Scottish clubs CIC in the right direction

There’s been some interesting coverage of social enterprise beyond the traditional outlets over the last week. This article from The Economist about the current challenges facing The Big Issue is well worth a look but perhaps more surprising is an article* in football magazine, When Saturday Comes, on the growing use of the Community Interest Company (CIC) structure by Scottish League football clubs.

According to the article, while lower division clubs, Stenhousemuir and Clyde, are already operating as CICs – Stenhousemuir’s website provides the kind of clear explanation for using the CIC structure than many social enterprises might do well to replicate – Premier League St Mirren are currently looking to become the first full-time professional club in Scotland to go down the CIC route. Unlike Stenhousemuir and Clyde, where the clubs themselves are CICs, in St Mirren’s case supporters have set-up a CIC co-operative with intention of raising money to buy a controlling stake in the club.

In the When Saturday Comes article, journalist Peter Geoghegan explains that: “When it comes to football, one of the most attractive features of a CIC is that it ‘locks-in’ all the club’s assets, ensuring that assets built up over time cannot be squandered for profit by the current generation. Instead assets must be used for the stated community purpose. Even if a CIC is wound up, its assets must be transferred to another, similarly asset-locked body. All this makes it mightily unattractive for any would-be robber baron chairman.

One reason why this story is worth highlighting is that it’s an example of situation where organisational structure really does matter. Most football clubs in the UK are set up as conventional trading business but both the aims of the business and its major stakeholders are very different to a conventional trading business. Some people do buy football clubs with intention of selling them on for a profit but the aim of a football club – even for most owners – is to win trophies while achieving financial sustainability rather than to make a profit while getting relegated.

In terms of stakeholders, the people who care most about a football club are the club’s supporters but they are, technically at least, in the simple position of paying customers whose rights don’t extent beyond the ability to either turn up to matches or not. Unlike the customers of restaurant or supermarket, however, most football supporters are stuck with their  team for life, and can’t just choose to go and support a different club if whoever happens to be owning the club at the time doesn’t provide the service they want.

The combination of a need for financial sustainability and wider accountability to both supporters and a local geographical community, makes CIC an ideal structure for football clubs. While the top five or six English Premier Clubs – which are major international brands – have the potential to make serious money for owners, beyond that top tier, there is no honourable way to make large amounts of money from owning a football club. While some do try to do so dishonourably, the general set-up in English football is for relatively rich people to lose lots of money owning football clubs in exchange for some combination of pleasure and prestige. This goes wrong when a particular rich person feels they’ve lost as much as they can afford to and tries to cut their losses and sell up but no one wants to take on business that’s laden with debt and has little or no chance of ever making a profit. A CIC wouldn’t be able to put itself in that situation – a rich person could still pour in unstainable levels of cash but they’d have to accept at the start that they wouldn’t get most of it back.

Unfortunately, the key barrier to CIC’s in English football is that, for most clubs, unless all the other clubs also chose to do so, living within their means would mean accepting that they’d be unlikely to ever reach the Premier League or – in the case of the smaller Premier League clubs – to qualify for the Champions League. As a Coventry City supporter, I know that our current ownership by a little-known venture capital firm is a disaster for all parties – they can’t be accused of asset-stripping because previous owners had already sold most of the assets before they took over – but I’m not sure that’s quite enough for me to give up on the dream that the club might one day be bought by a UAE-based billionaire who will chuck his oil wealth into the club enabling us to sign Lionel Messi.

Assuming, though, that clubs are in a position where it’s possible for them to become a CIC in the first place – either because supporters in the community can raise the funds to buy them from their owners or owners are prepared to give them to the supporters – CIC is potentially a structure that could enable football clubs to operate in the real world financially, while being responsive and accountable to their supporters and their wider local community.

As the When Saturday Comes articles notes: “Retiring football chairmen are wont to declare their desire to safeguard the long-term future of the club – Wigan’s Dave Whelan springs to mind. A CIC is not foolproof – a board could still overextend and get into serious debt – but it does introduce safeguards to protect the club for those who value it most.

*This article is not available online. It appears on page 11 of the February 2012 issue of When Saturday Comes.

5 Comments

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5 responses to “Scottish clubs CIC in the right direction

  1. good to see social enterprises getting coverage in mainstream press – although the idea of using social enterprise models as a means to allow supporters to buy a stake, and even take over, a club commercially isn’t a new one and pre-dates the introduction of the CIC model – see Supporters Direct at http://www.supporters-direct.org/pages/?p=3977 (who have been offering support to fans to incorporate within relevant legal forms for over a decade…)

  2. Beanbags admin

    Yes, to be fair to When Saturday Comes, they’ve generally given lots of coverage to supporter ownership over the years – the article’s not suggesting that CIC is the only vehicle community ownership (or the best), it’s just reflecting on the fact that it’s being used.

    Another thing that’s possibly interesting, though, is that by some definitions almost all football clubs could be described as social enterprises – in that they exist for a clear purpose other than profit, and don’t distribute profit to shareholders (because they’re in no danger making any). But clearly most of them aren’t social enterprises.

    • thanks Beanbags admin, interesting point about the potential argument that all football clubs could be seen as social enterprises – I did a piece of work developing and piloting a toolkit for clubs to identify their social impact; interestingly from all the clubs who participated, only those in ownership of a supporters trust were happy to share their governing documents and accounts with anyone who wasn’t a director of that club…

  3. Alisdair Cameron

    Agree with both above., but that’s because while social enterprise is a newish phrase the underpinning concepts are as old as the hills. I think football is complicated by two cultural factors, one long-term, one more recent.
    The long-term one is the attachment supporters have to their club, which could be said in many cases to depart from the realm of the rational, which doesn’t always make great business sense.There’s also a lot of divergent opinion among any given club’s supporters, plus of course the love-hate aspect: love a player one week, hate him the next, etc which wouldn’t make workforce planning easy…The newer angle is as david alludes to, the premiership huge money aspect, players as mercenaries, clubs as oligarch’s playthings. hard to compete, because it’s an area where the rules of business don’t seem to apply.
    Ideally, though, yes supporter-owned clubs (like some on the Continent, but that doesn’t cure all problems: look at Real Madrid and Barcelona’s internal soap operas) would be a better structure.

  4. Great article David
    manifest this across the range of CIC activity and it makes for a heady brew of optimism and potential, albeit set against the wider challenges we all face. Gossip alert – There’s a few clubs this side of the border asking questions :-o!

    Alongside other forms such as Co-ops it definitely has a role to play, and im also going to argue the case that a CIC, or any other type of community owned club could challenge for honours…….Arsenal (and I say this as a Chelsea fan) could be set as the nirvana example to replicate, their financial/growth strategy is in balance and they have (DARE I SAY IT!!) a patient capital investment model of Bonds that shows the way.

    Sounds like Coventry could be available for the right price no? Is the appearance of an eastern prince or a community buy out more likely??? Ive steered off point now, right now id take 4th for Chelsea!

    As my No1 Christmas pressie FIFA12 game commentary tells me (what a wonderful niece I have!) , David did in fact beat Goliath!

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