editor contained thoughtful suggestions. (84) In early February it was announced that the Sports Minister would meet Safa "in a bid to sort out Bafana mess." (85)
It light of all this attention to its sporting and administrative shortcomings it comes as no surprise to learn that Safa underwent a restructuring. One leading newspaper displayed a frontpage headline reading "Radical plan to fix Bafana" and reported that "South Africa's soccer bosses have agreed on a radical plan to build a more powerful Bafana Bafana ahead of the 2010 World Cup." (86) Another leading weekly journal announced in its headline that "Local soccer's setup is being turned on its head to change Bafana Bafana into a winning team." In the item it was reported that "a revolutionary restructuring of football is being touted" with the suggestions that a government representative and a "well-respected businessman" were to be appointed to a new governing body for South African football. (87) This is a clear demonstration of a football club having to balance its two souls: the deep-rooted social and community activity of predominantly amateur players and the dictates of a professional business.
The third major sport in South Africa, Rugby Union, is also deeply rooted in the national psyche and attracts as much emotional reaction as does soccer. A major newspaper in April 2006 began an article critical of Rugby administration with the enjoinder to "Listen up. The signs are neon-bright: Super 14 standards are shambolic, the State of the smaller provincial unions is pitiful. Club rugby is on its knees. transformation has become a dog's breakfast, and too many players are draining the system." (88) The article went on to assert that "change is one of the things SA rugby doesn't handle particularly well, especially with so many Flat Earthers running the game." That comment comes after the Rugby Union had undergone substantial change and it is therefore necessary to put the criticisms into context. The story begins with the then Minister of Sport recommending to then President Mandela in 1997 that there be a commission of inquiry into the affairs of the South African Rugby Union (Saru). There is a dispute as to who approached the Minister 89 to initiate the inquiry into allegations of corporate mismanagement against the then President of Saru, Mr Louis Luyt. A legal challenge to the inquiry was successful. This did not end the matter. There is a trail of court cases, commissioned Reports, official enquiries and legal opinions as well as endless media scrutiny and public reaction which shows no sign of abating.
The storm focused on Mr Luyt's successor as President, Mr Brian Van Rooyen (90), In August 2005, following a further inquiry a report was delivered to the Saru Board. That report, 338 pages long, found a range of poor corporate governance practices in Saru, listed a number of allegations of corporate misconduct, accused Mr Van Royen and other members of the President's Council of not acting in the "best interests of the union" and found that Mr Van Rooyen had "used his position and privileges for personal gain." An advocate, Jannie Lubbe, was asked to evaluate the contents of the report and he also took additional evidence received from, amongst others, the Department of Sport and Recreation. In December 2005 Advocate Lubbe handed his report to Saru CEO. Johan Prinsloo, and the chairperson of the Saru disciplinary committee, Judge Lex Mpati. In response to this report, and its finding that a prima facie case existed, the Saru President's Council Disciplinary Committee appointed Judge Edwin King in December 2005 to investigate the alleged mismanagement. Judge King was experienced in these matters as he had led the investigation into cricket match-fixing in 2000 but he did not last long enough to have the same impact on the affairs of Saru. One month after his appointment Judge King withdrew from the enquiry pleading that the "matter has taken too long to come to fruition." According to one media report while Judge King did meet with Saru no terms of reference were clarified and Judge King had lost patience with the delays, (91)
The announcement by Judge King was made days before the inquiry was to begin and with the Annual General Meeting of Saru barely a month ahead. The announcement generated harsh, indeed cynical, media reaction. The Star carried a headline reading "Slippery Brian to get away with it" and the view was expressed that the judge's resignation meant that the inquiry would be put on ice and may perhaps never take place. (92) That story was to be the first of a month-long media attack on the conduct of the affairs of Saru and its President. On the Saturday following Judge King's resignation a Saru official announced that a provincial union president would "look into the inquiry into Van Rooyen" but the official immediately qualified the announcement by saying that he would have to discuss the matter with the Sports Minister. He did say "we hope to complete the inquiry before the AGM." That announcement came from the President s Council less than a month before the AGM and buried in that announcement was the news that Mr Van Rooyen would be opposed by a provincial president, Oregan Hoskins. The challenger was described as "favourite to succeed Van Rooyen." (93) Nonetheless we were told that the sitting "Rugby boss remains defiant as new challenger campaigns to unseat him" (94) and in response to the appointment of a former judge, Joos Hefer, to head the investigation Mr Van Rooyen hired leading lawyers. (95) This may have been premature as the same official who had been asked to look into the matter repeated that he had met with the office of the Sports Minister, that "there were some concerns from the ministry's side" and that he was not willing to speculate on the time the investigation might take nor when the investigation would commence. (96)
The status of the inquiry became one bargaining chip in the increasingly bitter infighting for the presidency of Saru. There was a report that Mr Van Rooyen was negotiating a deal whereby he would resign provided the investigation was stopped (97), a claim which Van Rooyen denied (98) the next day. Perhaps because of the confusion surrounding the status of the legal inquiry the media turned its attention to the run--up to the election at the AGM in late February 2006 but the implications of the pending inquiry was ever--present. In early in February, The Star newspaper was quoting the challenger as promising "good corporate governance and a union built on honesty and integrity should he be elected Saru president." (99) The next day the same newspaper was counting the votes and finding the challenger ahead by 29 votes to 15. (100) Allegations of dirty tactics by the incumbent were reported and denied (101) and evidence of other battles within Sarfu surfaced, in particular struggles by smaller franchises to remain in the Super 14. (102) It is a fair summary of the next few weeks media coverage to say that the coverage was more favourable to the challenger (103) than the incumbent with the press assuming that the challenger would win. (104) There were claims of dirty tricks (105) and claims of support for the incumbent by such persons as the Springbok coach. (106) Five days before the vote a headline could be interpreted as assuming the outcome when it invited the public to read about the "Rockstrewn path of Van Rooyen era" (107) and next day asked "is Brian buying votes to swing election?" On Thursday 23 February the SABC FM "After Eight Debate" was entirely given to the imminent elections in Saru and the next day a newspaper headline declared "End near for Van as Hoskins secures backing of big unions." (108) Two days later the Sunday Times carried an analysis of the election under the headline: "Brian meets his Waterloo" and although the ballot had been secret and Saru refused to disclose the vote the newspaper asserted that "Hoskins wins easily" and that Van Rooyen's defeat was "humiliating: 27 votes to 17." (109)
The election did not end the ructions within South African rugby. In his first media statement the new president declared himself "shocked and stunned" to learn that his predecessor had offered a provincial union a Test Match and many million rands in return for that union switching its votes to him and added that this "made it even more important that the investigation into claims of corporate mismanagement against the former president went ahead." (110) The former president was reported at the same time as welcoming the investigation in order to clear his name. (111) While the two protagonists maintained their eagerness to get into the legal ring there were hints that the inquiry, pending for more than one year, would not continue. The president of the provincial union which van Rooyen was alleged to have attempted to bribe, declined to comment further other that to say: "I don t think we need to get into that. The election is over and I'm tired of rugby politics for now." (112) It was also suggested that the investigation would cost millions and that, with van Rooyen out of rugby administration, to continue with the inquiry would serve no purpose". (113) One columnist wondered "who'll carry the costs and whether it is now even necessary to continue." (114) Despite this the new president "was adamant that the investigation should go ahead, adding that he was also seeking a forensic audit of the national governing body" because "we need to start with a clean slate on these matters." (115) The adamantine position of the new president softened in less than two weeks. On a television programme the president was asked if the action against Van Rooyen would continue. The president replied that he is not directly involved, that it is a legal process and that we would just have to wait and see. (116) That, for now, is the end of that story but the recriminations within Saru continue and one of them, in the words of the president is "a legal condundrum I've inherited from the past administration, but SA Rugby will do everything possible to keep the matter out of the courts." (117) The comment that this was a legacy from the past raises directly the question of whether a mere change in the elected officials can achieve desired changes on and off the field. At least one respected commentator remains unconvinced and claims that "professional rugby's worst attribute in this country right now is the enthusiasm for scapegoatery" and clearly sees no improvement as a result of the recent elections in Saru. (118)
Sports are games engaged in for recreation and pleasure by millions. The games are organized by community volunteers and are participated in by amateurs. Increasingly, however, for many what was once a game has now become a livelihood. Vast amounts of money are involved. Governments take a close interest in major sports and in the conduct of major sporting events. The governance and management of sports, both on an off the playing field, is a matter of public interest. For many years the governance and administration of sport were tightly fused, most commonly characterized in the concept of the "Imperial CEO" who personified the organization and who always got his way. In response to a number of stimuli the three major South African sports of cricket, rugby and soccer have begun a process of restructuring their corporate governance.
Good corporate governance exists when there is accountability, transparency and openness. It exists where there is no "Imperial CEO". The "Imperial CEO" is the old model of corporate governance. The recent South African experiences in the three major sports shows that the old model is only slowly being eroded and that the transition to good corporate governance in professional sport is difficult. Whether the current changes eliminate "boardroom tomfoolery" and also achieve results on the playing field remains to be seen.
* Keynote paper presented at the South African Sports Law Association Annual Conference, Stellenbosch, 14-15 September 2006.
** Professor Brian Brooks, BA, MA, Ll.M. Dip.Juris is Head of the School of Business and Economics at Monash SA.
(1) J. Rice Start of Play (London, Prion Books Ltd.. 1998) al page 227ff.
(2) J.A.A. Basson and M.M. Loubser (eds), Sport and The Law in South Africa. (LexisNexis. Service Issue 4, Part 1, Sport and Society, Chapter 1-11.
(3) Jim Nafziger will forgive me if I also point out that in his seminal text there is but one implied reference to the need for good governance in sports organizations. That is found under the heading Organizational Corruption in Nafziger, International Sports Law (Transnational Publishers Inc., New York, second ed., 2004) at pages 30-34. In a more recent publication there is attention at various points to the need for professional governance and administration of sports: Toomey (ed.) Keeping The Score: Essays in Law and Sport (The Centre for Commercial and Corporate Law. Unisersity of Canterbury, 2005): R. Cloete (ed), Introduction to Sports Law in South Africa (LexisNexis Butterworths, Durban, 2005) chapter 4.
(4) Twenty years later the slogan surfaced again and seems to have been readopted on Wall Street. See Cover Story "Wall Street 2005: Is Greed Still Good?" Fortune Vol. 151, No. 10 European Edition, June 13, 2005 in which the theme of the article beginning at page 28 is that "it feels like the 1980's all over again."
(5) Worldcom and Enron in the USA. Parmalat in Italy, the financial crisis in Asia in April 1997 and, more recently the Linter tcxtile group collapse in Australia are the inost notorious. For one detailed analysis of one of these scandals see Loren Fox, Enron: the Rise and Fall (Wilby, Hoboken, New Jersey, 2003). For a careful analysis of the Asian crisis see Corporate Governance in Asia: Lessons From The Financial Crisis (UNDP, Kuala Lumpur, 2002).
(6) In Australia, for example, a leading weekly journal, The Bulletin, carries an extensive business section. That section is zealous in exposing corporate corruption as illustrated in the issues of November 15 and 22, 2005.
(7) For example The Prevention of Corruption Acts of Singapore. Tanzania and in South Africa.
(8) "Another turn of the screw for directors of companies," Financial Review, Thursday December 5, 1991 page 50. (a "rort" is a colloquial expression to describe corrupt behaviour)
(9) Corporate Governance in Asia: Lessons From The Financial Crisis (UNDP, Kuala Lumpur, Malaysia, 2002), Preface, page 3.
(10) Law Talk Issue 622, 12 April 2004 at page 12 (Law Talk is the official monthly publication of the New Zealand Law Society).
(11) Corporate Governance in Asia, op cit examines reports on corporate governance in Indonesia, South Korea, Malaysia, The Philippines, Singapore and Thailand.
(12) The USA Business Roundtable "Principles of Corporate Governance" is an example as is the Australian model which separates the role of Chairman and CEO: Bosch, "Corporate governance reform in the USA." Corporate Directors Association of Australia Board Report No. 1011. December 2005 at page 5.
(13) The United Kingdom Combined Code on Corporate Governance, July 2003. Preamble, Para.5.
(14) Op cit note 5 Foreword page 1.
(15) For example the collapse of the stand at Ellis Park in Jonannesburg on April 11th 1991 causing 43 deaths. Many years earlier a stand collapsed in Hillborough in England. Prosecutions followed. In New Zealand recently there have been two deaths in unconnected road cycling races. In the first the organizer was charged with criminal nuisance and convicted. That conviction was overturned on appeal. In the second the police decided not to prosecute.
(16) Visa is to sign a sponsorship deal for a sum as high as 22 million pounds for the World Cup from 2007 onwards as FIFA's new financial services partner. Mastercard has been the financial services partner since 1990. Other to have signed with FIFA include Coca-Cola, Hyundai, Adidas and Sony: The Star 6 April 2006 at page 27
(17) "The bountiful game." Sunday Times Business Times 13 June 2004 at page 1.
(18) "The world's most celebrated and controversial spin bowler, Shane Warne, has heen offered at least R10 million to play provincial cricket in South Africa for the next two years." Front page story in Saturday Star (Johannesburg) April 8th 2006.
(19) In April 2006 the agent of a prominent English soccer star, Ashley Cole, was charged with breaching Football Association and FIFA rules for "illicit talks" on a possible move to another club. The player had earlier been fined 75 thousand pounds (about R800000) for attending the talks: Saturday Star Sports, April 8, 2006 at page 23. The agent of another English star, Wayne Rooney, has also been charged with breaching the FIFA Players' Agents Code of Conduct while the "Row over Cole's Chelsea meeting rumbles on". Sunday Times, April 9th, 2006 at page 30.
(20) "DB breweries is poised to take legal action against the NZRU this week in the face of a major row over what beer fans can buy at All Black test matches." NZ Sunday Star Times 26 September 2004. That is a mild contretemps compared to the following headline: "Sex shop deal stumped" which covered a report that "An English cricket club has had to pull out from a sponsorship deal with a sex shop after it was threatened with expulsion by its local league." The Star Sport, 12 April 2006 at page 27.
(21) "PSL wants to make big bucks from TV" Sunday Times 16 April 2006 at page 27, which reported that broadcasting rights were worth millions of rands but that "negotiations between the PSL and the SABC are just one aspect of an increasingly complicated and fraught relationship between sporting bodies and TV stations in South Africa."
(22) "Fair play for all World Cup workers is new rallying cry" Star Business Report, Friday 21 May 2004 at page 2.
(23) An illustration of this is found in the role of Ali Baeher, former CEO of South African Cricket and now an influential member of the Board of Saru. He is the sponsor's appointee. For an example of his role see The Star 30 January 2006.
(24) In recent years proven instances of match-fixing and bribery in soccer have been reported in Vietnam, China, The Czech Republic, Germany, and ,most blatant of all, in Nigeria where the acting Secretary-General of the Nigerian Soccer Federation in April 2006 said that football referees in Nigeria can take bribes from clubs provided this does not influence their decisions on the pitch: http://soccernt.espn.go.com/news/story ?id=363449&cc=3888 (last accessed l0th April 2006).
(25) The International Weightlifting Federation suspended India from international competition for an unspecified period following several Indian lifters testing positive during the 2006 Melbourne Commonwealth Games. The Indian Federation imposed life bans on two of the lifters: The Star Monday 10th April 2006.
(26) The Sun (UK) 9th September 2004.
(27) See the clear indications of sponsors concerns at the inquiry into the affairs of Saru and its President (The Star, 30 January, 2006 at page 6) and the evidence of continued support when it was clear that the president would not win relection. ("Bumbling Brian snubbed" Saturday Star Sport 18 February 2006 at page 34).
(28) Rodney Hartman "Some SA Super l4s look like Under--14s." The Star 6 April 2006 at page 26 (emphasis addcd).
(29) The Sports Minister in South Africa said that "the government was concerned by the team s decline and wanted answers" to "what went wrong" during Bafana Bafana s dismal performance at the African Nations Cup: The Star 10 February 2006. In a similar vein the New Zealand Minister of Sport "as openly critical of that country's failure to win more medals at the Melbourne Commonwealth Games: NZ Herald 28 March 2006.
(30) President Mbeki of South Africa commented on his country's dismal failure in the Africa Cup of Nations in his 2006 State of the Nation address to Parliament, a matter which drew the attention of both columnists and cartoonists. See, for example, the editorial page of The Star 3 February 2006 which has President Mbeki reading his State of the Nation address and saying "But first,
let us address the issue that concerns the nation most the state of our football."
(31) Following the poor showing of the South African team. Bafana Bafana, in the African Cup the South African Broadcasting Corporation devoted an entire morning to debating the topic " Should government intervene in sports administration?" SABC Tuesday 7 February 2006.
(32) Mail and Guardian 10-16 March 2006 at page 48.
(33) Mail and Guardian 7-12 April 2006 in Sport Section page 48.
(34) Mail and Guardian 3-9 February 2006 at page 6.
(36) From the official website of SAFA: http://www.safagoal.net/mission.asp.
(37) Article 7.11.
(38) Article 7.12.
(39) At another and ambiguous level are those who are described as "organizers" of events. That such functions can result in legal actions is demonstrated by two unrelated incidents in New Zealand as described supra at footnote 15.
(40) "The Ethical issues Confronting Managers in the Sport Industry" Journal of Business Ethics, Vol 20, 1999, 51-66.
(41) "Corporate governance reform in the USA." CDA Board Report, No. l01l, December 2005 at page 5.
(42) The president of Saru had been accused of being a bully. He replied. "Luyt: I was no bully". Letter to editor, Sunday Times 5 June 2005. In early 2004 an Afrikaans language carried a headline describing the then president of Saru as "'n diktator".
(43) Mail and Guardian 3-9February 2006 at page 6.
(44) "Baxter paints gloomy Bafana picture: Former South African coach's tale of intrigue reads like a best-selling novel with bugged telephones being part of the deal." Sunday Times 5 February 2006 at page 30.
(45) Sunday Times March 12, 2006 front page article.
(47) The new structure was approved by the national executive of Safa at a meeting on Friday 7th April 2006: Frontpage report, Sunday Times April 9th 2006.
(48) Domenico Di Pietro, "The Dual Nature of Football Clubs and the Need for Special legistation", The International Sports Law Journal, 2003/2 page 24.
(49) Journal of Business Ethics Vol. 20, 1999 at page 52.
(50) Angry fans built barricades, threw boules and bricks and had to be baton-charged by police. Fans were reported in The Daily Mirror as saying that "MU fans are disgusted and repulsed by the Glazers. The Glazers are enemies of the MU supporters. "That was in Fehruary 2005. By mid-year it had become clear to the fans that the Glazers were passionate about keeping MU successful. Even the UK Sports Minister, Richard Cahorn, was supportive of the Glazers. See generally the release by the Communications Department, MUFC 29 June 2005.
(52) Op.cit. note 16.
(53) As most memorably President Mandela at the conclusion of the Rugby World Cup won by the host team, South Africa. The President wore the jersey carrying the number of the winning captain.
(54) Mbeki commenting on Bafana Bafana 's dismal failure in the African Cup during his State of the Nation address, a matter which drew the attention of cartoonists. That this is not a response exclusive to South Africa is demonstrated by the New Zealand Minister for Sport who was highly critical of his country's failure to win more medals in the Melbourne Commonwealth Games. See NZ Herald 28 March 2006.
(55) Not only did the President comment unfavourably on the Bafana Bafana failure but the South African Broadcasting Corporation devoted an entire morning to debating the topic "Should government intervene in sports administration?" SABC, Tuesday 7th, February 2006.
(56) UCB Constitution Article 7.11.
(58) Tim Castle, "Corruption In International Cricket", in Toomey (ed) Keeping the Score: Essays in Law and Sport (The Centre for Commercial and Corporate Law, University of Canterbury, Christchurch, New Zealand, 2005) 145-155.
(59) Sunday Times, 13 June 2004.
(60) For three months in 2004 there was constant media reports on the scandal with an early frontpage report asserting that "Arrests expected as club officials and players are also probed over match-fixing": The Star 14 June 2004. Referees revealed how they rigged games: Sunday Times 20 June 2004 at page 5. Notwithstanding these revelations, arrests and confessions by August 2004 the Premier Soccer League CEO was able to assure the public that the alleged corruption in the game, and the ongoing police investigations, would in no way delay the start of the local soccer season. Furthermore. he made it clear in a written statement that "the league is aware of the allegations against clubs and officials, but has no evidence in its possession that would enable it to proceed with internal prosecutions In terms of rules against any parties at this stage." The Star Sport Section 3 August 2004 at page 18.
(61) The press seized on this as for example the headline "Operation Dribble Scores Again" in the body of which item it was reported that "The number of people held for match-fixing, bribery and corruption in soccer has risen to 21, after two more club bosses and a senior Premier Soccer League referee handed themselves over to police." The Star, 29 June 2004 on front page.
(62) The Star Thursday 22 July 2004.
(63) Article 13.2.
(64) Article 7.2.
(65) Article 7.11.
(66) Article 7.12.
(67) Article 14.2.
(68) Article 15.
(69) In April it was reported that business and government might contribute to the payment of the salary of a top international coach for the national soccer team (Bafana Bafana) with a senior official of Safa quoted as saying that "the government wanted to have a big say in the rebuilding of Bafana Bafana to ensure that the 2010 World Cup is a success." Mail and Guardian 7-12 April 2006, Sport Section page 48.
(70) Mission Statement of SAFA accessed on the official website http://www.safagoa1.net/mission.asp.
(71) In three qualifying games Bafana Bafana failed to win a match or score a goal and was bundled out in the first round. This was against a history of successes including winning the African Nations Cup in 1996, being runners-up in 1998 and qualifying for the World Cup finals in France in 1998.
(72) Soccer Life 4-5 February 2006 at page 6.
(73) The Star Sport Section 27 January 2006 at page 25.
(74) Sunday Times Sport Sunday 29 January 2006 at page 22.
(75) Sunday Times 29 January 2006 at page 13.
(76) "During his annual State of the nation address last week President Thabo Mbeki echoed South African's disappointment at Bafana's loss, saying their performance in Egypt "did nothing to advertise our strengths as a winning nation." The Star 10 Februarv 2006.
(77) "(Boo)fana are greeted by a hostile public." The Star Sport 2 February 2006 page 24 reporting the team being subject to a chorus of boos on its return from the Africa Cup of Nations and, later at a "much-heated post-booing press conference." The Mail and Guardian reported "the "venom of the derisory boos and jeers that greeted the national football team on their return from the African Nations Cup" and President Mbeki's "indignation with their dismal performances in Egypt." See issue 3-9 February 2006 at page 6.
(78) Mail and Guardian 3-9 February 2006 at page 6.
(79) See articles in Mail and Guardian 27 Jan-2 Feb 2006 at page 44, Soccer Life 4-5 February 2006 at page 6 and Mail and Guardian 17-23 February 2006 at page 44.
80 50 Soccer Life 28-29 January 2006 at page 9.
(81) Stuart Baxter quoted in Sunday Times 5 February 2006 at page 30.
(82) The Star 3 February 2006.
(83) The Sunday Independent 5 February 2006 at page 22.
(84) See for example, "SA soccer needs to have a rethink," Letters section of The Star 6 February 2006 at page 12 and "Now is the time for cool heads to fix soccer": Letters section of The Star 10 February 2006 at page 13.
(85) The Star, 10 February 2006.
(86) Sunday Times 12 March 2006.
(87) Mail and Guardian 10 to 16 March 2006, Sport Section, page 48.
(88) "How I'd shake up SA rugby," Sunday Times, 2 April 2006 at page 28.
(89) See letter from former President of Saru, Louis Luyt published in Sunday Times, 5 June 2005. Mr Luyt asserts a "dossier" was compiled by Mr Van Rooyens and that this formed the basis for the inquiry.
(90) It is important to emphasise that at the time of writing no criminal charges have been brought against Mr Van Rooyen and no internal disciplinary proceedings brought by Saru.
(91) ABC Online 17 January 2006.
(92) The Star 18 January 2006.
(93) "The strife of Brian takes another turn", Saturday Star Sports 21 January 2006.
(94) Headline in The Star 23 January 2006 at page 3.
(95) "Van Rooyen faces 11 charges, hires crack defence," The Star 26 January 2006 at page 27.
(97) "Bacher brokers Van deal". The Star, 30 January 2006 (Ali Bacher is a Saru board member appointed by the sponsors and former cricket CEO and he agreed that Van Rooyen had asked him to "facilitate his exit from South African rugby.").
(98) "Van Rooyen denies deal, admits meeting but is ready to fight on", The Star 31 January 2006.
(99) The Star 1 February 2006 at page 20.
(100) The Star Sport 2 February 2006 at page 24.
(101) The Star Sport 3 February 2006 at page 24 and again on 21 February 2006 at page 18 (Is Brian buying votes to swing election?").
(103) In one report close to the election a photograph of Van Rooyen was captioned: "Rhino Cowboy: Brian van Rooyen has a swaggering style all his own." Sunday Times 19 February 2006 at page 24. On the Monday following the election The Star carried a large photograph of the new Saru president with the caption reading: "No arrogance in this man: Regan Hoskins ousted controversial Brian van Rooyen to become the new Saru president. He faces huge challenges in his bid to clean up the game." The Star 27 February 2006 at page 8.
(104) "Regan must set himself to clean up Brian's big mess." Saturday Star 4 February 2006 at page 28: "It looks all over for Van Rooyen, Star 6 February 2006 at page 8; "Bumbling Brian snubbed," Saturday Sport 18 February 2006 at page 34, a reference to the fact that Van Rooyen was not invited to a multi-million rand sponsor-ship renewal announcement. Whether the sponsor or Saru had declined to invite the president of Saru was unclear.
(105) The allegations included claims that the then president of Saru offered inducements to small unions in return for their votes. Inducements took the form of offering the union a Test match as well as millions in rands. Sunday Times 26 February 2006 at page 26.
(106) Frontpage of Sunday Times 12 February 2006.
(107) The Star 20 February 2006 at page 8.
(108) The Star 24 February 2006.
(109) Sunday Times 26 February 2006 at page 26.
(110) 'Test for votes claim rocks rugby", The Star 27 February 2006 at page 5.
(111) Ibid at page 12.
(112) Ibid at page 5.
(114) "Tough calls await Regan," The Star 27 February 2006 at page 8. A few days later the same newspaper published a letter welcoming the change in the administration of rugby in South Africa. The editor appended a photograph of the new president with a caption declaring that he "has to repair the damage done during the Van Rooyen era." The Star 3 March 2006.
(115) The Star 27 February 2006 at page 5.
(116) That Sport Show, ETV, Sunday 12 March 2006 at 3.30 pm.
(117) "Hoskins inherited shambles: Spears mess sticking in Saru's guts", the headline to an item which reported on a continuing problem within Saru over which franchises should or should not be admitted into the new Super 14 competition. The Star Sport 12 April 2006 at page 27.
(118) "The curse of scapegoatery and fat, greedy men who don't care." Saturday Star 15 April 2006 at page 23. The author of the item is editor of Rugby World South Africa.
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|Publication:||The International Sports Law Journal|
|Article Type:||Case study|
|Date:||Jul 1, 2006|
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