Reference no: EM133000035

MGT3SGV SPORT GOVERNANCE

RISK: ISSUES FOR DIRECTORS

Case Study: Essendon Football Club

On 4 February 2013, the then AFL CEO, Andrew Demetriou, told the Essendon Football Club (FC) Chairman, David Evans, that a major report accusing Essendon of doping was about to be made public. Whether or not the Australian Sports Anti-Doping Authority (ASADA) had already determined to investigate the Essendon FC prior to Essendon CEO, Ian Robson, phoning ASADA with the authority of the Board's Chairman, Evans, to "self report" is immaterial. Following Essendon's press conference of 5 February 20133, where Essendon Senior Coach, James Hird stated: "As a leader of the football department, as the coach, I take full responsibility for what happens in our football department", the role of the Essendon FC Board in (a) preventing and (b) containing risks to the Club came sharply into focus.

With the more column inches in Australia being devoted to the scandal that engulfed the Essendon FC following these allegations than any other issue relating to the economy, national security, humanitarian disasters and international conflict, it is timely to review the governance implications arising from this scenario.

Background: The December 2011 Constitution of the Essendon Football Club indicates that it is a public company limited by guarantee under the Corporations Act.4 Under clause 54, the Board of Directors consists of between nine and ten Directors, constituted by not more than six Elected Directors, and not more than three Appointed Directors and an executive officer, if appointed as a Director under clause 71. Ian Robson was appointed as Managing Director and CEO in 2009.5 The 2012 Annual Report indicates that there were ten directors eligible to attend the 14 meetings held during the financial year.6 The Constitution states that the Board has all powers of the Club, including the power to appoint the CEO and the Senior Coach, and to ratify the Selection Committee. The Assistant Coaches were to be appointed by agreement between the CEO and the Senior Coach.

Facts: The Essendon FC Board made the decision to pre-empt the 7 February 2013 press conference led by Ministers Jason Clare and Kate Lundy.7 At that media event, findings from the Australian Crime Commission "Organised Crime and Drugs in Sport" report following Project Aperio, alleged links between organised crime and doping in sport.8 This was described by one commentator as the ‘blackest day in Australian sport'. No sports or clubs were identified during this press conference.

Shortly after this media conference, the CEO of ASADA and the AFL announced an agreement to conduct a ‘joint investigation' into Essendon's 2011 and 2012 supplement program9, with the Club announcing it would fully co-operate with that investigation.10

CASE QUESTION 1:

Imagine you are an Essendon FC Board member receiving a call from your CEO on 5 February 2013 relating to allegations that a major report accusing the Club of doping is about to be made public. In considering what course of action to take, what types of "risks" can you identify (a) to the club and (b) to yourself personally?

Role of the Board in High Performance

Essendon FC launched its own internal investigation, conducted by Ziggy Switkowski, who released his report, the Switkowski Report, on 6 May, 2013.11 The first of several "key findings" was that the size of contemporary football clubs, including Essendon, led to issues around accountability, not contemplated by the current Constitution and Board structure. In 2013, Essendon FC employed: "Seventy-five people full time across all its functions and another 35 in part time roles. Annual revenues, and costs, surpass[ed] $50 million." Switkowski made the point that: "Where an AFL football department may have had 5 personnel 20 years ago (coach, trainer, physio) and perhaps 10 around 2000, today's AFL club may employ 30-40 people on the football side of the organisation. This requires formal structures and delegated powers, processes and controls and, depending upon the head coach's approach, may limit his close oversight of all matters to do with football."12
Switkowski is assumed to be describing Essendon FC when he observes that: "The organisation of most clubs is often divided into a commercial arm and a football operations arm, with each head generally reporting to the chief executive officer, who in turn reports to the board." The Senior Coach in this case also reported directly to the CEO, rather than to the Head of Football Operations. In Chip Le Grand's book "The Straight Dope", Le Grand claims that: "It wasn't in his [Hird's] job description to hire or manage the fitness and conditioning staff but it was within his power to call them out."13 Le Grand claims that Hird: "shares responsibility for Dean Robinson and Stephen Dank joining the club, [and] he encouraged them to bring a harder-edged, high-performance culture to the Club."14
It is not clear who at Essendon FC hired Robinson, known as ‘The Weapon', in August 2011. Le Grand's book claims that Robinson was: "given a fat salary, broad licence and a clear mandate to make the players bigger and stronger. He was put in charge of all fitness and conditioning, sports science and medical staff. He assumed responsibility for a substantial budget and was given authority to hire the people he deemed necessary to take Essendon from finals aspirants to premiership contenders. One of the first he hired was Stephen Dank."

CASE QUESTION 2:

While the Board appoints the Senior Coach, the Senior Coach reports to the CEO, who then reports to the Board. Le Grand claims that: "As with everyone else in a position of authority at Essendon, he [Hird] could have done more to prevent what happened in 2012, as he has admitted since."
(a) To what extent do you agree with that statement?
(b) Whose responsibility should it have been to check the credentials of staff employed in the sports science team, including Robinson and Dank?
(c) What role does the conflict between the goal of winning premierships and complying with the "rules" play in the culture of the Club and decisions made by the Board?
(d) What role could or should the Board have played to prevent this situation from arising?
Club CEO, Ian Robson, immediately resigned after the release of the Switkowski Report, accepting: "that he was ultimately responsible for the crisis that could lead to doping bans for several Essendon players."18 (Noting that up to that point, no Essendon players have had an anti-doping rule violation finding made against them.

CASE QUESTION 3:
Does the CEO bear ultimate responsibility? Could tightening up expenditure approvals through financial delegations; accountability and reporting, have prevented this situation from arising?

Attachment:- SPORT GOVERNANCE.rar