10/1/2013

UNIVERSITY OF THE FRASER VALLEY

Case Study and Ethical Dilemma 6

SHREY BUDHIRAJA
200106769 BUS 400

Corporate Governance of Professional Football Clubs: for Profit or Glory?

Every professional sports league in the world, regardless of the sport or the location of the league, has a specific governance structure that each team or club must function under. Modern football is developing through commercialization as they need more funds to buy more experienced players for the club. Thus a strong link has been developed between a clubs governance structure, spending power, and success. This case again revolves around the dilemmas of money and power which overpower the authenticity of the sport. As the technology has advanced such as TV, Radio and the Internet which has more fans and people inclined towards is gaining immense popularity all because of these broadcasts of International sports and commercials. A significant amount of clubs revenue is generated from these broadcasts which feature players in advertisements not just in football. A game always has to be played for the nation, fans and followers not for profit, only then the fun arises. Commercialising makes it loose its charm, the players start playing for self-interest/money and that is the situation they lose respect, followers and dignity. Theory of Justice is actually justified only when no money is involved and no players are bought or sold. If the players arent ethical in their game play then neither would the fans be enthusiastic supporters. The Clubs main aim these days is to increase its spending power so that they can buy extraordinary skilled players. For that they deviate from their ethics of virtue or the moral character and partner with millionaire companies and brands so that they earn maximum revenue and spend it on their players. This is a vicious cycle where everyone is playing for its self-interest. The business man is buying the team to see it win and earn money as well as encouraging, promoting betting. While the players have their own self motive and greed for money. The club wants fame and revenues and for that it is willing to buy and sell the valuable players just to win. Popularity amongst the people have again made the seats to view really expensive due to which the fan following has lost to great extent. Ethics of duty towards the citizens of the nation who promote the game is not being adhered to which is a serious cause of concern. The biggest asset which a follower gives to its supported team is TRUST. To regain trust the clubs have initiated a government funded initiative, Supporters Direct. This collects shareholdings from fans to involve public accountability and governance in the functioning of clubs. Now these clubs are being involved in social events and frequently they raise social issues for the benefit of the state. CSR programmes have been launched on behalf of ethics of duty they have towards the citizens. Football worshipers would certainly react to such events when its of their own interest. Club leadership in case of Real Madrid and FC Barcelona is with the members who watch and pay that is they are shareholders who have ownership and voting rights on the club. The concept of Utilitarianism where active members of the club could bring out a change and reduce commercialisation of their favourite game. Only fit and proper person who do not have a monetary motive can be members/owners of club. Recommendations were also made in favour of supporter led governance where ticket prices would be less and more privileges and facilities would be provided to supporters. Also young players should be supported who intend to play for community and not for self. I am totally in favour of the fact that football clubs should play for the community first and then for the money they get. If the clubs are owned and run by supporters no bias or unethical practices would take place. Commercialisation of the game should be stopped. Egoism leads to unethical practices and thus the dilemma arises profit or glory?

Who Cares whose Shares?

Ques 1 What are the main ethical issues in this case? Ans 1 The main ethical issues in this case are Insider Trading The stocks as bonus were given to me by the company in due faith that they would be kept safe and no unethical trading would take place. So as per my moral duty i should stick with the company or leak the information /foreseeable loss which my close friend could suffer due to the decline in share prices. Here comes the dilemma one side is a close friend/personal relationship and on the other side is the business performance which is at stake. The companies trust on me as an ethical employee is at stake and contrary to it is the loyalty towards my friendship. Ques 2 Who are the main stakeholders here, and how would you compare the relative importance of their stakes? Ans 2 The main stakeholders here are 1) Shareholders They have purchased part ownership rights in the firm and are directly linked to the firms performance such as Freddie who wants the share prices to rise so he could get better returns for his shares. 2) Employees Their performance is linked to the bonus they would get if they performed well in form of shares. Thus if they perform well their own share prices would go up if not they themselves would face a loss. They have an advantage as they can usually foresee the performance of the company and might indulge into insider trading. 3) Executives They have a profit motive for the firm as they are the ones who run it so the companys good performance is their primary motive.

Ques 3 Explain how would you ultimately decide? Ans 3 Some of the factors which would resolve my ethical dilemma are 1) Integrity Integrity is at stake either I go for truthfulness and fair dealings , do not leak companies private issues to his friend outside for the sake of company or else he obliges his friend by telling him about the falling share prices protects him from losses which I can foresee. I would rather not go against my Integrity as it is difficult to regain as compared to little losses which can be made up for. 2) Objectivity My objectivity would be at risk if I allow a personal relationship to affect my legal and ethical duty towards my employer. Business and personal relations should never be intermingled thus I might sell of all my shares but would not leak company information.

3) Professional Capability & due care A duty of care has to be kept for the company and towards the law. As passing on the insights or secrets of the company is a serious offense and against professional code of conduct. 4) Confidentiality It is the moral responsibility of the employee/manager to keep business information confidential and refrain from disclosing it. 5) Professional Behaviour Personal relationships and business needs to be kept to make maximum profits. Whether it may be immediate family members too. Trust and goodwill has to be maintained by your own acts. Thus I might sell of my own shares but would not indulge in insider trading.

Ques 4 Is there a difference between acting yourself on the information you were given and passing this information on to Freddie? Ans 4 Yes there is a major difference amongst the two as if I know and can speculate that the share price is going to fall in the near future I might sell of my shares so that I do not face a loss. This is not against law or the ethics but if I forward the information to Freddie that would be leakage of business information to outsider for personal gain which is a serious offense with the law and also unethical which could lead to the company in losses. Also its share prices would fall and goodwill would be at stake.