WHEN it comes to the IPL, transparency is a vital tool for corporate governance in the future, but not in the manner in which it has transpired. However, rather than speculate, let’s focus on what transparency in team ownership means for global leagues, beyond the conspiracy theories and hair-raising twists. Lets assume for the time being that the equity is clean, the ownership isn’t illegal (admittedly legalese), and there isn’t any latent indication of unethical practices or conflicts of interest detrimental to the IPL. Taking this a step further, let’s just focus on why ownership guidelines are so rigorously maintained and enforced by professional leagues.
The structure of global professional sports leagues and the ownership pattern of teams within them vary. Some leagues require the teams operate as Limited Liability Companies (LLC), others are Partnerships (General or Limited), and still others are not even owned by the investors, only managed. Regulating ownership and management of teams in professional sports leagues, especially where there are multiple investors owning individual teams, is an arduous task. However, most leagues successfully manage to achieve this by setting out strictly enforced and clear-cut ownership guidelines stipulating the ownership eligibility criterion. Therefore, the National Football League (NFL), Major League Baseball (MLB), and the EPL despite different league structures and team ownership guidelines and patterns, have clearly defined league rules and ownership eligibility criterion that mandate compliance.
Regulating ownership is of primary importance in all leagues, as is meeting the due diligence threshold which would include credential checks, ascertainment of the ownership and management meeting the eligibility criterion, as well as ensuring transparency in equity ownership. However, there are many reasons for this that don’t necessarily deal merely with questionable shareholding patterns, and the now maligned ‘free equity’ component. The fact remains that leagues would like to ensure that the ownership and management of the teams is focused, committed, has a long term vision, and will contribute positively to the game, community, and the league, in terms of goodwill, image, and of course successful on-field performances. Rogue investors, or listed corporations are often discouraged due to their inability to show long term commitment, or focused management. In leagues there are strictly enforced barriers to entry and exit. It is also important to note that the office of the Commissioner in each of these leagues is the omnipotent lawmaker, and the Commissioners themselves are household names with significant clout. Selig, Stern and Goodell are as well known as most players and celebrity owners, and far more powerful when it comes to their respective leagues. This lends credibility, consistency, and a long term strategy/vision that enables accountability and ethics.
A case in point is the NFL which has a unique ownership structure allowing it to maintain strict control over management and ownership of teams. Unlike other leagues, there are no corporate owners allowed, and the ownership groups must contain twenty-four or fewer individuals. The general partner and his/her family must together own 30 per cent or more of the team, and change in ownership is strictly regulated. The reasoning behind this is again linked to ensuring focused management with a singular vision as well as consistent and long term ownership. Interestingly, all the NFL teams are American-owned.
On the other hand the EPL is heavy on foreign equity and ownership. 10 of the 20 EPL teams are foreign-owned . The due diligence and background checks are sometimes questioned with respect to their thoroughness. The ownership guidelines have been questioned, along with their implementation. While foreign investment has propped up the league and made it a global powerhouse, many of the clubs are debt-ridden, and the cleanliness of the funds and ownership has been a subject of mass speculation. Even Sepp Blatter has gone on record to voice his concerns. The only solution seems to be greater scrutiny, and a more thorough due diligence prior to entertaining team purchase bids from investors about whom little is known. Whether or not the IPL adopts similar processes will depend to a large extent on what the outcome of this fiasco is.
Transparency in team ownership was meant to be a positive development; a gradual move towards accountability, professionalism, and corporatization of the IPL. Then the Chirpgate epidemic ran amuck, as Tweety tested positive for a highly contagious variant of Avian Flu before it could be contained or quarantined. The Crash of the Titans.
