To what extent is the regulation of sport effective in terms of financial management of clubs?

An evaluation of corporate and financial governance, in the context of failing football clubs and salary cap clauses.

Abstract

The 2018 events surrounding the financial fair play dispute that arose between Manchester City Football Club and UEFA provides the background for this article. Much case law and literature has focused upon professional sport financial issues, including salary caps and financial fair play. Three specific legal issues are discussed here, however, framed by three core questions, and using European football as the primary example: do current professional sports financial management regulations (Financial Fair Play, or hereinafter FFP) provide sufficient deterrence against club financial misconduct? Do football clubs’ corporate governance principles differ to those applicable to other corporate environments? Are salary caps a viable football financial management option? The article will then argue the need for reforms to current football FFP approaches. The opening section offers definitions and explanatory notes on the relevant governance in sport, including what constitutes ‘financial fair play.’ Section two looks to the Manchester City Football Club - UEFA dispute, to offer analysis of the current financial regulations - and the long-term football governance consequences – to suggest that FFP has not (yet) translated into improvements for financial sustainability. Section three offer suggestions for reform, including the proposition that a well-constructed salary cap system would perhaps prevent future disputes. The conclusion further argues that an appropriate salary cap model provides for surer, more transparent financial governance than the current FFP system.