THE IMPORTANCE OF TRANSPARENCY IN CORPORATE GOVERNANCE: THE FIFA AND UEFA CASES

Transcription

1 THE IMPORTANCE OF TRANSPARENCY IN CORPORATE GOVERNANCE: THE FIFA AND UEFA CASES LLM International Business Law, Tilburg Law School Supervisor Prof. Erik P.M. Vermeulen Author Volodymyr Kravets June 10, 2016 Tilburg

2 Contents Introduction.3 1 st chapter... 5 Establishment and development of FIFA and UEFA.5 2 nd chapter Structure of FIFA and UEFA rd chapter Features and characteristics of non-profit organizations th chapter Financial performance of FIFA and UEFA th chapter Role of stakeholders How the main stakeholders influence on FIFA and UEFA th chapter New challenges for FIFA and UEFA Lack of transparency in making decisions th chapter Ways of future development Possibility and benefits of invitation of independent CEO Possibility and benefits of FIFA and UEFA merger.35 Conclusion Bibliography

3 Introduction Pierre de Coubertin, the founder of the modern Olympic Games once said: "Sport is part of every man and woman's heritage and its absence can never be compensated for 1." For over several decades a deep concern about the governance standards of sport have surfaced in the global community. In the past couple of years, however, the accumulation of scandals in sport has grown so intensely that the credibility of sport and its organizations is shaken fundamentally, threatening the public trust in sport as a lever of positive social and cultural values in democratic societies 2. Everybody knows what football is, somebody calls it soccer. There is no other issue or event in the world which can unite people of different countries, nationalities, and religious as good as football. Some people think that this is just a simple game. For most people it s not just a game, its culture, philosophy and passion. For somebody football is a whole life. But football is not organized chaotically. It is very professionally governed, structuralized and managed. The most successful and well known football organizations in the world are Federation Internationale de Football Association (FIFA) and a Confederation recognized by FIFA The Union des Associations Europeennes de Football 3 (UEFA, English version the Union of European Football Associations). Both organizations are neutral politically and religiously situated in Switzerland and are registered under Article 60 of Swiss Civil Code. Both associations had scandals for the last few years and both replaced their presidents. The fact of being of great value of this topic is a justification for both FIFA and UEFA believably the brightest examples of how the neutral associations can have a global impact and how transparency is important in their decision making. This example shows that reputation can be more influential than real enforcement. Within the time football had grown from just an interest of a Sunday match to a global concern of system of values which have impact on current life of million ordinary people, governments, countries and the whole continents. For instance of case the particular country gets the opportunity to host the tournament like FIFA World Cup 2014 or UEFA EURO 2012, it changes development of the country significantly. First of all, ordinary citizens feel the responsibility and global destiny of their country because of the attention of the whole world and capacity to invite and to host tourists and football supporters from all over the world. Then the economy of the country changes to the frame of tournaments requirements in response to build new stadiums, hotels, roads and other infrastructure needed for the comfortable hospitality. Considering above mentioned, the importance of FIFA and UEFA efforts of organizational conducts is difficult to overestimate. These organizations have a great social impact in modern world. FIFA and UEFA both participate in struggle against all forms of racism and discrimination, violence and hooliganism, and match-fixing. FIFA and UEFA spread the values and principles which are acceptable in every country in the world. But the new world is emerging and global relationship mean that we can 1 Pierre de Coubertin ( ), French pedagogue and historian, founder of the modern Olympic Games. 2 Danish Institute for Sports Studies: Action for Good Governance in International Sport Organizations, p Article 1 of the UEFA Statutes, 2016 edition 3

4 no longer rely on traditional forms of coordination which were oriented around hierarchical and command and control based relationships 4. All of the stakeholders in associations like FIFA and UEFA are less comfortable with the idea being told what to do and they will opt to leave if the working environment fails to deliver. In the past, such fixed organizational forms provided a source of comfort, but now it merely frustrates or irritates. In its statutes UEFA formally declares that it is a sporting authority which does not have the powers of a government, it represents Europe s national football associations, and can only act in accordance with the wishes of these associations 5. The last example with so called Panama Papers showed that now for the global community it is not enough just to face the legal requirements, and avoiding illegalness doesn t keep you in safe, because when the organization declares transparency and honesty but doesn t hold it troubles will appear very soon. The Prime Minister of Iceland resigned because of being not honest with his citizens. Honesty means a lot. Honesty means trust. For example the whole banking system is built on trust. Let s imagine the situation when the clients do not trust a bank anymore. It is needed only 20 percent of clients to withdraw their deposits and the bank will collapse. The same is with FIFA and UEFA if people won t trust them and won t believe in values they expose, there will be no value of what they are doing, sponsors and official partners won t support them, those associations will be destroyed from inside. The FIFA and UEFA both have very pure purposes for the world like policy against discrimination, against racism, but at the same time they have many internal problems, and there are always scandals with transparency in policy of decision making. The FIFA and UEFA are both non-governmental and non-profitable, but at the same time they are associations with colossal revenues, unprecedented global reach, political weight, and tremendous social influence. This unique status, setting sports organizations apart from both non-governmental organizations and commercial corporations, constitutes a challenge for specifying the exact best governance practices applicable to them 6. At the same time the FIFA and UEFA conduct these activities with lack of transparency. Principles of transparency and honesty are very important because the global communication is based on trust. Without trust to government commonly it will end up with governmental resignation, when people don t trust to private company it means the company can become bankrupt, but if people stop believing in such organizations like FIFA and UEFA the system of global traditional values can collapse. The best explanation of worlds harassment about screaming violence of basic principles and unwilling to develop the organization s transparency, its activity and performance can be the former FIFA President s Mr. S. Blatter quotation: "Let it be as it is and let's leave (football) with errors. The television companies will have the right to say (the referee) was right or wrong, but still the referee makes the decision a man, not a machine. 7 " 4 Mark Fenwick, Erik P.M. Vermeulen: Disclosure of Beneficial Ownership after the Panama Papers, p Article 2 of the UEFA Statutes, 2016 edition 6 Danish Institute for Sports Studies: Action for Good Governance in International Sport Organizations, p

5 1st chapter Establishment and development of FIFA and UEFA The FIFA is an association founded on 21 May 1904 in Paris now based in Zurich and registered in the Commercial Register in accordance with art. 60 ff. of the Swiss Civil Code 8. The FIFA was established as a non-profit organization and governed by Swiss law. The first countries that formed it were: France, the Netherlands, Belgium, Denmark, Portugal, Sweden and Switzerland. Now, it has reached to 209 member associations. Because it was established in France, the French abbreviation of its name is still used (Fédération Internationale de Football Association FIFA) worldwide. Robert Guérin was the first President of the Association a 28 years old French journalist. It is interesting that the first member country outside Europe was South Africa, which joined FIFA in Since 1930 FIFA organizes the World Cup, which became the most watched sporting event in the world, exceeding even the Olympic Games. In 1932, taking into account a great depression, FIFA decided to move its headquarters to neutral Switzerland. From that time FIFA had accepted more than two hundred new members that influenced on corporate structure and actions of the organization. UEFA was established on 15 June 1954 in Basel, Switzerland. The first UEFA president was Ebbe Schwartz and the first general secretary was Henri Delaunay who very soon was succeeded by his son Pierre Delaunay. In honor of Henri Delaunay, the UEFA European Championship trophy awarded to the winner is named after him. The main building principle of those who established the organization in the 50 s was the fostering and development of unity and solidarity among the European football community. Now six decades later, UEFA s mission remains very much the same. But it has also become the guardian of football in Europe by working closely with its 54 member associations to promote, protect and nurture the sport at all levels, from the elite and its stars to the millions who play the game as a hobby 9. Till now UEFA was developing very gradually but steadily. The association started with just three employees and now amount of people working at UEFA s administrative headquarters estimates over five hundred. The UEFA had changed few times the residence of its headquarters. First attempts of establishment were in Paris, France in Then it was officially established in Basel, Switzerland in In 1960 it moved the headquarters to the Swiss federal capital Berne for more than thirty years. From 1995 till now for more than twenty years the address of the UEFA s headquarters is: Switzerland, Nyon, Route de Geneve, 46. Unlike FIFA which started with seven member associations UEFA started with 31 and in 2015 it counted 54 associations. The number increased rapidly at the beginning of 1990s, with the Eastern European political changes and the Soviet Union collapse when each of the sovereign country had its own football association. In 2016 Kosovo association joined the UEFA as 55th member. UEFA has developed from a mainly administrative body into a dynamic sports 8 FIFA statutes 2015 edition, p. 6 9 UEFA official web site - 5

6 organization that promotes, protects and develops European football keeping a pace with the rapidly changing landscape of modern-day football 10. Every two years a great tournament takes place, whether it is FIFA World Cup or UEFA Euro competition (each tournament takes place every four years) which attracts people from all over the world. In summer 2016 the whole world will pay attention to France because of the UEFA EURO It is expected that near 2.5 million of tourists will visit France just for purpose of the tournament and spend approximately 1 billion Euros 11. But except the above mentioned events the FIFA and UEFA organize a variety of contests for men, women, youth and even amateur players. FIFA currently is responsible for organizing worldwide the next tournaments 12 : the FIFA World cup as the most spectacular and exciting tournament among all kinds of sport in the world; the FIFA Confederations Cup the tournament in which only participate the national teams the winners of every continent (UEFA, CONMEBOL, CONCACAF, CAF, AFC and OFC), plus the FIFA World Cup winner and the national team of the hosting country 13 ; the Olympic Football Tournaments, thereby also taking into account the Olympic Charter; the FIFA also organizes variety of competitions for youth and adults such as: the FIFA U-20 World Cup, the FIFA U-17 World Cup for men and the FIFA Women s World Cup, the FIFA U-20 Women s World Cup, the FIFA U-17 Women s World Cup for women, and also the FIFA Futsal World Cup, the FIFA Beach Soccer World Cup and the FIFA Club World Cup for the professional football clubs. The importance of the tournaments organized by FIFA is difficult to overestimate, because for example the last FIFA World Cup in Brazil watched half of a planet in 207 countries all over the world. Just the final game counted up to 1 billion in-home and out-of-home audience and the whole tournament watched approximately 3.2 billion 14. On the other hand the European competitions are watched starting from June till May and for one night only of the UEFA Champions League Final near 300 million watched annually 15. UEFA currently holds a jurisdiction to organize or abolish 15 competitions in Europe and mentions that FIFA competitions shall not be affected by this provision 16. Except the most popular the UEFA Champions League, which is held annually, and the UEFA EURO tournament which is held once for four years it organizes a variety of contests for men and women youth of different ages: UEFA under 21 Championship, UEFA under 19 Championship, UEFA under 17 Championship, UEFA Youth League for men; UEFA Women s Euro, UEFA Women s Under 19 Championship, UEFA Women s Under 17 Championship, UEFA Women s Champions League for women; futsal competitions (UEFA Futsal EURO for national futsal teams, UEFA Futsal Cup for professional futsal clubs); professional football clubs competitions (UEFA Europa league, UEFA Super Cup); UEFA Regions Cup the first tournament for amateur football players. 10 UEFA official web site Article 15 of the FIFA Governance Regulations, 2016 edition 13 FIFA Confederations CUP, Fact Sheet, available at 14 FIFA World Cup Brazil 2014: Television Audience report, p Article 49 of the UEFA Statutes, 2016 edition 6

7 At a global level, the sport constitutes an extraordinary success story of civil society. Few events or associations of civic organization can have the same level of global inspection, consumer and participatory interest. Till now, football, like anything, has frequently been caught between the desire to maintain the cherished traditions that have sustained it, and the imperatives demanding modernization and transformation Matthew Holt: UEFA, Governance, and the Control of Club Competition in European Football, 2009, p. 21 7

8 2nd chapter Structure of FIFA and UEFA This chapter introduces the structure of FIFA and UEFA. There are issues about propositions of improvement of the structure and reform of the FIFA and UEFA. For the comparison the structure of the Council of Europe and International Olympic Committee will be presented as an example of wisely organized and transparent organization. The FIFA and UEFA take care about organizing football. FIFA worldwide and UEFA only in Europe. These organizations have variety of reports: financial report, activity report, report of development of women football, on how they perform and develop the game 18 but still remain too closed for the society. The FIFA and UEFA have many similar features: both have the same legal form of association and registered under article 60 of Swiss Civil Code; both are neutral nongovernmental organizations; both are non-political organizations; both are no-profit organizations; both have headquarters in Switzerland (FIFA in Geneva and UEFA in Nyon). The corporate structures of FIFA and UEFA are very similar. The supreme body of both entities are their congresses. They both are chaired by their presidents. And they both have many of committees. The Secretariat is responsible for the assistance and support of above mentioned bodies. The Secretariats of both FIFA and UEFA are ruled by General Secretary. The structure of FIFA can be observed schematically as follows: The FIFA President holds the highest post in the FIFA structure. FIFA created the highest office for the president who is elected for four years and can be re-elected. The president represents FIFA with other authorities, he is also a chairman of the Congress, Executive and Emergency Committee meetings. The President in empowered to appoint many employees of the FIFA. The FIFA President is responsible for the implementation of the decisions the Congress passed. The right to be re-elected as a president allowed the last three respectable persons like Sir Stanley Rous ( ), Joao Havelange ( ) and Joseph S. Blatter ( ) together to hold the position of the FIFA President for 54 years; The FIFA Congress the FIFA Congress is a world football parliament, the supreme and at the same time legislative body. It counts 209 member national associations. There are two formats of the Congress: Ordinary and Extraordinary. The Ordinary Congress shall be held once a year and Extraordinary at any time of FIFA Council demand or one-fifth of the member associations. During the Congress meeting every national association has one vote. First of all Congress has a legislative function, but also now only the Congress is empowered to 19 : election of the FIFA President, election or dismissal of the chairpersons, deputy chairpersons and members (of Disciplinary Committee, Ethics Committee, Appeal 18 FIFA Activity report 2014, p Article 28 of the FIFA Statutes, 2016 edition 8

9 Committee, Audit and Compliance Committee, Governance Committee), appointment of scrutineers, appointment of auditors, amendments of the statutes, vote for the host country of the FIFA World Cup and also approval of budget and different reports (audit report, financial report, activity report, etc.); The FIFA Council and the Bureau of the Council the FIFA Council the non-executive, supervisory and strategic body. The standing and ad-hoc committees are found to assist and advice the Council. When the FIFA reform is in process the FIFA Executive Committee still remains and passes decisions on all cases that do not come within the sphere of responsibility of the Congress or are not reserved for other bodies by law or under these Statutes 20. For now, the structure of the FIFA Executive Committee is the following, there are now 24 members and the FIFA President of which: the President, 8 representatives from the UEFA, 4 representatives from AFC (Asian Football Confederation), 4 representatives from CAF (Confederation of African Football), 3 representatives from CONCACAF (Confederation of North, Central America and Caribbean Association Football), 3 representatives from CSF (South American Football Confederation or CONMEBOL) and for one representative from OFC (Australia, Oceania) female member (elected by the Congress).Bureau of the Council. There is also a Bureau of the Council which tries to solve some issues which are immediate between two meetings of the FIFA Council. The Bureau of the Council shall deal with all matters requiring immediate settlement between two meetings of the FIFA Council 21. The Bureau consists of seven members: the FIFA President and six members from six Confederations appointed by the FIFA Council. The general secretariat (including the position of the General Secretary) the Secretary General is the chief executive officer (CEO) of FIFA. He chairs and heads the Management Board 22. The Secretary General for exercising its duties should be recorded in the Commercial Register of the Canton of Zurich as having joint powers of signature (with one other person). Standing and ad-hoc committees (including the remaining Executive Committee); The Committees structure is not very complicated anymore. There are nine different standing committees instead of 26 that were before. There is no need to describe the functions of the committees because their names explain the purposes they were created 23 (Governance Committee, Finance Committee, Development Committee, Organizing Committee for FIFA Competitions, Football Stakeholders Committee, Member Associations Committee, Players Status Committee, Referees Committee, Medical Committee); The independent committees; The independent auditors Article 31 of the FIFA Statutes, 2015 edition 21 Article 38 of the FIFA Statutes, 2016 edition 22 Article 15 of the FIFA Governance Regulations 23 Article 39 of the FIFA Statutes, 2016 edition 24 Article 24 of the FIFA Statutes, 2016 edition 9

10 The Council, the President, the standing committees, the independent committees and the Secretary General are authorized to issue directives, guidelines, policies, procedures, circular letters, manuals and similar documents for the implementation of these FIFA Governance Regulations as part of their range of duties and powers, subject to the FIFA Statutes and the provisions of these regulations 25. Article 21 of the FIFA statutes says that the Congress may grant the title of the honorary president, honorary vice-president and the honorary member 26. The title allows to take place in the debate during the Congress but without voting rights. According to mentioned above, the last FIFA scandal and the global community demand for radical reforms the FIFA proposes its own way of reform. There are some positive and innovative amendments, but also ineffective issues which will keep the same order that leads to troubles and scandals. First of all the reform will be divided into four parts 27 : Governance, Transparency, Accountability, Diversity. They say that the FIFA reform should make the association: modern, trusted and professional. What changed can be schematically showed as next: And after the reform the FIFA Council will be changed. But the changes are not radical, instead of 24 the number will increase up to 37 members of which 28 : - the FIFA President; - 8 vice-presidents (3 from UEFA and for one from AFC, CAF, CONCACAF, CSF, OFC); - 28 other members, which consist of: 6 representatives from the UEFA, 6 representatives from AFC, 6 representatives from CAF, 4 representatives from CONCACAF, 4 representatives from CSF, 2 representative from OFC. Every candidate will required to meet some particular criteria. An Independent FIFA Review Committee will be responsible for such eligibility check. But on the other hand Article 75 of the FIFA Statutes mentioned that the Executive Committee will automatically transformed into the Council and the members of Executive Committee will be first serving members of the Council for the remaining period of their previous positions in the Executive Committee. The new limitation for FIFA President, the FIFA Council and Members of independent committees will appear considering re-election. After the reform they can be elected for maximum of 3 times for four years period 29. Additionally for the FIFA President, the FIFA Council and Secretary General individual annual compensation disclosure. And in the next chapters there will be discussed the importance of transparency and disclosures. Separation of powers after the reform will be exercised in two ways: political decision making and business operations. The General secretariat will be transformed and new positions added besides the Secretary General the position of Chief Compliance Officer will be created. And new innovative operational issue will appear the Secretary General have to report to the Council. 25 Article 2 of the FIFA Governance Regulations 26 Article 21 of the FIFA Statutes, April 2016 edition Article 33 of the FIFA Statutes, April 2016 edition

11 The new body will be created fully independent the Audit and Compliance Committee, which will follow the next issues: clear roles in decision-making, dispute resolution, independent audits, no conflicts of interest, zero tolerance for discrimination, no political interference, respect all regulations, representative democracy, religious and political neutrality, separation of powers, integrity of the game. Taking into account the importance of stakeholders in modern football organizations the reform proposes to create a new Football Stakeholder Committee which should be made of: Clubs, Players, Coaches, Leagues and Referees. And again this proposition creates more questions than answers: who will represent clubs, players, coaches, leagues and referees? What will be the selection criteria? How many members will form this committee? What power will get this committee? Just to compare the last amendments to the FIFA statutes. Let s take the FIFA Statutes 2015 edition and FIFA statutes 2016 editions and expose new changes. First of all it is observed the limitation of re-election of the FIFA President the most important and waited amendment. About this innovational option will be mentioned in details in the chapters 6.1 and 7.2 of this work. From now there will be no requirements about woman on a board anymore, which was actually controversial issue, because all board members should respond the professional requirements, but not always just a gender requirement can be competitive. Transformation from the FIFA Executive Committee to FIFA Council looks more like cosmetic change and not radical( the FIFA Executive Committee was made of 25 members now the transformed new body the FIFA Council counts 37 members and the sources of forming are the same, the proportions a little bit changed and reduced one member of women representative). Reduced number of committees from 26 to 9. The position of Chief Compliance Officer will be created the person who should have as an essential function in a company an overseeing and managing regulatory compliance issues. FIFA has also other bodies helping to fulfill its important mission. F-MARC aims to protect players health, prevent injury and maximize the health benefits of the game; the Dispute Resolution Chamber (DRC) is FIFA's body that provides arbitration and dispute resolution on the basis of equal representation of players and clubs and an independent chairman, and 12 FIFA Development Officers have been issued the task of working with Member Associations in identifying and implementing future projects within their respective regions 30. It is clear that FIFA is transforming from the organizations corporate governance of which was built on basis of its product the football, to the organization with the highest standards of corporate culture and transparency in decision making. The UEFA structure has a four levels constitution as can be observed in Figure 1 and can be schematically structured as next: First level the UEFA Congress (consists of 55 member associations) and external auditors that are working in parallel 31 ; Article 46 of the UEFA statutes, 2016 edition 11

12 Second level Organs for the Administration of Justice (also additionally Court of Arbitration for Sport in Lausanne (CAS) is working in parallel according to Article 46 of the UEFA statutes), the Executive Committee, the UEFA President, the UEFA Governance and compliance auditors (Article 45 of the UEFA statutes) 32 ; Third level Subsidiaries (as created by the Executive Committee in order to achieve the UEFA objectives defined in article 2 of the UEFA statutes) + Professional Football Strategy Council + General Secretary/Administration + Committees + Expert Panels; Fourth level: Match Officers and Instructors. Figure 1 33 The UEFA Congress has two formats of performance: ordinary and extraordinary meetings. The Ordinary Congress is organized once a year and involves representatives of all the UEFA s member national associations. Now its number reached to 55. The issues of the Ordinary Congress are: approval of budget and different reports (the report of the President and Executive Committee, financial report, auditors report), elections (of the UEFA President, of the Executive Committee members, of the European members of the FIFA Executive Committee), amendments (to the statute and regulations) and issues considered with membership (acceptance, suspension and exclusion of a member association. An Extraordinary Congress may be convened by the UEFA Executive Committee, or at the written request of one fifth or more of the UEFA member associations, stating the items to be placed on the agenda 34. External auditors are responsible for the independent report and are elected/re-elected every year on the Ordinary Congress. 32 Article 45 of the UEFA statutes, 2016 edition 33 Official web site of UEFA

13 The UEFA executive committee is a supreme executive body and manages UEFA. It consists of the Chairman the UEFA President and fifteen members. The members are elected by the UEFA congress. The UEFA Executive Committee takes place every two months. The Emergency Panel is a body that is responsible for executing final decisions on fixedterm issues that should be done by the UEFA Executive Committee between the meetings of the last. The Emergency Panel consists of five members UEFA President; the first UEFA vice-president; the UEFA vice-president chairing the Finance Committee, and two other members of the UEFA Executive Committee appointed by the UEFA President on a case-by-case basis 35. The UEFA s President main function is to represent the UEFA and to be a chairman of the UEFA Congress and UEFA Executive Committee. In case of equal voting the President s vote has dominant value. These responsibilities he is carrying for four years and can be re-elected unlimited times. The election of the UEFA President is held during the Congress. Also the UEFA President is responsible for the relations between UEFA and its Member Associations, FIFA, other confederations, political bodies and international organizations. For example the last three UEFA Presidents Jacques Georges ( ), Lennart Johansson ( ) and Michel Platini ( ) held together the UEFA President office for 32 years. Those organs are mostly disciplinary. They are: the Control, Ethics and Disciplinary Body and the Appeals Body; Ethics and Disciplinary Inspectors and the two-chamber Club Financial Control Body (CFCB). The Ethics and Disciplinary Body have the main function to open a disciplinary investigation. The Appeals Body is empowered to revise based on the Disciplinary Regulations the decisions of the Control, Ethics and Disciplinary Body. There is also possibility for disciplinary inspectors to manage investigations solely or cooperate with other non-uefa bodies. If the disputes between UEFA and other entities like associations, leagues, clubs, and players occurs, it should be considered by the Court of Arbitration for Sport in Lausanne, Switzerland. This Council deals with improving collaboration between the various stakeholders in European football. The Council has 16 members delegated from 4 sources, for 4 members from each. The Council is made of four UEFA vice-presidents on behalf of the interests of UEFA's member associations as well as the general interests of UEFA as European football governing body; then, twelve representatives for a two-year term from three groups recognized by UEFA as representing the interests of the European professional football leagues, of the clubs participating in the UEFA competitions, of professional players in Europe (for example the Association of European Professional Football Leagues (EPFL), the European Club Association (ECA), FIFPro Division Europe). Committees and Panels cover a variety of issues in European football the UEFA is involved. There are nineteen committees and six expert panels. The spheres they are operating differentiate for medical matters, players status, and players transfers, refereeing and finance, as well as submission of advices, proposals and recommendations to the UEFA Executive Committee. Mostly the committees and expert panels have an advisory function. 35 Article 4 of the UEFA Organizational Regulations, edition

14 Honorary President and honorary members are persons who deserved a special treatment from the UEFA for their activities in the past. The honorary president has the capacity to advice but without right to vote during the UEFA Congress and UEFA Executive Committee meetings. Honorary members have the same capacity but only during the UEFA Executive Committee meetings. The UEFA Administration is responsible for the business and administrative issues. It is situated at headquarters in the House of European Football in Nyon. The administration has its own chairman the UEFA General Secretary who is responsible for its organization, management and direction. The procedure of appointment of the UEFA General Secretary is the next: the UEFA President proposes the candidate to the UEFA Executive Committee and if the Committee agrees the candidate is appointed. The General Secretary holds his position on a permanent basis. He is also empowered to appoint Directors who shall be employed by UEFA 36. Structures of FIFA, UEFA, International Olympic Committee and Council of Europe comparison. It s difficult to understand for the first look whether structure of the FIFA and UEFA is enough good and progressive. Everything can be better understood and appreciated in comparison. The same issue with the FIFA and UEFA structure. Comparing with International Olympic Committee (hereinafter IOC) and Council of Europe maybe both FIFA and UEFA can borrow some good principles of building transparent and sustainable entity. Let s have a look on the corporate structure of the International Olympic Committee the Supreme Authority of the Olympic movement. The structure is the following: - The President of International Olympic Committee represents the organization; - Executive Board was created in 1921, the Executive Board is the executive organ of the IOC. The Executive Board sees to the management of IOC issues and ensures respect for the Olympic Charter. It is the only body competent to propose Charter modifications to the Session, submit names of persons it recommends for election and appoint the IOC Director General 37 ; - Administration responsible for collaboration between all members of the Olympic Family, from the National Olympic Committees, the International Sports Federations, the athletes, the Organizing Committees for the Olympic Games, to the TOP partners, broadcast partners and agencies from the United Nations. At least they can borrow the procedure of election of the President of International Olympic Committee which elects during the Session, by secret ballot, a President from among its members for a term of eight years renewable once for four years 38. It is very obvious that the Council of Europe is a different organization from FIFA and UEFA, but at the same time they have a lot in common. The structure of the Council of Europe is the next 39 : the committee of Ministers and the Parliamentary assembly (before 1994 it was called the Consultative Assembly). 36 Article 41 of the UEFA Statutes, 2016 edition Article 20 of the Olympic Charter, August 2015 edition

15 The Secretariat of the Council of Europe is serving both above mentioned organs 40. In detail the structure of the Council of Europe and its functions are very progressive. Secretary General the head of the organization. The main function is to represent the Council of Europe and responsible for the strategic management of the Organization. The General Secretary is elected for a five year term on the Parliamentary Assembly meeting. Deputy Secretary General divides with the Secretary General his duties. Committee of Ministers one of two the most important bodies of the Council. The policy of the Council of Europe is managed by the Committee of Ministers. From the financial perspective the Committee approves the budget of the Council of Europe and programme of activities. Committee of Ministers consists of every member state which are represented through their ministers of foreign affairs or other permanent diplomatic representatives. Parliamentary Assembly (PACE) the second one of two the most important bodies of the Council. The Parliamentary Assembly consists of 318 members of parliament from the 47 member states. The Assembly elects the Secretary General, the Human Rights Commissioner and the judges to the European Court of Human Rights. It provides a democratic forum for debate and monitors elections. Its committees play an important role in examining current issues. Congress of Local and Regional Authorities - the Congress of Local and Regional Authorities is responsible for strengthening local and regional democracy. It comprises 636 elected representatives representing more than local and regional authorities. European Court of Human Rights - this is the permanent judicial body which guarantees for all Europeans the rights safeguarded by the European Convention on Human Rights. It is open to states and individuals regardless of nationality. The 47 member states of the Council of Europe are parties to the Convention. Commissioner for Human Rights - The Human Rights Commissioner independently addresses and brings attention to human rights violations. Conference of INGOs - The Conference includes some 400 international Non- Governmental Organizations (INGOs). It provides vital links between politicians and the public and brings the voice of civil society to the Council. The Council's work benefits extensively from the INGOs' expertise and their outreach to European citizens. So from the International Olympic Committee and the Council of Europe the FIFA and UEFA can borrow the next: Influence of the parliament, in this case Congress of FIFA and UEFA; Transparency in structure and policy; Professional performance of their events. The best example of transparency is to visit the official web site of these organizations. On the official web sites of Council of Europe 41 and the International Olympic Committee 42 there is all essential information about the structure and the functions of all the main bodies. 40 Article 10 of the Statute of the Council of Europe

16 3rd chapter Features and characteristics of FIFA and UEFA as nonprofit organizations In this chapter the following will be described: the overlook of the Swiss legislation about non-profit organization. Which forms are allowed, which forms they chose, which forms are better to choose for sport organization. Also the example and comparison of worlds well known and influential non-profitable non-governmental charity organizations. Both organizations are non-governmental associations and are registered under Art. 60 of Swiss Civil Code. Let s start with the definition of the association. The association is a corporately organized group of persons that pursues a basically ideal (non economic) purpose and has a legal personality 43. The Swiss law requires association to have two organs: the general meeting - the UEFA Congress as the supreme governing body (Art. 64 Swiss Civil Code) and the association s committee the UEFA Executive Committee (Art. 69 Swiss Civil Code) 44. The Swiss law allows associations to have an additional or different organs instead of the general meeting if articles of association mention this, such as a secretary or a delegates meeting. Purpose of the association Pursuant to art. 60 paragraph 1 Swiss Civil Code, the purpose of an association may be political, religious, scientific, cultural, charitable, social or of other noneconomic nature. Associations of persons pursuing a commercial purpose are subject to the company law defined in the Code of Obligations 45. The decisive question is how a commercial purpose is defined 46. It is essential that an association does not primarily strive for monetary and financial benefits for its members. The ideal purpose always has to remain the main focus even if the association runs a commercial business. The difference between a commercial and a noncommercial purpose is not based on whether the association of persons operates a business or not 47. If an association operates a commercial business and achieves a gross revenue of at least CHF per year (annual revenue), it is obligated to be entered into the commercial register 48. If an association does not operate a commercial business, it is eligible for entry in the commercial register; in such case the entry is only a declaration but results in the association s publication and makes it subject to debt enforcement by bankruptcy or debt recovery from bill of exchanges. An association that is under a duty of audits must also be entered into the commercial register Hausheer/Aebi Muller 2008, p Dominique Jakob, Roman Huber and Katharina Rauber. Nonprofit Law in Switzerland. Working Papers of the Johns Hopkins Comparative Nonprofit Sector Project, No. 47. Baltimore: The Johns Hopkins Center for Civil Society Studies, 2009, p Art. 59 para. 2 Swiss Civil Code 46 Portmann, W.: The Swiss Law on Associations, 2005, p Rulings of the Swiss Federal Court 88 II 209 et seqq., Art. 61 para. 2 no. 1 Swiss Civil Code, art. 36 para. 1 Commercial Register Ordinance of 17 October Art. 61 para. 2 no. 2 Swiss Civil Code, see below IV. a. 3.2 Association Audit 16

17 Non-profit organizations have a somewhat deceiving title. Organizations designated as non-profit receive various tax benefits from their respective domestic governments, as by definition they are required to immediately reinvest any potential profits into the organization s designated activities. However, it s important to make the distinction between non-profit and poor. Despite not holding onto and distributing any profits from organizational activities 50, NPO s can still be absurdly rich. High ranking members in these organizations can still take home very nice salaries and the bank accounts for these NPO s can easily be in the 7 figures. Some of these names you ve probably never encountered before while others you re probably very familiar with, but the one thing they all have in common is a seriously stacked company account. The FIFA as well as UEFA are non-profit organizations. First of all it means they do not pay taxes. But both of them are not-like most of the nonprofit organizations. They are not charity organizations and they do not exist for donations. For example top ten the wealthiest nonprofit organizations in the world are charity organizations and the sources of their financial performance are usually donations and government support. And they are 51 : YMCA, Goodwill Industries International, Catholic Charities, United Way, American Red Cross, Salvation Army, Habitat for humanity International, Boys and Girls Club of America, Easter Seals and Smithsonian Institute. YMCA Young Men s Christian Association 52 is the most powerful and well recognized non-profit organization in the world with an annual budget of approximately USD 6 billion. The organization has become famous because it has been providing services to communities all over the world for over 170 years. The organization promotes Christian values to young boys through various community programs. The headquarters of organization in Geneva, Switzerland, and operate centers in North America, Europe and Africa. The opportunities they offer vary greatly from location to location. Mostly it is focused on sports, youth engagement, training services, immigrant services, and many other. Goodwill Industries International 53 with annual budget USD 4.5 billion manage to help individuals with disabilities and members of their families. The Catholic Charities 54 annual budget USD 4.4 billion, their mission is to reduce poverty in America. They have the capacity to help over 9 million people every year. The United Way annual budget of USD 4.1 billion they doesn't have very particular aim. But they are operating in thousands of their branches and help people that depends on a situation. American Red Cross 55 with an annual budget of almost USD 3.5 billion is extremely well known. One of the most old charity organizations in the world founded in 1881 as first assistance for domestic humanitarian help. At the beginning it was a help in the event of catastrophe within the United States, but with time the organization has expanded into many other similar programs 50 Dominique Jakob, Roman Huber and Katharina Rauber. Nonprofit Law in Switzerland. Working Papers of the Johns Hopkins Comparative Nonprofit Sector Project, No. 47. Baltimore: The Johns Hopkins Center for Civil Society Studies, 2009, p

18 and now it responds to approximately disasters in the United States. Today they are involved in health and safety services, collection and distribution of blood provided by donors, community services for poor people, disaster reliefs, supporting America s military families, educational programs, and an enhanced international presence. The budget of the organization is formed mostly by private donations and reaches almost to $3.5 billion. The organizations is ready to help whenever the national disaster happens 56. On the contrary from the UEFA financial report is seen that commercial subsidiaries exist 57 for many years without any reasonable purpose (for instance Euro 2008 SA still exists and is still on the balance sheet although the tournament UEFA EURO 2008 for almost eight years in a history). Although these are not financial transactions, UEFA shows value-in-kind benefits from commercial contracts (e.g. sportswear, technical equipment, beverages and transport) in the income statement under commercial rights revenue, and value-in-kind expenses under other event expenses 58. The Salvation Army 59 annual budget USD 3.2 billion the main activity is to run the shelters for homeless. The Habitat for humanity International 60 with annual budget of approximately USD 1.5 billion this organization helps to build houses from the ground up only with volunteering labor and sell it to poor people for the price only to cover materials expenses. They build houses after natural disasters (hurricanes or earthquakes). Boys and Girls Club of America 61 with annual budget USD 1.4 billion, the main issue for this organization is to organize after-school programs for youth especially for those who are from lower-class neighborhoods who doesn t have much possibilities to be involved in extra-curricular activities. Easter Seals 62 with annual budget of USD This organization specifies on assistance to people with special needs, especially autism. Smithsonian Institute 63 with annual budget USD 1.2 billion the main task is preserve and spread the knowledge to the general public. The pace and direction of today s world is overwhelmingly dictated by the decisions and actions of large organizations. In our recent past, power was consolidated amongst a very small group of people, sometimes single individuals such as monarchs and dictators. Of course, this is still the case in various parts of the world, but for the most part we ve moved past it. The real power is held for the most part by governments and corporations Dominique Jakob, Roman Huber and Katharina Rauber. Nonprofit Law in Switzerland. Working Papers of the Johns Hopkins Comparative Nonprofit Sector Project, No. 47. Baltimore: The Johns Hopkins Center for Civil Society Studies, 2009, p UEFA Financial report 2014/2015, 25 February 2016 edition p

19 Governments have legal and political control over their respective populations, which is the most direct kind of control. On the other hand, the kind of power that corporations wield is a little bit trickier to pin down and accurately identify. They influence governments through lobbying and influence the public through mass advertising and other mechanisms. Most people looking to make any meaningful change in the world will use either government or the corporate world as their avenue but there is another way. Those companies show us how really the nonprofit organizations should help ordinary people all the time if they don t want to pay taxes. Considering all the facts it can be observed that FIFA and UEFA are associations under Swiss law, according Article 60 of the Swiss Civil Code they chose the form of association, they are non-governmental, registered in the commercial register, because they because they operate a commercial business and achieves a gross revenue of at least CHF per year 65 (annual revenue), political neutral, have no charity in their activities and they establish commercial organizations for better financial result. 65 Dominique Jakob, Roman Huber and Katharina Rauber. Nonprofit Law in Switzerland. Working Papers of the Johns Hopkins Comparative Nonprofit Sector Project, No. 47. Baltimore: The Johns Hopkins Center for Civil Society Studies, 2009, p. 6 19

20 4th chapter Financial performance of FIFA and UEFA In this chapter will be explained about the following: how the FIFA and UEFA who are nonprofit organizations get revenues estimated few billion of US dollars or Euros. The main source of income is broadcasting 66, marketing and commercial rights. Financial performance of FIFA for several years is very controversial, because for the last year FIFA got USD billion in revenues, but the expenditure increased by USD 240 million to USD billion. First time for many years that FIFA ended the year with a negative annual result of USD 122 million 67.For example for the last five years the balance was always positive: in 2011 USD 36 million, in 2012 USD 89 Million, in 2013 USD 72 million, in 2014 USD 141 million. Let s have a look on a last 2015 financial year performance. The total revenue counted USD billion which is 100%. There were three sources of income: event-related revenue (85%) with USD 973 million, finance income (8%) of USD 98 million and other operating income (7%) of USD 81 million 68. The biggest amount of the revenue was event-related: TV broadcasting rights USD 629 million (consist of: 2018 FIFA World Cup USD 613 million and Other FIFA events USD 16 million), marketing rights USD 257 million (consist of: 2018 FIFA World Cup USD 246 million and Other FIFA events USD 11 million), hospitality rights USD 35 million, licensing rights USD 12 million and other revenues USD 40 million. The total expenses for the last 2015 financial year counted USD billion. The expenditures of FIFA were as follows: Event-related expenses (61%) of USD 781 million (consist of: 2018 FIFA World Cup USD 574 million, FIFA Club Protection Programme USD 29 million, Other FIFA events USD 178 million), Other operating expenses (15%) of USD 190 million (consist of: Personnel USD 92 million, Communications USD 26 million, Buildings and maintenance USD 20 million, Taxes and duties USD 4 million, Depreciation and amortization USD 14 million, Other (e.g. IT, travel, logistics, reception) USD 34 million), Development-related expenses (13%) of USD 161 million (consist of: Financial Assistance Programme (FAP) member associations USD 54 million, Goal Programme USD 27 million, Financial Assistance Programme (FAP) and development programmes confederations USD 33 million, Technical development programmes USD 10 million, Refereeing Assistance Programme (RAP) USD 9 million, Women s football USD 7 million, Other (e.g. education, medicine and science, solidarity projects) USD 21 million, Football Governance (7%) of USD 95 million (consist of: Committees and Congresses USD 33 million, Legal matters USD 62 million), Financial expenses (2%) of USD 30 million (consist of: Foreign currency loss USD 28 million, Interest expenses USD 2 million), Exploitation of rights (2%) of USD 17 million (consist of: Broadcasting and media rights USD 11 million, marketing USD 4 million, and Licensing 66 UEFA EURO 2016 France Press Kit 67 FIFA Financial and Governance report 2015, p FIFA Financial and Governance report 2015, p

21 USD 2 million). The reasons of such poor performance can be different, starting with the not a grand performance and coming to the scandals about transparency in decision-making. And now let s have a look on a financial performance of UEFA. The UEFA is an international non-governmental, not-for-profit organization in the form of an association according to Swiss law and is domiciled in Nyon, Switzerland 69. The UEFA financial year starts on 1 of July and ends on 30 June of the following year. 70 This can be explained by the main product of the UEFA the football. For the previous 2014/2015 financial year UEFA had next results: Revenues and income by nature euro 2.12 billion, which consist of: Broadcasting rights (79.5 %) of euro million; Commercial rights (16.3%) of euro million; Tickets and hospitality (1.7%) of euro 37 million; Other revenue (1.3%) of euro 27.3 million; So total revenue counted euro million plus Asset management of 1.2% which is euro 24.9 million. Expenses of euro billion, which consist of: distribution to participating teams euro billion, contributions to associations euro 44.6 million, event expenses euro million, referees and match officers euro 35.7 million, information and communications technology euro 52.5 million, employee salaries and benefits euro 72.8 million, depreciation and amortization euro 11.2 million, other expenses euro 48 million. Positive balance sheet approximately euro 144 million. Over the last four years, UEFA generated on average more than 2 billion in revenue every year 71. Source of income is divided into two ways: first source income by nature as well as by competition, second source other income. Although UEFA is non-for-profit non-governmental organization for its commercial purposes it establishes commercial entities. For example UEFA established a subsidiary for UEFA Euro 2016 with name EURO 2016 SAS. Besides this, there are other subsidiaries. There is also a service company UEFA Events SA fully consolidated with share capital of 4 million Swiss francs. UEFA, which holds all the competition rights, and the French Football Federation have set up a company, EURO 2016 SAS, to which they have delegated responsibility for the operational organization of the tournament under a single directorate 72. EURO 2016 SAS is a company under French law, with the legal form of a simplified joint stock company, owned 95% by UEFA and 5% by the French Football Federation. From the UEFA financial report flows that Euro 2008 SA (Dormant company) 73 still exists and is still on the balance sheet although the tournament UEFA EURO 2008 for almost eight years in a history. Although these are not financial transactions, UEFA shows value-in-kind benefits from commercial contracts (e.g. sportswear, technical equipment, beverages and transport) in the 69 UEFA Financial report 2014/2015, 25 February 2016 edition 70 Article 44 of the UEFA Statutes UEFA Financial report 2014/2015, 25 February 2016 edition 72 UEFA EURO 2016 France Press Kit 73 UEFA Financial report 2014/2015, 25 February 2016 edition 21

22 income statement under commercial rights revenue, and value-in-kind expenses under other event expenses 74. According to the UEFA Financial report 2014/2015 the accounting principles of the UEFA are the next 75 : to deal with all questions relating to European football, to promote football in Europe in a spirit of peace, understanding and fair play, without any discrimination on account of politics, gender, religion, race or any other reason, to monitor and control the development of every type of football in Europe, to organize and conduct international football competitions and tournaments at European level for every type of football whilst respecting the players health, prevent all methods or practices which might jeopardize the regularity of matches or competitions or give rise to the abuse of football, ensure that sporting values always prevail over commercial interests, redistribute revenue generated by football in accordance with the principle of solidarity and to support reinvestment in favor of all levels and areas of football, especially the grassroots of the game. The slow and evolutionary nature that has characterized the game has no doubt been instrumental in football s growth and success, yet as the world changes, football changes with it. For the guardians of association football, the challenge at the beginning of the twenty-first century will be to marry the modernizing imperatives with the traditions that have guided football to its unchallenged position as the world s dominant sport. Nowhere can those challenges be greater than on the continent of Europe, where football and economics have increasingly clashed UEFA Financial report 2014/2015, 25 February 2016 edition p UEFA Financial report 2014/2015, 25 February 2016 edition, p Matthew Holt: UEFA, Governance, and the Control of Club Competition in European Football, 2009, p

23 5th chapter 5.1 Role of stakeholders, In this chapter will be explain in detail about the following: who are the main stakeholders and what is their role in the activity of FIFA and UEFA. How the main stakeholders like sponsors and partners influence FIFA and UEFA. And what is the role of partners and sponsors and how the FIFA and UEFA structure them. Analysis of the governance structure of UEFA and the governance of European football needs to consider a number of things. These include the role and influence of stakeholders and their integration into the current organizational framework; an understanding of how governance and the integration of stakeholders relates to the sustainability of the European model of sport, and its key aspects; and the importance of the management of change 77. The political debate on sport in Europe often attributes considerable importance to the so-called "European Sport Model". The Commission considers that certain values and traditions of European sport should be promoted. In view of the diversity and complexities of European sport structures it considers, however, that it is unrealistic to try to define a unified model of organization of sport in Europe. Moreover, financial and social developments that are common to the mostly of the Member States (commerce, challenges to public wasting, increasing numbers of participants and stagnation in the number of voluntary workers) have resulted in new challenges for the organization of sport all over the world. The emergence of new stakeholders (participants outside the organized disciplines, professional sports clubs, etc.) is posing new questions as regards management, democracy and representation of interests within the sport movement. The Commission can play a role in encouraging the sharing of best practice in sport governance. It can also help to develop a common set of principles for good governance in sport, such as transparency, democracy, accountability and representation of stakeholders (associations, federations, players, clubs, leagues, supporters, etc.). While doing so the Commission will draw on previous work 78. Attention should also be paid to the representation of women in management and leadership positions. The Commission acknowledges the autonomy of sporting organizations and representative structures (such as leagues). Furthermore, it recognizes that governance is mainly the responsibility of sports governing bodies and, to some extent, the Member States and social partners. Nonetheless, dialogue with sports organizations has brought a number of areas to the Commission s attention, which are addressed below. The Commission considers that most challenges can be addressed through self-regulation respectful of good governance principles, provided that EU law is respected, and is ready to play a facilitating role or take action if necessary. 77 Matthew Holt: UEFA, Governance, and the Control of Club Competition in European Football, 2009, p E.g. the "Rules of the Game" conference organized in 2001 by FIA and the EOC and the Independent European Sport Review carried out in

24 The governance of the global football operates in a multi-layered, and multi-organizational environment. FIFA s relationship within the structures of football is complex enough before one begins to consider the development of institutions and organizations operating outside the football framework 79. The main stakeholders of FIFA are: 209 Member associations, 6 confederations (including UEFA), sponsors, partners, media, broadcasters and supporters 80. The main stakeholders of FIFA are 209 worldwide national associations. Also important role play six confederations recognized by FIFA: UEFA, AFC (Asian Football Confederation), CAF (Confederation of African Football), CONCACAF (Confederation of North, Central America and Caribbean Association Football), CSF (South American Football Confederation or CONMEBOL), OFC (Oceania Football Confederation) 81. Very important and interesting fact that UEFA is a stakeholder of FIFA and FIFA is a stakeholder of UEFA. UEFA is a stakeholder of FIFA as one of the six confederations that are involved in its difficult structure. On another hand UEFA is a Confederation recognized by FIFA. The changing nature of governance in sport has meant that UEFA must negotiate a complex network of stakeholder interest 82. It can be better observed through the Figure 2 how the UEFA stakeholders are located, how they cooperate and how they organized. The main stakeholders of UEFA are: 55 member associations, the FIFA, National leagues, sponsors, clubs, players, supporters, broadcasters, European Union, National Governments and Local governments. Figure 2 79 Matthew Holt: UEFA, Governance, and the Control of Club Competition in European Football, 2009, p (last visited on June, 1, 20016) 82 Matthew Holt: UEFA, Governance, and the Control of Club Competition in European Football, 2009, p