Financial Fair Play, stadiums, supporters’ participation to the Club’s management: a chat with Mr. Gandini, AC Milan Organization Director -
May, 2013The closing sport season is, probably, among those that have stimulated at a European level the greatest amount of debates on issues that have no direct reference on the playing field.
We asked to Umberto Gandini (@UmbertoGandini), AC Milan Organizing Director and ECA Vice-President, to help us to better decipher what is going on, thanks to his direct experience.
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Q: Mr. Gandini, let's start with the main discussion "issue" in recent months: Financial Fair Play has started. How was this project born and up to what point it has been a path on which UEFA has cooperated with the other actors? Let me first say that I have never really loved too the adjective "fair", especially since it implies that those who do not respect the requirements are "unfair". However, the idea has been mediatically successful, so we have continued to use it.
The project is the result of a shared discussion, born from the inspiration of President Platini, but then reasoned between UEFA, the football clubs (represented by ECA), the Federations and players (represented by FIFPro).
The very first idea actually stems during the Champions League Final in Moscow in 2008, which saw Manchester United opposed to Chelsea. Two clubs which, for different reasons, at that time had very high debt: MUtd for the LBO transaction occurred earlier, Chelsea due to Abramovich will to achieve leading positions in Europe quickly.
President Platini initially considered that it was necessary to achieve a total elimination of debts. Within the ECA, however, we observed that the presence of bank debt, in itself, is not a negative factor, since it is traditionally an element common to all companies pertaining to different industries.
From there we started to build a regulation that was centered on balancing the budget, in the belief that this was the really interesting goal. And, not less important, in the identification of some parameters that would help to ensure the sustainability of the debt: this is the real issue.
Q: By the end of June we should know the first observations by UEFA Club Financial Control Body (the body created at UEFA to manage from a procedural point of view and on all assessments of compliance with the requirements Financial Fair Play, NdR) What kind of relationship exists between the individual and the CFCB Club? Does it all work mediated by UEFA and the national associations or meetings were held with the primary stakeholders, ie the Club, to have a concrete and practical comparison on individual aspects?The relationship between the individual Clubs and the CFCB is straightforward: each Club will send its data and documentation to have them assessed for Financial Fair Play purposes.
We do not really expect big differences in the approach between this "new" party and those who already oversee the budgets of the Club (the audit firm for the statutory financial statements, the Covisoc for the national license) considering that the CFCB can reasonably ask for clarification or additions to the documentation provided and then begin a contradictory to arrive to a shared view.
Should the position of CFCB diverge from the Club one and should this conflict lead to determine the sanctions against this club, then it will start the traditional procedure with the steps before the Disciplinary Committee and, subsequently, to TAS in Lausanne.
Q: What attitude do you expect from CFCB in this first phase of implementation of Financial Fair Play?I presume the CFCB will initially adopt a less formal and more substantial approach. The path in the implementation of the new legislation was deliberately built to lay down clearly the target, but also to put the Clubs in a position to comply with the requirements within a reasonable time. There are, in fact, structural components (the diversification of revenues, the salaries, the funding sources) that can not be changed within one or two seasons.
I think the CFCB will pay particular attention to verify whether, in the event of a Club's failure to comply with one or more parameters of the Financial Fair Play, it has started a virtuous path to reach the expected result or whether, instead, the problem has not been properly addressed.
The decision to identify a set of sanctions that starts from the "recall" to reach the "withdrawal of the title" will allow CFCB to dose appropriately its intervention, taking into account the overall context within which a Club has operated. I do not expect, thought, an "Inquisition" approach, but rather a management of emerging issues. In a resolute way (CFCB born for this and can not change its mission), but in also with an "understanding" approach.
In any case, I'd like to remember that the assessments made by the CFCB during 2013 will relate to the 2011/12 FY, ie one of the two that make up the first observation period. So this first year will be a step closer to the verification of 2014 Spring, when the very first sanctions would be decided.
Q: The subject on which everyone is waiting to see what will happen, and many believe to be the real "test" to see if the Financial Fair Play is "a serious matter", comes from the sponsorship "fair value" when coming from related parties: the most striking example is Paris Saint-Germain's contract with the Qatar Tourism Authority, signed with retroactive effect for 2011/2012. What is your opinion on what will happen?
Undoubtedly the case of QTI sponsorship of PSG is special. Much will depend on how the lawyers of the PSG will be able to justify the value (and retroactivity) of the sponsorship agreement as part of "related party transactions". To be honest … none of us envy at this time PSG! To prove that a sponsorship of 150 million is indeed withinh the "fair value" is complex and, as far as I'm concerned, difficult. But I also assume that if they moved this way they have build an effective line of defense.
As for the support of the French Football Federation is concerned, I think it's natural. Among other things, it is important to remember that the "fair value" is specific request coming from Financial Fair Play, but does not necessarely impact on each Federation internal assessment process. For which, therefore, PSG 2011/12 Annual Report was not liable to reliefs.
Q: What are the elements of the Financial Fair Play that, in his view, would need further consideration?I'm glad you asked me that question, because I think that the discussion in recent months has been too focused on PSG and Manchester City sponsorships, while there are other issues which, I believe, have not yet found a solution that ensures uniformity in the assessment process. I mean that there are differences in the accounting criteria of each nations and UEFA evaluation process still do not make all Clubs "equal".
A first example is the substantial absence of Annual Report official audit by most of the clubs pertaining to Eastern Europe (including Russia) Federations. I have the utmost respect, of course, the correctness of the owners and shareholders of the Company, but it is also true that we have a part of the UEFA world that has stringent procedures and request a third party (the audit firm) control, while another part of the same world can potentially draw up budgets and provide them to CFCB without these being subject to any external check.
A second example concerns a peculiarity of Spanish law, according to which annual contributions coming form the Club's shareholders are treated as ordinary income. This, especially when we tried to send a signal contrary to "football maecenas" is a bit incoherent. Why, for example, the 180,000 Barcelona shareholders can annually fund their Club and Abramovich (to say a random name) cannot?
A third example concerns a matter which has recently even led to the opening of an infringement procedure by the European Commission, which disputes some Dutch and Spanish clubs for having been beneficiaries of "state aid". Also in this case it is known that in some UEFA areas there are Governments, either directly or through subsidiaries, that deliver substantial contributions to the Clubs, as sponsorships or tax benefits.
Unfortunately, all these issues are not easy to solve, because it is clear that football clubs are, firstly, subject to the individual laws of their own Nation and, therefore, close their Financial Statements in accordance with those regulations. I also understand that it might be difficult to map all these specificities in order to fully identify harmonization criteria for the purposes of the CFCB controls.
What I hope to happen is that, quickly, also these matters will be addressed. We will then probably come to the determination that there are no viable solutions, but at least we will have tried.
Q: Considering that one of the major "problems" European football is the players costs, both in the market values and, especially, in wages, would it be possible to borrow salary cap idea, as applied in the United States?The US is very different from our reality. These are "closed" Leagues, without relegations. The number of subjects that need to share a certain approach is contained and directly concerned. I do not think, therefore, that the U.S. model could be applied as it is.
Salary cost reduction is actually a goal that most of the Club have (although they are sometimes themselves responsible for such a "race"). It clashes, however, with a series of obstacles not easy to overcome:
1- the need for the rule to be applied in all UEFA; differently it would create discrepancies that would lead to the impoverishment of some championships for the benefit of others;
2- the availability of the main "victims" of these decisions. For the moment FIFPro (European Footballer Union) has been open to listen but without special glimpse availability to an agreement.
In the meantime, however, the European clubs are increasingly signing contracts which provide a share of fixed salary and a variable in an attempt to bind as much as possible of the costs to the results obtained, in order to self-finance (as far as possible) the costs with the additional income.
Q: Let's change the subject and move on to the Supporters. In Europe there is a growing debate about how the may contribute to the life the Clubs team, also as shareholders. Supporters Direct is carrying out a project funded by the European Union. We would like to have your opinion on this phenomenon, in particular on any problems and constraints that you believe may prevent a gradual spread in Italy.What is happening in Europe is very attractive. I think, however, that it strongly depends on a cultural factor.
In England, the fan-shareholder existed, today almost not anymore. So, even the "homeland" of this culture has actually abandoned this practice in the last decade: Premier League Clubs are owned by private investors, or at least have a control structure easily attributable to a specific subject , just like in Italy.
Germany is certainly the country where this model is more prevalent. Partly because at the time of the transformation of football clubs form "no profit" associations into normal companies Germay has expressly adopted the "50 +1" rule, that prevent an individual person to control a Club.
But to return to the concept of cultural tradition, we must not forget that Germany is a Nation where the entire economic system is based on the concept of participation: I am referring in particular to the direct employees involvement in the management of the company for which they work. It is clear that it is almost natural that the football team see the supporters having an important role.
If we come to Italy, I have to say I'm a bit skeptical on the actual possibility that supporters participation may succeed, bot for a cultural matter and also because the management model used until now forced the owners to important annual injections of money into the clubs, something that would not be possible for a normal supporter.
As far as I know, in Serie A only Genoa CFC has an experience of this kind, because 25% of its share capital were donated years ago by President Preziosi to "Fondazione Genoa". Perhaps this could be an interesting model, because Fondazione Genoa has the right to participate in the appointment of the governing bodies of Genoa (Board of Directors and Board of Statutory Auditors) and, therefore, can play a sort of warranty role with respect to the proper management of the Company.
I do not exclude that, in the future, the approach will change. Indeed, perhaps, if football clubs become truly self-sufficient, we may study how to have supporters participating to the Company life. But I think it will be hard to find a comparable situation to, let's say, Barcelona, Real Madrid and Bayern Munchen.
Q: Now l'ets come home, to Italy. At the beginning of April, FIGC published Football Report 2013, a photograph of our professional football. The debate emerged after the publication, and the solution invoked always the same: "let's hurry to approve the law on stadia". Can you tell us his vision about the stadium issue and, to the extent possible, the strategy for Milan also use this lever to increase and diversify the revenues of the Club?Italian Clubs, more than other belonging to the Big-5, strongly depend on television rights and from participation in European competitions. Unfortunately, the commercial revenues and those arising from the exploitation of the stadium are still marginal.
I think the slogan "property stadium" is, however, deceptive. It is not the ownership of the stadium that makes the difference, but the possibility of exploitation of the same by the Club, increasing the offer towards business customers, offering attractive alternatives to the supporters (the Museum, shops for the sale of official products, spaces for conferences and meetings).
We shall be careful to consider international examples as automatically "localizable" on our territory. I think of Milan and, although it is perhaps the Country "economic capital", I struggle to believe they we may find the same economic environment of, for example, Munchen.
Juventus, who is the team with the greatest number of supporter in Italy, has chosen a 41,000 seats venue. I can't say if if was a proper choice or not, but I would imagine they have pursued the goal of having a load factor consistently close to 100%, to get the maximum benefit in a sustainable investment for the team.
As for Milano, I believe there are conditions for the City to have two venues.
AC Milan wants to stay at San Siro, and if there was the possibility of turning it into a facility exclusively dedicated to us we would be happy to study and, where possible, to proceed with such a project. Probably the constraints that currently prevent us from taking full advantage of the system (in particular the needs of our mutual respect and Inter) would be eliminated and, then, we could increase the matchday revenues that, currently, I'm afraid came almost to a maximum of how much is allowed to get in the current situation.
Returning to the national debate, I would add, however, that the investment of a new stadium is not for everyone: care should be taken to the component of debt that is generated, which must be within reach of the Club.
Perhaps for this reason, in the past, there have been many projects that supported the investment in sports activities on the fringes of a commercial or residential that would allow a return of the expenditure.
I do not see anything wrong, because the goal of an investor – even more so today with the Financial Fair Play – must be to undertake profitable initiatives and leading a benefit.
But the sports component should remain the central element of the project and not be a corollary.
