Financial solvency is an ongoing re

Financial solvency is an ongoing requirement for the holding of an AFL licence and, to that extent financial performance of the clubs is evaluated by the Institute of Chartered Accountants in Australia (ICAA) Annual Survey of AFL Clubs Financial Reporting. The report also highlights the associated corporate governance issues such as declaring directors’ indemnities and reporting on members’ financial liabilities.
The lack of financial solvency threatened the existence of several clubs in the 1980s.
At some stage during that decade, Collingwood was technically bankrupt and St. Kilda negotiated a scheme of arrangement with players and coaches who were owed money. Footscray was saved at the eleventh hour from a merger with Fitzroy through the ‘rattling of cans’, and Richmond undertook the same process with the ‘Save Our Skins’ campaign (Linnell, 1995).
During the 1980s mismanagement was rife with the focus by club directors more on self-promotion and short-term on-field success, than the long-term interests of members (Linnell, 1995). At a meeting of influential directors, called by John Elliot the President of Carlton Football Club, he noted that “There has been very little if any, responsibility being accepted by club directors” (Linnell 1995, p.29).
The fortunes of the clubs and interests of the members were not necessarily better served in the 1990s with an angry reaction to the proposed merger between the Hawthorn and Melbourne Football Clubs in 1996. The merger was ultimately thwarted with both boards in disarray after the event (The Age, September 1996). The ultimate penalty for club members was realised for Fitzroy Football Club supporters when the team was merged with Brisbane at the end of 1997. With only eight players from the existing team going north and the injudicious comments of the Brisbane club president, it was a virtual take-over (Mangan and Nauright, 2000).
There were attempts to solve the financial problems of some clubs by offering them for private sale to then ‘high flying’ (later failed and dubious) entrepreneurs. The Sydney Swans Football Club licence was sold to an entrepreneurial doctor who aggressively marketed the club and gave it some glamour. However, when his business interests failed, he was no longer able to support the club financially and to continue the aggressive marketing needed for the Sydney market. A similar situation occurred with the newly created Brisbane Bears Football Club. The club got into severe financial difficulties as a result of the collapse of the corporate owner Quintex. The financial distress was such that, the clubs would have been wound up by creditors, without a re-purchase of the licences by the AFL. One of the conditions of the repurchase was that both clubs reverted to membership organisations (Linnell, 1995).
The viability of several clubs is not secure today. The Geelong Football Club has a debt of over $1 million and has appealed to supporters for financial contributions through various initiatives (Geelong Football Club Financial Statements, 1999). North Melbourne Kangaroos, Western Bulldogs and Melbourne Demons have all lamented small membership numbers. The North Melbourne Kangaroos have been playing several of their ‘home’ games in Sydney to try to attract a new supporter base and generate a slice of the Sydney corporate sponsorship. This strategy however, appears in conflict with the desires of their membership base which is based in Melbourne. Similarly, the Western Bulldogs have attempted to break into the Sydney market but to a much more limited extent (AFL Draw 2000). Richmond Football Club has a strong membership but lack of on-field success over many years has seen a decrease in members in 2000, which contributed to the recently announced trading loss of $639,000 (Richmond Football Club Financial Statements).
The aim of this paper is to legitimise the focus of corporate governance in sport by firstly acknowledging the corporatisation of sport. It will then discuss the most recent thinking on corporate governance including consideration of shareholder versus stakeholder approaches to governance with the objective of presenting a framework for evaluating governance in the AFL clubs. The paper will focus on the clubs themselves rather than the AFL Commission. It is the club directors who have the fiduciary duty to act in the best interests of their clubs as represented by the members and it is the clubs who are most closely linked with a trading business. It is beyond the scope of this paper to evaluate the effectiveness of governance in any of the AFL clubs and to ascertain whether they adhere to the corporate principles of good governance. The paper merely aims to set the discussion of governance in sport in context and to present a framework to facilitate future research in this area.