Interested?! How sports organisations can help manage conflict of interests

For example:

• in January 2021, World Rugby’s Council endorsed a package of governance reform recommendations; and
• the outcome of UK Sport and Sport England’s review into its joint Governance Code is expected in Spring 2021.

This note focuses on one element of good governance – managing conflicts of interest, given that conflict of interests arise frequently in sports organisations. Conflicts of Interest within sport Conflicts of interest are exacerbated by the very nature of the vast majority of sporting federations and governing bodies. Typically, such sports bodies seek to act in a way that is good for its sport as a whole but are established as “member organisations”, in other words, representative of their members. The members’ interests are often in direct competition with the sporting federation or governing body. For example, International Tennis Federation and its members (principally each national tennis association) are all competing for sponsorship and licensing  revenues from the same corporates who have determined that their sport is one they wish to invest in. Notably, these inherent competing interests come to a surface in the decision-making within such sport bodies.  It is extremely common for the boards of such sport bodies to have directors who have been nominated/appointed by one or more of its members (Nominated Director). Nominated Directors are integrally involved in decision-making as they serve on the board and committees/sub-committees of the sports federation/governing body whilst retaining their involvement with the member body. From our experience, conflicts of interest can arise (in addition to those that apply more generally to directors) because the Nominated Director:

• has loyalty and obligations to its nominating member body often competing with the interests of the sporting organisation;
• may also be a director of the nominating member; and
• has access to sensitive information which is confidential to the sports organisation but of interest and valuable to the nominating member.

A recent high profile example of conflicts of interest within sport is the Scottish Professional Football League (SPFL). Seven of its ten directors are elected representatives of the clubs.  These directors are inherently conflicted when the matter to be decided upon impacts the football club to which they are connected.  Given the principal role of the SPFL is to manage the league these clubs play in, such conflicts are regular.  Further it is, perhaps, unrealistic to expect a director to act in the best interests of the SPFL if those interests conflict with the interests of the club he/she works for on a day to day basis . Key Recommendations Managing conflicts of interest within sports organisations is critical to effective decision-making within sports organisations, maintaining integrity and to ensure public trust. At Onside, we have a wealth of experience of helping sporting organisations manage conflicts of interest. Our key recommendations are:

• Independence – consider whether the sports organisation would benefit from a greater degree of independence in its decision-making bodies. This can be achieved by appointing a significant proportion of independent directors whose only interest is the organisation itself and who can bring relevant skills and expertise. Such independent directors can complement, and even hold to account directors from within the sport/organisation.  Directors with relevant sport experience could also be selected following an open recruitment process rather than nomination.
• Recognise – we recommend that a sports organisation implements and maintains a specific conflict code of conduct. This will educate all relevant people as to when a conflict may arise, the different risks and what action should be taken e.g. declare the existence of such conflict (before considering agenda items) and either absent themselves from any such discussion or decision or ensure that it is authorised (see below).
• Manage – a sports organisation should establish a clear procedure to review conflicts of interest and (where appropriate) authorise conflicts, for example, when the relevant number of the other decision-makers and/or stakeholders agree and/or where the conflicted individual is not exercising influence. The procedure for declaring and authorising conflicts is also typically set out in the sports organisation’s constitution or regulations. For example, World Squash attracted criticism when the chair refused to absent himself from decisions around his own behaviour.
• Record – we recommend that a sports organisation maintains a full register of each conflict and the steps taken as a result, including in the minutes of relevant meetings.
• Confidential information – a sports organisation should carefully consider the disclosure and use of its confidential information, particularly in light of any Nominated Directors, including as follows:
• Dissemination – implement systems to control the dissemination of confidential information i.e. to those with a strict business case to receive it; and
• Permitted Use – ensure confidential information is only used to assist the sports body achieve its purpose and objects.
• Terms of reference – we recommend that Nominated Directors have clear terms of reference, setting out, amongst others, their duties and authority and reporting responsibilities.
• Compliance – sanctions should be in place for failure to declare conflict of interest or failure to follow the rules, which ultimately could result in the resignation of the relevant director.
• Sport Codes – sporting organisations should check that they are compliant with any applicable code, for example implemented by its international federation or national governing body and/or other applicable code, such as the UK Sport and Sport England Code of Governance and/or The Principles of Good Governance for Sport and Recreation.
• Directors duties – all directors should be mindful of complying with the statutory duties, including avoiding a conflict of interest.

If you need any assistance with the issues raised in this note, please contact Harriet Leach (harriet.leach@onsidelaw.co.uk) or Jamie Singer (jamie.singer@onsidelaw.co.uk).