Corporate Governance is the promotion of corporate fairness, transparency and accountability.
In July 2003 a new Combined Code of Corporate Governance ("the Combined Code") was brought in and this is overseen by the Financial Services Authority. In short, the code specifies the distribution of rights and responsibilities of the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. If you find that confusing then don't worry, just concentrate on my first sentence in particular my words "fairness, transparency and accountability".
During my research I noted that one of the aims of a Premiership Club's Supporters Trust included "...to lobby the club and ensure that Corporate Governance is maintained". At the moment we are still putting together our proposals on the aims of the proposed trust and these will be presented at the Open Meeting (when all interested supporters meet to consider and vote on the formation of the Supporters Trust etc) however, in the meantime it got me thinking.
One of the reasons why I think a Supporters Trust will flourish is because it is totally democratic and above all will be fair, transparent and accountable to it's members, in other words it would employ good corporate governance. So how does the club deal with Corporate Governance?
Well in the 31 May 2005 accounts the Club issued a statement on this subject saying "The Directors have considered the principles of Corporate Governance ("the Combined Code"). The Board supports the highest standards in Corporate Governance and believes that the Code provides a statement of best practice, compliance with which offers opportunities for enhancing management focus as well as for delivering the principles of openness, integrity and accountability on which the Code itself is based".
Having read the board's statement, knowing that the Combined Code is overseen by the FSA and with the company being listed on OFEX you would think that there was nothing to worry about. Well normally you would, until you actually read the Combined Code, for those interested the link is here http://www.fsa.gov.uk/pubs/ukla/lr_comcode2003.pdf#search=%22fsa%20corporate%20governance%22
If I draw your attention to C.3.1 it states “The Board should establish an audit committee of at least three, or in the case of smaller companies two, members, who should all be independent non-executive directors. The Board should satisfy itself that at least one member of the audit committee has recent and relevant financial experience”.
Now you're losing us Ollie I hear you say? Well, when you look at the Club's accounts again you'll see that the two members of the audit committee are Alistair Mackintosh and Bryan Bodek. Come on Ollie what's your point? Well, Alistair Mackintosh is an executive of the company so under the Combined Code he should not be on that committee. In fact, you could argue that he is not independent either and if that is the case then he fails on two counts.
My guess is that he is on the audit committee because he is the only member of the board with the relevant financial experience having come from an accountancy background, it's only a guess though! But isn't Alistair Mackintosh also responsible for the club's finances? In the few interviews he has given to the media he certainly does give the impression that he has the club's finances under control. Good point. So if he is in control of the club's finances why is he also on the audit committee? Another good point, I can't answer that one.
My next guess is just a guess, and that is, that Alistair Mackintosh is the Chairman of the audit committee. Why do I say that? Well Bryan Bodek declares in the company's accounts that he is the Chairman of the Remuneration Committee but doesn't declare that he is the Chairman of the Audit Committee. OK, I have made an assumption here but it is something that the next set of accounts should clear up once and for all.
What is Bryan Bodek's position? I have heard from many sources that he is BSkyB's representative on the board but I have not been able to confirm this. I'll put this down to rumour and I'll give him the benefit of the doubt there but if he is (BSkyB's representative) then he too should not be on the audit committee.
If you have read Colin Savage's articles on the finances then you will know that he raised the above points with Alistair Mackintosh earlier this year. I understand that Alistair Mackintosh's reply was something along the lines of the auditors have no problem with the current audit committee. Well I for one believe him. If the auditors are happy, the FSA are happy and OFEX is happy then what do I know?
By the way, thank you to the many supporters and shareholders who picked this issue up independently of me and Colin's article and sent me an e-mail about it. I hope this article helps a little. Oh and one other thing, I would hope that when the Supporters Trust is formed it will ensure that important issues like these are raised at the appropriate level on the supporters and shareholders' behalf. I for one would not want to see the club I have loyally supported all my life and invested some of my hard earnt wealth in its shares fall foul of any legislation applicable to it.
As is normal, your comments, input and questions are always welcomed please send them to email@example.com and if there are any other subjects you would like us to tackle here on this blog, please send them our way we will do all that we can to oblige. In fact, we've had a few questions arrive and will be answering them individually as well as via another FAQ to be published on here soon.