What If No One Owned Chelsea FC?
(Bloomberg Opinion) -- Chelsea Football Club is having to function without its wealthy shareholder after proprietor Roman Abramovich was sanctioned over his links to President Vladimir Putin following Russia’s invasion of Ukraine. Buyers are now queuing up in anticipation that the U.K. government will permit a sale of the West London team. The situation revives questions about whether a soccer club should have a rich owner — or indeed any owner — at all.
The directors of Chelsea FC, the Abramovich-controlled outfit that owns the team, are being forced to run the club as if it has no shareholder. It can carry on its sporting activities but Abramovich can’t benefit financially. There are government-imposed curbs on revenue-generating activities and spending. The focus necessarily shifts to the other stakeholders and creditors, including fans with season tickets, players, staff, and suppliers. In particular, there should be a daily assessment of whether Chelsea can avoid entering administration.
The monthly wage bill, reportedly 28 million pounds ($37 million), will increase in July as players return from loans to other clubs. While a sale could provide an expedient way of lifting the current restrictions hampering Chelsea, the shareholder-less company is in fact a good model for soccer — and one to which the game might ultimately aspire.
Some amateur clubs, as well as charities and non-profit organizations, already choose to become what are known as companies limited by guarantee, a corporate vehicle that is owned by no one. Governance takes the form of a regular board, appointed by “members.” In sports, these would typically be supporters: The model is effectively a form of fan ownership, albeit without the fans putting in much cash.
The mixed blessing of this structure is that investment is funded only by debt or accumulated profits rather than equity. Teams must live within their means. That’s fine provided every club operates under the same constraints and governance is strong enough to prevent borrowings spiraling out of control. But so long as even a handful of rivals adopt a shareholder model, the financial playing field is uneven. Being an owner-less club works only if everyone has the same structure, or if there are constraints on shareholder-owned rivals, either in the form of regulation or stock-market pressure.
Financial fair play rules introduced more than a decade ago have limited the ability of wealthy owners to buy their way to sporting success, which is what Abramovich did with Chelsea. That said, it remains possible for clubs to run at a loss, and there’s clearly scope for the framework to become tougher. A fan-led review of English soccer called in November for the establishment of an independent regulator with the remit to ensure financial sustainability, so that soccer clubs would not be “the playthings of owners.” It also advocated curbs on owner subsidies if such injections destabilized the wider league. These proposals make sense and ought now to receive a fresh impetus.
For some suitors, such as private-equity firms with an eye on a solid financial return, the prospect of future tougher curbs on player spending could be attractive. If soccer in general is forced to become more disciplined, an investment in Chelsea becomes less risky. The aborted European Super League, with its attempt to create a closed competition where the worst performers weren’t relegated, was essentially an initiative to remove the incentive for clubs to outspend each other.
Maybe jettisoning shareholders is too idealistic a model for sports. But let’s at least have owners who don’t spend their way to trophies.
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Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.
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