Jason Stockwood is Chair of Grimsby Town F.C.
I was delighted to see the output of last month’s Crouch Review into football governance which was welcomed by fans, pundits and politicians alike.
The review, commissioned by the Government in response to the widespread backlash to the proposed breakaway European Super League, sets out sensible measures for the future of the beautiful game.
Aside from the headline proposal to establish an independent regulator for the first time, the review also called for several measures that would put the interests of fans at the heart of boardroom decision-making at clubs across the country.
The review was forced because the extent to which the voice of fans had been ignored when it came to decision-making at a number of elite clubs became impossible to ignore. The Fan Led Review of Football Governance should prompt us all to think more broadly about whose interests make it into the boardroom.
The review describes corporate governance as “a system of rules and practices that determine how a company operates and how it aligns the interests of all of its stakeholders”. While that may seem common sense, it runs contrary to the development of corporate governance over the last 50 years or so and the letter of the law.
Rather than seeking to align the interests of all stakeholders, corporate governance has been chiefly concerned with addressing the so-called “agency problem” that is created by the divergence of interests between a company’s principals, the shareholders and their agents – the executives.
A system of rules has evolved that has sought to incentivise those charged with running companies to put the interests of shareholders first. Born of a view that was distrustful of business leaders, for decades business schools insisted that the performance of executives should be measured on a single metric – shareholder return. This thinking also crept into our company law framework with the Companies Act 2006 which allows directors to consider other stakeholders when making decisions, but only in the course of pursuing the success of the company for the benefit of the shareholder.
Delivering healthy returns to shareholders is of course critical, particularly when a comfortable retirement for many of us depends on generous dividends being sustained over time. But it can’t be the be all and end all. Businesses are so much more than vehicles to channel funds to a particular group. Good businesses create rewarding and fulfilling work.
The best companies deliver goods and services that improve the lives of their consumers. Our most respected corporations generate pride in place and a sense of community much like our best football clubs. Places like Bourneville in the West Midlands, Saltaire in Yorkshire and Port Sunlight on the Wirral were created by industrialists who recognised the need for business to play an active role in society.
Now is a time in Britain when we urgently need that spirit of enlightened entrepreneurialism again. As a country we face huge challenges in boosting productivity, modernising skills and creating decent jobs – levelling up in other words. All while protecting our environment and keep place with global competitiveness.
The European Super League debacle showed what happens when some of Britain’s best loved brands lose touch with their roots and put profit before people. Any talk of a break away league would have been dead on arrival if the directors of these clubs had been mandated to consider, even briefly, the reaction of fans, the impact on the wider footballing pyramid, and the impact on local communities.
There is another way of doing business. It’s like what we’re trying to do at Grimsby, pursuing success on and off the field, but balanced with considering our workers, our fans, and the wider community. We’re not unique. Consider the simple gesture by Brentford not to introduce a new kit next year – cheaper for fans, better for the environment. Decisions like this could be the norm, not the exception. But as we’ve seen many times, the incentives in British boardrooms too often steer decisions in the wrong direction.
But we don’t just need a fix for football. We need a new approach for British business too.
I want to make sure every single company in the UK, whether big or small, aligns the interests of their shareholders with those of wider society and the environment. The Better Business Act – supported by nearly 900 UK business from local firms to high street brands like Iceland, John Lewis as well as the Institute of Directors – would amend Section 172 of the Companies Act 2006 so that companies are legally obligated to operate in a manner that benefits their stakeholders while seeking to deliver profits for shareholders. That should include workers, customers, communities and the environment.
The Better Business Act would enact this change, empowering directors. In situations where a director has to choose between the company’s intention to create positive social or environmental impacts and the interests of shareholders, the directors would no longer be compelled to default to prioritising them. In this way we can ensure British business stays in the top tier globally while staying rooted in the communities and environment they were created to serve.