The scandal surrounding football is a prime example of the importance of good corporate governance, and what can be done to promote it, Badr Jafar writes.
Fifa arrests provide object lesson for corporate governance
On the morning of May 27, Swiss authorities in coordination with the FBI. arrested seven international high-ranking football officials at a Zurich hotel.
Hours later, the US justice department announced it was bringing charges against nine Fifa officials and five others of alleged serious criminal offences including “racketeering, wire fraud and money-laundering conspiracies”.
On the same day, authorities conducted a raid on Fifa’s headquarters and announced their own criminal investigation into “irregularities” in the awarding of the 2018 and 2022 World Cups to Russia and Qatar, respectively, targeting allegations of “corrupt behaviour and money laundering”.
Whatever the outcome of these investigations, it is clear that football’s governing body, established more than 110 years ago, is in the middle of a legal, commercial and public relations crisis. For any organisation – public, private or not-for-profit – to find itself in such a position is a sign that serious mistakes were committed, to say the least. There can be no doubt that Fifa’s corporate governance processes, which 209 football associations across the world have put their trust in, have been grossly inadequate.
This should be a cautionary tale for businesses everywhere – including here in the Arabian Gulf – on the need for transparency, accountability and anti-corruption measures that can give your stakeholders confidence in your practices and trust in your outputs.
Specifically, I believe there are a number of important lessons that can be learnt from what has already emerged from the Fifa scandal.
First, the scene for good or bad governance always is set at the top. When senior executives of any organisation are personally implicated in alleged corruption, alarm bells should be ringing about the kind of corporate culture that has been allowed to develop on their watch.
Second, a lack of transparency does not just limit an organisation’s ability to prevent governance failures.
It also limits its ability to defend itself against allegations of corruption and maintain the trust of its stakeholders. When Fifa appointed the former US federal attorney Michael Garcia to conduct a review of the ethics of the 2018 and 2022 World Cup bidding processes, it inadvertently scored an own goal with the treatment of his 350-page findings by announcing they could not be made public for “legal reasons”.
Subsequent public pressure compelled Fifa a few months later to publish a 42-page “summary”, which was described by Mr Garcia himself as “materially incomplete” with “erroneous representations of the facts and conclusions” and left many wondering what the organisation had to hide. Mr Garcia subsequently resigned as the Fifa ethics investigator in protest.
Third, when organisations have an international footprint, their activities in one market are often subject to the jurisdiction of regulators in another. In the Fifa example, the defendants’ use of the American banking system, in addition to the hosting of meetings in the United States to plan their alleged activities, in part gave the US department of justice the authority it needed to facilitate their arrests in Switzerland.
Fourth, governance failures at one institution can have far-reaching effects on its stakeholders and their reputations. The allegations levelled at Fifa have put immediate pressure on large sponsors such as Visa, adidas, Coca-Cola, McDonald’s and Hyundai to take action, expressing serious concerns over the developments. In good times and bad, their reputations are tied to that of international football.
Even Interpol has distanced itself from the troubled football body, suspending a 10-year, €20 million (Dh81.6m) partnership it established with Fifa in 2011 under the banner of “Integrity in Sport”.
At a more basic level, I believe these events also offer an important lesson for the rest of us about the cost of accepting that certain things cannot be changed. You might call this a kind of apathy tax. After all, questions about the integrity of global football are not new. If even half of what has been alleged in recent years turns out to be true, how and why was this allowed to continue for so long?
We may argue that it was out of our hands, but consumers and other stakeholders often have much more power than they think to hold organisations to account and bring about change within high-profile institutions. The #NewFifaNow campaign established in January is one example of how creative campaigning and social media can apply pressure to stakeholders (in this case, sponsors and national football associations) and go a long way in helping to shine a light on issues of concern and necessitate remedial action.
Governments also have an important role to play here. While it is always better for businesses to be proactive when it comes to preventing corporate corruption, regulators know that not everybody will always play by the rules. They must put mechanisms in place to investigate indications of corruption before it is too late, with a view to protecting the integrity of their markets.
For example, the establishment of a national integrity commission, along the lines of Saudi Arabia’s recently established National Anti-Corruption Commission (known as Nazaha, which means “integrity”), is something that could be considered by other countries in the GCC.
Good governance is a culture as much as it is a practice. It is a set of beliefs as much as it is a set of rules. The crisis engulfing global football demonstrates how all of us, particularly in business, must always be vigilant about our own governance practices and those of the institutions we put our trust in. When the culture of any organisation is allowed to spin out of control, there is no telling if things will ever be the same again.
Badr Jafar is the chief executive of the UAE’s Crescent Group and the founder of the Pearl Initiative.
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