Sports Governance

Abstracts

The issue of governance has become a major area of concern for all profit and non-profit organisations. The sports sector is no exception. It is now expected that sports bodies and organisations have to adhere to acceptable standards and behaviour around such issues as social responsibility, the environment and ethical considerations. The sector faces its own challenges. While not unique to sport, it exhibits behaviours which can differ somewhat from what we might call “traditional businesses”.

Sport, at the elite end, is often referred to as a “results” business. This puts pressure on administrators and coaches to strive for success, come what may. This can lead to bad behaviour in many areas of the sport. Cheating, doping, corruption and match fixing have feature prominently in the sports sector. Arguably this is because the all-consuming desire to win means that individuals and organisations are prepared to engage in behaviours that are not acceptable to society.

In this chapter we consider the principles of effective sports governance and examine issues such as accountability, transparency and the need for independent auditing of performance. We assess the criteria that might be used to gauge whether or not a sports organisation practices good governance.

Appendix

Discussion Questions

• 1. Assess the approach to the governance of the sport of cricket in South Africa.

• 2. Examine the relationship between the governing body for cricket and the government.

• 3. Evaluate the racial quota system employed by the cricket body.

Discussion Questions

• 1. Assess the approach of FIFA in relation to its attempts to deal with the scandal.

• 2. Examine the approach of Adidas, as one of the key sponsors, to the ensuing scandal.

• 3. What are the learning points, if any, from the point of view of governance in this case?

Discussion Questions

• 1. In terms of how the sport of Formula One has been governed, how would you assess the contribution of Bernie Ecclestone during his period in charge?

• 2. In your analysis of Ecclestone’s contribution, examine his personality and how that has shaped the direction of the sport: for better or for worse.

• 3. The new owners of Formula One have recently taken over. What recommendations would you make to them in terms of the future development and governance of the sport?

3.1 South African Cricket – Dark or Bright

3.1 Background

The history of cricket in South Africa is inextricably bound up with the policy of apartheid, which was introduced by the government in 1948. This policy actively discriminated against the black and coloured members of South African society and was manifested in a range of initiatives, such as segregation on buses, separate schools and separate areas where people could view sporting events in the stadia.

Although encountering world-wide criticism and opprobrium, sports such as rugby (traditionally played by the Afrikaner and white community) and cricket (predominantly white) continued to operate in the domestic and international arenas.

The issue was brought to a head in 1968/1969 with a coloured player by the name of Basil D’Oliveira. He had left South Africa some years before, because of lack of opportunities to play at a top level for that country. He was banned from entering South Africa when he was selected to represent England on their tour there. He had already played for England prior to this tour and ironically was not initially selected. That clearly would have solved the problem for the South African Government. However, one of the selected players got injured and D’Oliveira was called up as a replacement. This triggered the ban and England cancelled the tour. Other countries such as Australia also cancelled up-coming tours and South African cricket was cast out of the international cricket scene.

Over the next 20 years or so, cricket continued to be played strongly and vibrantly in South Africa. Some coaches and administrators worked on building up interest and enthusiasm within the coloured communities, largely under the radar of the international gaze.

Many talented white cricketers did not have the opportunity to display their talents on the international stage at the top level as a result of the ban. They did play in England and Australia at county and state level (below the top (test) standard).

South African cricket attempted to circumvent the ban by organizing rebel tours to their country. International teams were recruited and offered high levels of payment and a couple of them took place. It aroused the ire of the anti-apartheid supporters and although one or two attempts were made by those players to do some basic coaching in the local black townships, it did not have much success in stemming the tide of criticism. South African officials, such as Dr. Ali Bacher, were accused of hypocrisy because they put the self-interest of the white cricket-playing community at the core and also sought to generate profit from these tours.

During this period of isolation, cricket administrators were criticised for not doing enough to develop cricket in the coloured and black communities. They were also accused of meekly accepting the apartheid policies of the South African government during this period.

3.1 Re-Introduction

Much of the subsequent part of this case is centred on what happened after the release of Nelson Mandela in 1990. This move by the South African Government effectively signalled the end of their uncompromising approach to apartheid. Mandela had been a noted critic of apartheid and was instrumental in setting up the ANC – a protest movement which aggressively challenged apartheid from the early 1960s onwards. He spent the best part of 30 years in jail for his actions.

The move to re-integrate South African cricket happened very quickly.

Dr. Ali Bacher, one of the leading proponents and organizers of the rebel tours, quickly moved to get South African cricket back on the international stage. With help from the ANC, the two existing cricket boards: the South African Cricket Board (the traditional body) and the South African Cricket Union (which was always run on multi-racial lines) came together and merged. The new body was called the United Cricket Board of South Africa (UCBSA).

During early through to mid-1991 Bacher and colleagues feverishly set about networking and negotiating with international cricket board representatives in an attempt to gain sufficient support and votes to be re-admitted into international cricket.

After numerous meetings, they eventually gained approval from key cricket nations such as the West Indies, Pakistan and India. South Africa was also approved for participation in the 1992 World Cup. A further bonus occurred when the Indian board responsible for running cricket had to cancel a visiting tour from Pakistan and asked South Africa if they could, at short notice, step in for a tour to India. South Africa was back on the international cricketing scene almost in the blink of an eye! The team were received rapturously by Indian cricket fans and the show was on the road.

3.1 Post-1992

With little development, in any formal sense of cricket, in the black and coloured communities it was not surprising that the initial teams were made up of almost exclusively white cricketers.

Nelson Mandela took over as the President of the country and he followed a policy of forgiveness about the way in which apartheid policies, so vigorously pursued by successive South African governments, had impacted so dreadfully on the black and coloured populations. This manifested itself in a benign attitude to the re-entry of cricket and rugby to the international competitive environment. It is probably fair to say that the continuing lack of investment in infrastructure and coaching in the development of these communities was “shoved” under the carpet and accepted by politicians, administrators and indeed the general public, in their quest to re-establish South Africa as a successful sporting nation once again.

The Springboks (the national rugby team) won the World Cup in 1995. This was hosted by South African as well, so there was an immediate boost to the country in terms of pride. One of the most iconic photographs in sport shows Nelson Mandela wearing the Springbok jersey (seen by many as the ultimate seal of approval of the apartheid era in years gone by), presenting the trophy to the South African captain. This single act reinforced the message that Mandela was prepared to forgive (if not necessarily forget) this period of history.

The next few years witnessed the establishing of the South African cricket team: known as the Proteas, as a successful member of the international cricket circuit in at both test and one-day level. However, not many black players emerged, of sufficient calibre, to be classified as consistently good enough to play at this elite level. One such player however, Makhaya Ntini, was the first ethnically born black player to play for South Africa. He became one of the iconic players from 1998 to 2009, and was only the third player from that country to take 300 wickets in test cricket. He also became a role model for the black community and did a lot to foster interest in cricket from this community. Since then, a number of black players have made contributions to South African cricket including: Lonwabo Tsotsobe, Aaron Phangiso, Kagiso Rabada and Temba Bavuma.

Today, cricket is the second most popular sport in South Africa, and is the only sport in the country to feature in the top two sports of all race groups. This has had both successes: Herschelle Gibbs, a Cape Coloured, is one of the sport’s most dominating batsmen and the black bowler Makhaya Ntini reached number 2 in the ICC Player Rankings in 2006.

As might be expected when the black population were represented by their own political parties and movements and dominated the structure of the government, gradual moves were made to address the on-going imbalance in the structure of sports such as rugby and cricket.

Both sports were still dominated by the white population. Many critics of the system argued in that, in the case of cricket most of the black players who broke through to play at the top level came from wealthier backgrounds and received extensive coaching at private schools. Thus, it was argued, that the imbalances and injustices in the sport of cricket were not being properly addressed by the government and the administrators. This would appear to support the view that sports, like rugby and cricket, had not really undergone any serious form of transformation.

3.1 Changes Afoot

The United Cricket Board of South Africa (UCBSA) originally merged from two earlier incarnations of boards, also went through a process of change and became known as Cricket South Africa (CSA). Before it changed its structure, however, it established its first Transformation Monitoring Committee at a special conference at the Southern Sun hotel in 1998.

This committee identified ten major thrusts or directions that the sport should follow in order to transform the sport to reflect the demographics and changing nature of South African society.

These thrusts were identified as:

• 1. The role of the UCBSA Board.

• 2. Democratization.

• 3. Redress and representivity.

• 4. Constitution.

• 5. Competitiveness and revenue.

• 6. Development.

• 7. Closing the gap.

• 8. Funding and distribution.

• 9. Recording the full history of South African cricket.

• 10. Accountability and monitoring.

Progress was reviewed and the UCBSA Thrusts were fine-tuned by CSA at its National Transformation Indaba in 2013, whereby the rapid Africanisation of cricket was made a strategic priority with the focus on the following resolutions:

• 1. Governance.

• 2. Procurement and appointment of staff.

• 3. Professional cricket.

• 4. Amateur cricket.

• 5. History and Legacy.

• 6. Funding.

(source: ► http://cricket.co.za/cat/23/About-CSA/1943/Transformation-Philosophy/)

Currently Cricket South Africa is committed to its undertaking on transformation and redress that includes delivery of the following key issues:

• Demographically representative entities and democratic structures

• Development of cricketers and our human capital

• Equitable allocation of resources and equity across the board

• Ethos of dignity and equality

• A culture of sustainability, non-racialism and access for all

• Recognition of the history of all South African cricket.

During the late 1990s through to the mid-2000s a consistent argument was put forward and largely centred on the view that if South Africa was to be seen as a “rainbow nation”: this should be reflected in “rainbow cricket and rugby teams”.

Various initiatives were introduced to force cricket teams to introduce a quota system, whereby they had to pick a certain number of players from the black community in their teams. This engendered much controversy and debate within the cricket sector and across the country as a whole.

Its advocates argued that this was the only practical way in which to ensure that players from these communities could progress their careers. It would also allow them to be developed, not just as players, but also as role models for the youngsters.

The counter-argument was based on the view that players should only be chosen on the basis of merit, that is you are picked if you are good enough; not because you have to make up a quota.

Ironically, as a result of such measures, white players felt that they were being victimised. In some instances, players of major talent such as Kevin Pietersen, decided to move to England to pursue his international ambitions, arguing that he was being restricted by the quota system in South Africa.

In 2007 CSA decided to do away with the quota system. South Africa had introduced a quota system in 1998 to address the racial discrimination caused by the Apartheid system. The stipulation was then that every team had to field four players of colour - a term which encompasses black Africans, mixed-race people and those of Asian descent. It was officially removed in 2007.

Sports minister Makhenkesi Stofile stated the focus would switch to helping black athletes by investing £15m a year.

“Quotas are out. We are not going to decide who must be on the team. All we are saying is expose everybody, give them an opportunity”, (► http://news.bbc.co.uk/sport1/hi/front_page/7082466.stm)

This caused further debate. Surveys suggested, that by a small majority, the general population still favoured its retention.

3.1 Further Change

Serious questions were raised about the behaviour of the CSA. South Africa hosted the Indian Premier League (a very successful 20/20 competition in 2009). This happened because of terrorism problems in India. In order to ensure continuity and satisfy sponsors, India took up the offer from CSA to host the event in South Africa.

CSA’s remuneration committee recommended that bonuses be paid to CSA staff to reward them for the success of this event. However, the CEO Gerald Majola and the COO Don McIntosh had already negotiated bonuses for its senior officials with the IPL and they received the majority of these bonuses. One of South Africa’s justices recommended that Majola be the subject of a disciplinary enquiry as a result of these allegations. It was established that these payments had been made. KPMG and legal advisors were asked to carry out an enquiry and make investigations. This report was commissioned by the Minister of Sport and Recreation and instructed a Ministerial Committee of Enquiry, chaired by Justice Nicholson, to carry out this investigation.

The subsequent King Report on Governance for South Africa (2009) also emerged because of international changes in approach to this area. It emphasises the need for transparent and effective communication with its various stakeholders, to build trust and confidence.

The report concluded that both officials had a duty to inform CSA about the background to the negotiations about the payments and that they did not act in the best interests of the organization.

Commentators made the observation that the sacking of Majola and McIntosh was caused mainly by the situation where a large and unwieldy board is threatened by the power that resided in the hands of a couple of individuals.

In 2013 the CSA re-introduced the quota system. A recent report, presented to CSA at that time, contained information that most black African players give up the game between the under-19 and provincial level, at an age at which, if they are not contracted, will need to find jobs. The report also revealed that when black African players do get into the system, they are often further side-lined. Only two black African players turned out in more than 80% of their franchises’ games last season and when they did, they bowled less overs and batted lower down than players of other races.

2016 witnessed a further step up in the emphasis on the racial quota system. South Africa’s Sports Minister Fikile Mbalula felt that the government should no longer have to beg for transformation across South African sports, such as cricket, rugby, athletics and netball. He announced that none of the governing bodies of sports would be allowed to bid for international competitions until such time as the ratio of blacks significantly improved. Support for this position could be made by considering the bare statistics of what happened post-reintroduction to the international arena. Black Africans (defined as those who come from the black, Asian and mixed race communities) make up around eighty-five per cent of the total population of South Africa. However, in 2014/2015, they accounted for only ten per cent of players who played at test match level. Since readmission, a further statistic revealed that as of 2016 only seven out of ninety players, who have been selected for their country at cricket, have come from these categories.

His comments were generally accepted by the CSA who decided to go with a policy of having six players out of the eleven in the international team that must be classed as black and at least two must be black African. These remedies, in their view, should address the concern of the Minister that it is a move to redress the injustices of the apartheid era. This policy was also implemented across the franchises in the main league and further down the leagues.

At the national level the policy was refined and adjusted to allow for six such players to appear in test matches in the calendar year, as an average. This meant that in some matches, against potentially weaker countries, it could be enforced to the full. In matches against stronger opposition, the number could be reduced.

This raised the overall question as to whether this policy is equitable or not?

Many commentators felt that selection, particularly at the top level, should be based on the principle of meritocracy-you only get selected if you are good enough. Others felt that it is a significant step in the process of transforming the sport of cricket and in the longer term will ensure that the sport is representative of the demographics of the population as a whole.

(Sources: adapted by the author from: T.A.W. (2017) “A new racial selection policy for South African cricket”. The Economist September 19th. Mnyanda, Siya (2016) “Imposing racial quotas is a vital step forward for South African Sport”. The Guardian. April 29th. Hoult, Nick (2017) How cricketing quota policy has impacted South Africa”. The Telegraph. July 1st. ► http://cricket.co.za/item/1943/Transformation.)

3.1 FIFA and Its Relationship with Adidas

3.1 Introduction

FIFA is the non-governmental, non-profit organization which, since 1904, is responsible for the governance of global soccer (Pielke 2013). Overall, 211 associations divided into six confederations (such as UEFA and CAF) affiliate with FIFA (FIFA 2016a). The former president Joseph Blatter had been in power for 18 years, before the scandal led to his ban from soccer related activities (FIFA 2016b). The newly elected president is former UEFA secretary general, Gianni Infantino.

Apart from setting the rules of the sport and supporting those confederations, FIFA is best known for organising the World Cup, which is played every four years.

Between 2011 and 2014 FIFA’s revenues have been estimated around US$ 5.7 billion, with its main income being sponsorships (U$S 1.6 billion) (Pylas 2015). Within FIFA’s system, the highest form of sponsorship is the so-called FIFA-Partner, who is allowed to use all FIFA events for marketing purposes. It is estimated that each FIFA-Partner currently pays around US$100 million for a four-year cycle (Deutsche Welle 2013). The six current FIFA-Partners are Adidas, Coca-Cola, Gazprom, Hyundai/KIA, Visa and the Chinese Wanda Group, which just signed its contract in March 2016. Famous second tier sponsors (sponsoring the World Cup only) include McDonalds and Budweiser.

3.1 Adidas

Adidas is a German sportswear company founded as a shoe manufacturer by Adolf Dassler in Herzogenaurach, Bavaria in 1940, where it is still headquartered. Today, the Adidas AG develops, designs and markets athletic products, with brands such as Adidas, Reebok, and Rockport. It is the largest sportswear manufacturer in Europe and second largest in the world, employing around 55.500 people. Adidas’ global sales in 2015 have amounted to €16.92 billion. At the time of the scandal, Adidas was the sixty-second most valuable brand in the world and additionally the third most sustainable brand (Corporate Knights 2015).

Overall, Adidas presents itself as a socially responsible company, with the goal to make the world a better place, stressing their core values as “Performance”, “Passion”, “Diversity” and “Integrity”. Adidas’ sponsorship approach is characterized through tolerance, diversity and a strictly enforced anti-doping policy.

Adidas is the oldest of all FIFA-Partners, being a partner (and providing every match ball) since 1970. Just recently Adidas prolonged their contract until 2030 (Reuters 2013). Available at ► https://sports.yahoo.com/news/adidas-extends-world-cup-sponsorship-until-2020-12362990-finance.html (◘ Fig. 3.1).

Fig. 3.1

Organisational structure of FIFA prior to organiational reform in March 2016. (Adapted by the author from: FIFA 2015b and Larkin (2015))

3.1 The FIFA Scandal

FIFA had been accused of corruption and unethical practices for years, especially after the World Cup bidding results for Russia 2018 and Qatar 2022 came out. The public outrage about corruption, bribery and similar, increased strongly.

The accusations climaxed when FBI officials arrested seven of FIFA’s top executives on 27 May 2015, just 2 days prior to FIFA’s general assembly. Two of those officials were existing (at the time) vice presidents: Jeffrey Webb and Eugenio Figueredo. All of them were charged with alleged cases of corruption and bribery in different areas, such as host biddings or marketing and TV deals, within the past 2 years. Just hours after those arrests, Swiss authorities opened-up legal investigations with regards to the bidding of 2018 and 2022, and four men (amongst them former FIFA executive Chuck Blazer) pled guilty in a US corruption investigation from 2013 involving bribes totalling more than US$10 million.

Instantly, FIFA tried to save its reputation as much as possible. President Joseph Blatter, perceived by many people as the heart of all evil within the corrupt FIFA-system, released a statement emphasizing that he welcomed the investigations and wanted to root out all wrongdoings within FIFA. Only 2 days later Blatter had been re-elected as FIFA President, despite the scandal and a public outcry for deep-rooted change.

As the scandal continued to unfold, more officials, as well as the organization itself, were accused of bribery and corruption, which ultimately forced Blatter to step down just 4 days after his re-election and forced FIFA to postpone the World Cup 2026 bidding. Still, it took until 7 August until FIFA announced that it would also conduct internal investigations about potential corruption within its system.

The FIFA scandal peaked again when Swiss government officials opened criminal investigations against Blatter in September. Those investigations led to a provisional ban in early October and in December the FIFA Ethics Committee extended this ban from all soccer related activities for the next 8 years for him and UEFA chief Michel Platini.

Overall, the crisis led into a widespread wave of disruption, counting fourteen arrests, multiple bans by the Ethics Committee and many additional investigations opened. For example, the way in which the bidding process was conducted for the Soccer World Cup in 2006, which was awarded to Germany.

In February 2016, re-elections were supposed to mark a new start for FIFA. During those elections a set of reforms, entailing changes such as term limits for president and council, integrity checks of council members, disclosure of individual compensation and a clear separation between management and political functions was agreed upon with an impressive majority.

The election of Gianno Infantini, as the new president, however, drew criticism, since he is believed to be one of Blatter’s protégés, and many people would have preferred someone completely detached from FIFA’s past in order to transform it into a transparent, non-corrupt organization.

3.1 Adidas’ Behaviour as the Scandal Unfolded

In order to assess the influences the scandal had on Adidas, it is important to re-iterate Adidas’ behaviour during the scandal in order to better understand the impacts. Throughout the whole scandal, Adidas’ reaction has been neutral. Although no sponsor took rapid action, such as a withdrawal, Adidas’ public statements, compared to other sponsors, were very subtle. Whereas for example FIFA-Partner Visa stated that they would reconsider their sponsorship connections if FIFA failed to reform, Adidas indicated that it would continue to promote its very high standards of ethical behaviour. Adidas also encouraged FIFA to adopt transparent policies.

It took Adidas until December to finally state that even they might reconsider the sponsorship, if FIFA failed to change its governance policies and procedures. However, it also expressed the view that it seemed to be going in the right direction.

Overall, Adidas’ reaction can be considered as a “wait-and-see” approach.

However, with this behaviour Adidas did not diverge from the other sponsors. As stated, the only sponsor threatening to withdraw at an early stage was Visa. On the contrary, Gazprom pronounced their full support for FIFA, stating that the sponsorship agreement would not be affected by the scandal. But, Gazprom, being a Russian corporation, has to be evaluated differently, especially when analysing consumers in areas such as Western Europe, due to its government connection. It must be remembered that Russia was due to stage the 2018 World Cup, It could be credibly argued that at the very minimum, it was unlikely to “rock the boat”.

On the other hand, Adidas strongly differed from other sponsors, when they did not join them (excluding Gazprom and Hyundai/KIA) in their call for Blatter to step down as president. Whereas, the other sponsors did so a few days after the scandal surfaced, Adidas refrained from joining this call for action. This again emphasizes that Adidas stayed more muted than the majority of other sponsors.

A uniform reaction from all sponsors, including Adidas, was evoked through passing the reforms proposed by the ethics committee, as well as the election of the new president. All main sponsors stated their hopes for the future and exclaimed that they saw this as a step in the right direction. However, reactions were not overly enthusiastic, still stressing that a lot of work had to be done in order to fully get FIFA back on track.

In summary, in accordance with the other sponsors, Adidas reacted in a reserved and neutral manner throughout the whole scandal. Although, all sponsors refrained from taking vast actions, it can be said that Adidas’ behaviour was even less critical than most others.

(Case adapted from Ennis, S., Marck, Michael and Giese, Stefanie (2016) “Implications for Corporate Sponsors arising from scandals in sport: The Case of Adidas and FIFA. Anzmac Conference Proceedings: Christchurch, December).

3.1 References

• Corporate Knighets. 2015. 2015 Global 100.

• Deutsche Welle. 2013. Adidas nets longer sponsorship contract with FIFA. Deutsche Welle, [online] 21 November. Available at: ► http://www.dw.com/en/adidas-nets-longer-sponsorship-contract-with-fifa/a-17244096.

• Pielke, R. 2013. How can FIFA be held accountable? Sport Management Review (Elsevier Science). 16 (3): 255–267.

• Pylas, P. 2015. Coca-Cola, Visa and Adidas are responding to the FIFA corruption scandal. Business Insider, [online] 28 May. Available at: ► http://www.businessinsider.com/coca-cola-visa-and-adidas-are-responding-to-the-fifa-corruption-scandal-2015-5?IR=T.

3.1 Bernie Ecclestone: A Man for All Seasons

3.1 Background

The Formula One sport has its origins in the European Grand Prix championships of the 1920s and 1930s.

In 1946 the genesis of Formula One emerged with the Fédération Internationale de l’Automobile’s (FIA’s) standardisation of rules. A World Championship of Drivers followed in 1950.

During this period and into the 1950s around twenty races were held at various venues throughout Europe, although some were not regarded as being of much significance.

Italian motor manufacturers, such as Alfa Romeo, tended to dominate the early seasons of this sport.

In the late 1950s races were shortened from around 300 miles to 200 miles. This year also saw the introduction of a championship for constructors.

The early part of the 1960s witnessed the emergence of a number of British specialist teams such as, Lotus, Cooper and BRM, and later McLaren, Tyrrell and Williams. These outfits were created purely for producing, developing and completing purpose-built open-wheel racing cars and had overtaken the industrial manufacturing powers such as Ferrari, Mercedes, Maserati and Alfa Romeo.

Most of the developments during this period centred on innovations to engines and aerodynamics.

From a marketing perspective, 1968 highlighted the arrival of unrestricted sponsorship. This happened mainly because of the withdrawal of support from automotive-related companies and brands. Tobacco companies were at the forefront in sponsoring teams.

Safety was also a major concern. During the 1960s and 1970s a number of top drivers lost their lives on the circuits. It was not unusual to see two or three perishing annually. This led to a number of initiatives to address the issue of safety and they reduced the incidences of fatalities.

By 1994 it appeared as though Ecclestone and his fellow directors had addressed the “danger” element.

This belief was shattered in 1994 with some bad crashes and injuries. It culminated in three deaths during practice and in the actual race at San Marino. Ayrton Senna died following a horrific crash in the race.

This sparked off a raft of changes to the engine capabilities, overall design of the cars and the configuration and design of the race tracks. The last 20 years has provided evidence that this tightening up on safety has worked and certainly all but eliminated the number of fatalities. Arguably, it also took away the element of danger from the sport.

3.1 The Emergence of Bernie Ecclestone

Motorsport was in the DNA of Bernie Ecclestone. Ever since he set up a second-hand motor-cycle parts business in the 1940s his passion for all things “motor” knew no boundaries. He also competed in various Formula three races during this period. Questions might be asked about his skill as a driver because he featured in numerous crashes and eventually had to concede that he was never going to succeed as a top driver.

Initially, he became involved in Formula One through his management of a couple of the well-known drivers at that time. He took a major step forward in 1971 when he purchased the Brabham team for £100,000. He was to run this team for over 15 years; eventually selling it for £5 million. As a team owner, he became heavily involved in administration issues affecting the sport of Formula One, and was a proactive member of the Constructors Association.

He took the view that to make the team successful virtually all of the resources had to be poured into the design of a competitive car for the Formula One races. The previous owner of Brabham had focused more on the business of car production. Due to weight issues with the engines being used (they were heavier than the competition) the performance of the team fell back somewhat and left them behind most of the other teams.

Ecclestone teamed up with a very promising driver: Nelson Piquet. He also changed the engine. The combined effect was that Piquet narrowly lost the championship in 1980, but eventually winning in seasons 1981 and 1983.

In 1985 Piquet left the team, professing himself unhappy at the unwillingness of Ecclestone to pour more money into technological developments, the lack of which, in his view made them somewhat uncompetitive. Ecclestone subsequently sold the team that year for £5 million.

Ecclestone, during his period as team owner, was eventually elected as the Chairman of the Formula One Constructors Association (FOCA). He worked closely with a friend of his on the association-Max Mosley. The latter addressed a number of potentially contentious legal issues. Ecclestone saw the selling of TV rights for the sport as a critical element in developing the sport and focused much of his attention on this issue.

His entrepreneurial skills led to the right to negotiate TV rights on behalf of the sport. This came from detailed discussions with FIA-the federation which represents the interests of the sport.

He quickly set up Formula One Promotions and Administration (FOPA), giving forty-seven per cent of television revenues to teams, thirty per cent to the FIA, and twenty-three per cent to Formula One Promotions and Administration (FOPA) (i.e. Ecclestone himself); in return, FOPA put up the prize money-grand prix could literally be translated from French as “big prize”.

Television rights shuffled between Ecclestone’s companies, teams, and the FIA in the late 1990s, but Ecclestone emerged on top again in 1997 when he negotiated the present Concorde Agreement: in exchange for annual payments, he maintained the television rights.

Ecclestone recruited some key people to address the safety issue (mentioned earlier in this case) and from the late 1990s through to today, these initiatives have significantly improved the safety of the sport-mainly through the design of the tracks.

He has subsequently dominated the sport of Formula One for over 40 years.

3.1 The Recent Takeover of Formula One

In October 2016 the American conglomerate Liberty Media formally took over the sport of Formula One. Ecclestone was expected by many commentators to be invited to continue as Chief Executive Officer. However, in early 2017 the Liberty senior management made it clear that they wanted a clear separation from the legacy of Ecclestone and appointed a new CEO; Chase Carey. They have given him the title “Chairman Emeritus F1

The total value of the takeover is around £6.4 billion, although that includes a sizeable amount of debt, with the equity valued at just over £3.5 billion. (The Telegraph: 23rd January 2017).

3.1 How Has the Sport of Formula One Fared During the Reign of Ecclestone?

It can be argued that when Ecclestone acquired control over the right to sell TV rights, he took the sport “fighting and kicking” into the twentieth century. Prior to his involvement, some people argue that the sport was disjointed and lacking in any centralised leadership or vision. For instance, Ecclestone sold the rights to cover F1 as a single product and not individually as a set of disjointed races. This unified approach enabled Ecclestone, over time, to acquire a dominant position in the relationship with the media companies.

The last three decades has witnessed the sport of Formula One broaden its international horizons to many of the emerging and developing economies of the world.

This is highlighted in the programme for the 2017 season.

3.1 The 2017 Calendar in Full

• March 26 - Australia (Melbourne)

• April 9 - China (Shanghai)

• April 16 - Bahrain (Bahrain)

• April 30 - Russia (Sochi)

• May 14 - Spain (Barcelona)

• May 28 - Monaco (Monte Carlo)

• June 11 - Canada (Montreal)

• June 25 - Azerbaijan (Baku)

• July 9 - Austria (Spielberg)

• July 16 - Great Britain (Silverstone)

• July 30 - Hungary (Budapest)

• August 27 - Belgium (Spa-Francorchamps)

• September 3 - Italy (Monza)

• September 17 - Singapore (Singapore)

• October 1 - Malaysia (Sepang)

• October 8 - Japan (Suzuka)

• October 22 - USA (Austin)

• October 29 - Mexico (Mexico City)

• November 12 - Brazil (Sao Paulo)

• November 26 - Abu Dhabi (Abu Dhabi).

Ecclestone also spotted the importance of generating as much cash as possible from the various stakeholders in the business. A report published in 2013 revealed that “Generally speaking, $500 million comes from the fees that promoters pay to host races and then another $500 million comes from the fees that broadcasters pay to screen the sport. Then you have circa $250 million coming from sponsorship - trackside advertisers and series sponsors. The remaining $250 million is coming from things like corporate hospitality” (F1 perfects formula for financial success, By Matthew Knight and Inez Torre, CNN.)

The contracts with the hosts who stage a Grand Prix event are designed in such a way that upward only annual increases are standard (usually around the order of 10%). Figures show that over the past two decades, F1 was the most globally watched sport on television in the world (500 million viewers).

In terms of who owns and controls the sport, the same article revealed the following:

The actual Formula One Group - the companies that own the commercial rights to F1 - is made up of multiple companies. We are talking about 30–40. They invest in multiple jurisdictions - the UK, Jersey, Luxembourg, Switzerland, all over the place - but the parent company of the group is called Delta Topco and they are based in Jersey. So, the owners of that you could say are the ultimate owners.

It is 35.5% owned by a private equity firm called CVC Capital Partners. The second biggest shareholder is an American company called Waddell and Reed - they have got in the region of 20%. The third biggest shareholder is the estate of Lehman Brothers - they have somewhere in the region of 12%. Bernie Ecclestone’s family trust has circa 10% and Ecclestone himself has around 5%. It’s a complicated structure.

The report also identifies another layer of complexity: there is no standard fee for staging an event. Ecclestone recognised that in an era where emerging countries and economies, from outside the traditional North American and European markets, more revenue could be extracted. Countries such as China, Turkey and Gulf States were eager to place their offerings to a wider market. They viewed sport in general and Formula One in particular, as an opportunity to capture world attention, attract tourism, change perceptions that people might have about their policies and so on. Ecclestone realised that higher fees could be charged for the right to stage such high profile events. More established venues, such as Monza (Italian Grand Prix), did not have to pay as much as the newer venues. It was estimated that Singapore initially paid over $60 million per year. Malaysia, its neighbouring country, paid around $67 million. In many such cases, the government of the respective country paid the fees.

Around forty-eight per cent of the profits generated goes back to the teams. In 2011 the profit generated amounted to around $1.2 billion. However, not all teams are treated equally. Some teams, such as Ferrari, get five per cent more than the others. This is because of the history and heritage which a team like Ferrari “brings to the party”. This is seen as recognition that too many teams either change their names due to alterations in ownership. Rewarding tradition can be perceived as protecting the image and exclusivity of the sport.

3.1 Problems in the Wind?

A critical issue in the development of the sport is that of audience figures globally.

In 2008 the sport captured over 800 million viewers world-wide. By 2015, this had declined to around 425 million: a sharp indicator that the sport had slipped in popularity. However, relative to other sports, the figures still make impressive reading – given that fans consume sports differently, when compared to 2008.

In response, F1 since 2012 began to sell media rights to subscription (Pay) television channels. This has generated additional income which it could be argued, begins to offset any losses from a potential drop in advertising or sponsorship.

It can be equally argued that a move to pay television will have an impact on the viewing figures: not everyone can afford the subscriptions or may be prepared to do so.

The lack of involvement or engagement with the Internet and social media platforms also might indicate the F1 is potentially sowing the seeds of terminal decline. Younger people do not engage as much with television any more: preferring to watch events through live streaming or OTT alternatives.

Attendance at individual Grand Prix events is also showing signs of a decline.

Many people also feel that the sport has become too predictable and does not generate enough uncertainty or excitement any more. The team with the best designed car tends to win almost every event. This is not good for generating enthusiasm or interest.

In a recent Grand Prix Drivers Association (GPDA) survey, 77 per cent of the 217,756 fans that answered it admitted that they were concerned that business interests were taking priority over the sport itself. And a whopping eighty-nine percent felt more needs to be done to ensure that Formula One is more competitive on the track.

“The fans are clear: they don’t want a radical overhaul of grand prix racing that takes it away from its historic roots”, said the GPDA Chairman, Alex Wurz in a statement. “It may sound simple, but the best drivers and teams fighting on track in the most exciting cars is their priority. And we, the drivers, passionately share that view. They want competitive sport, not just a show, and they think that Formula One business has become too important, jeopardising our sport.”

All of the above trends and developments raise potential questions about the long-term future of the sport and the viability of its business model.

3.1 The Legacy of Bernie Ecclestone?

The removal of Bernie Ecclestone ends an era in sports marketing in general and Formula One in particular. His forty-year reign has certainly moved the sports from one end of the spectrum to the other.

Ecclestone has drawn much criticism over the decades for his approach to running and governing the sport. He has been accused of being a dictator and serving his own interests at the expense of the Formula One teams and other key stakeholders.

In some ways, he has been receptive to changes in the rules and regulations-particularly in terms of engine design, degrading tyres and restricting the number of pit-stops. The drag reduction system (DRS) and the kinetic energy recovery system (KERS) have both been instituted to make the racing more exciting and to aid overtaking-but don’t sit well with purist fans. Reducing noise levels at events, while addressing environmental concerns, may have alienated traditional fans who enjoy the excitement and atmosphere which it generates.

The personality of Ecclestone and his focused approach have opened doors to key leaders and rulers in the global scheme of things. He is well connected and this has led to opening the sport in critical and attractive markets: such as China, Russia and India.

He has professed ignorance of the role of social media and the Internet.

He has been accused of being “anti-female”. The following quotation might sum up his views.

Speaking to Autosport in February 2000, Ecclestone did not expect women drivers to ever do well in Formula One, adding: "She would have to be a woman who was blowing away the boys. What I would really like to see happen is to find the right girl, perhaps a black girl with super looks, preferably Jewish or Muslim, who speaks Spanish”.

He has also been accused of bigotry and of being racist. This quote is an indicator of some of his views. He has expressed the view that Adolf Hitler was someone who was capable of getting things done.

Accusations of bribery were made against Ecclestone in Germany and this was eventually settled out of court with a payment of £60 million. He also had to settle a tax avoidance case in the UK.

Source: Developed by the author from various sources on the Internet.

Adapted from ► https://www.motorsport.com/f1/news/grand-prix-drivers-association-sets-global-fan-survey-record/610591/

Knight, Matthew and Torre, Inez (2013) “F1 perfects formula for financial success”. Available at ► http://edition.cnn.com/2013/07/30/sport/motorsport/f1-money-billion-dollar-business/index.html