A legal analysis of FIFA’s governance reforms: do they meet the standards of best global practice?
Published 18 May 2016 By: Chris Baird
Fédération Internationale de Football Association’s (“FIFA”) stated overall mission is to “develop the game, touch the world and build a better future”. FIFA’s efforts to adhere to, promote and fulfil this ideology have been hampered by allegations of inappropriate behaviours and practices over many years, culminating last year in a spate of high profile and well publicised scandals centring on financial corruption and bribery. These could have been avoided, or mitigated, by a more robust governance regime. It would appear that the checks and balances that have been in place at FIFA’s management level have failed to appropriately regulate an organisation whose power and influence has multiplied exponentially as the commercialisation and globalisation of football continues to grow.
Following the most recent incidents, the 2016 FIFA Reform Committee (the “Reform Committee”) was established to propose reforms to the governance structure of the organisation. These reforms were ultimately passed on 26 February 2016 at the Extraordinary FIFA Congress in Zurich, heralding what many will hope to be a new age of corporate governance at FIFA. This article notes the sequence of events leading up to this reform process and analyses the key reforms from a modern, corporate governance perspective, primarily drawing on the guidance of the UK Corporate Governance Code (“CGC”).
The path to FIFA’s governance reforms
The governance reform process of FIFA was initiated due to its long, undistinguished history of involvement in scandals and allegations of bribery and corruption, culminating in events post 2010 relating to the bidding and award process of the 2018 and 2022 World Cups. The notable events, in relation to the governance reforms in particular, include:
- In December 2011, the Independent Governance Committee (the “ICG”) was established as a temporary body with the goal of overseeing the creation of a framework of good governance and controls for FIFA. The ICG was chaired by Mark Pieth and involved a consultation process with a wide range of experts and stakeholders from both inside and outside football. The ICG gained approval for some reforms, including the division of the Ethics Committee into both an investigatory and an adjudicatory chamber, revision of the Code of Ethics and establishment of a new Code of Conduct, and the introduction of a confidential reporting mechanism.
- In November 2014, Hans-Joachim Eckert’s summary of Michael J. Garcia’s inquiry report into the 2018 and 2022 FIFA World Cup Bidding Process was published. The inquiry was commissioned to review the bidding process for both World Cups, as well as to investigate specific allegations of misconduct and corruption. Mr Eckert surmised that Mr Garcia’s report showed insufficient evidence of wrongdoing to justify re-opening the bidding process. Mr Garcia immediately claimed Mr Eckert’s summary contained “numerous materially incomplete and erroneous representations” and appealed FIFA’s decision not to publish the entire report to the Appeal Committee. His appeal was ultimately unsuccessful and he resigned from his position as chairman of the FIFA Investigatory Chamber.
- In August 2015, the Reform Committee was appointed by the FIFA Executive Committee (the “Executive Committee”) to recommend relevant and appropriate changes to the Statutes and Regulations of FIFA, with the aim of promoting significantly improved governance and transparency within the organisation. The proposed reforms were submitted to the Extraordinary FIFA Congress and approved on 26 February 2016 in Zurich.
Analysis of the reforms from a UK corporate governance perspective
There has been a growing argument1 that governing bodies of sport should look to the governance standards of publicly listed companies as the basis upon which they should formulate their own corporate governance rules. In the United Kingdom, all companies with a premium listing on the London Stock Exchange are required to report on how they have applied the CGC, which sets out the standards of good practice in relation to management leadership and effectiveness, remuneration, accountability and relations with stakeholders. Outlined below is a comparative analysis between some of the key reforms approved by FIFA and certain fundamental principles of the CGC.
Separation of management functions
The management structure of FIFA has been reformed in such a way as to seek to replicate, broadly, the management structure of a UK publicly listed company. The Executive Committee will be renamed the FIFA Council (the “Council”) and will adopt the role of a supervisory board of directors, charged with oversight of strategic matters and supervision of standing committees and the FIFA Administration. It will no longer have executive powers or direct responsibilities.
The General Secretary will adopt the position of the Chief Executive Officer of FIFA, with overall responsibility for the performance of the FIFA Administration through the implementation of policies and strategies as defined and directed by the Council.
According to the CGC, “the board’s role is to provide entrepreneurial leadership of the company within a framework of prudent and effective controls which enables risk to be assessed and managed. The board should set the company’s values and standards and ensure that its obligations to its shareholders and others are understood and met”.2 The FIFA Governance Regulations (“FGRs”) set out the duties of the Council, which focus on establishing the strategic direction, policies and values of the organisation. The FGRs also refer to the oversight duties expected of the Council. The duties of the Council under the FGRs are broadly in line with that expected of a board complying with the provisions of the CGC, providing the Council with a strong structural foundation on which it can operate effectively.
Importantly, the chair of the Council (the President)3 and the CEO4 will be separate roles. The CGC highlights the importance of a “clear division of responsibilities” for the running of the board of directors and the running of the company itself, with a separate chairman and CEO.5 By establishing separate roles, chairmen and CEOs can independently focus on their own roles, with the CEO responsible for the day-to-day operations of the company, and the chairman involved primarily with oversight and supervision.
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- Tags: 2016 FIFA Reform Committee | Anti-Corruption | FIFA | FIFA Congress | FIFA Council | FIFA Executive Committee | FIFA Governance Regulation | Football | Governance | Independent Governance Committee (IGC) | Regulation | Swiss Civil Code | Switzerland | UK Corporate Governance Code (“CGC”) | United Kingdom (UK)
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Chris is an associate in the corporate department at Slaughter and May, as well as being part of the Sports practice team. Working with a team of colleagues, he advised Lord Moynihan on the Governance of Sport Bill.