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.