Dirty-moneyball

Henry Ker, Editor-in-Chief at Emperor, explains how rugby's salary cap scandal shows Saracens had big governance problems

Oh, how the mighty have fallen. The swansong of a scandal which has dominated rugby for the past three months, it has been confirmed that Saracens will not be part of the country’s top league, the Gallagher Premiership, for the 2020-21 season. They will be relegated as punishment for breaking the league’s salary cap, actions described in many quarters as ‘financial doping’.

In November, they were initially docked 35 league points and fined £5.36 million, however they have now been handed a further 70-point deduction after failing to get their house in order for the current season.

To put this into context for non-rugby fans, Saracens are the reigning league and European champions, with five Premiership titles and three European Champions Cups in the past decade. They provided eight of the 23 English players involved in the 2019 World Cup final, including the captain, Owen Farrell, with another part of the winning South African squad.

Tom Fordyce, the BBC’s Chief Sports Writer, likened it to if Sir Alex Ferguson’s peak Manchester United team had got the drop. It’s like if Usain Bolt were kicked out the Olympics, Serena Williams out of Wimbledon or Muhammad Ali stripped of his belts for cheating. Its repercussions will be enormous.
Perhaps because of the romance of sport, we sometimes gloss past the administrative side of the game, but good governance is just as essential as at any FTSE company. However, for several reasons, including the history of amateurism and involvement of enthusiastic millionaire owners who bankroll clubs and wield disproportionate power, sometimes the governance performance doesn’t match that of the one on the pitch.

Playing fair

Since 1999, the Premiership has operated with a financial salary cap (currently £7 million, alongside various dispensations). The idea is to encourage a level playing field avoiding a few teams splashing the cash to take the best players and skew the league.

Saracens, however, were found guilty of breaking this cap over a three-year period. Among other things, the now former club Chairman and owner Nigel Wray entered into undisclosed joint ventures with players on properties and made payments for players’ image rights and events appearances that were deemed excessive. These actions were considered to count as extra salary to players and should have been disclosed. While the independent panel described Wray’s actions as ‘reckless’ and concluded there was no deliberate attempt to breach the cap – a view not everyone holds – there were clearly serious governance issues, before and after these revelations broke.

(No) locker-room talk

There was an obvious breakdown in communication with the league’s governing body. Despite there being an official salary cap manager, it seems there was little dialogue between them and the club. Indeed, Wray recognised one of his primary failings as ‘failure to consult with PRL’s salary cap manager prior to entering into any agreements and then disclosing the transactions to him.’ This seems an astonishing oversight.

There have long been suspicions that Saracens must be breaking the cap – particularly as they continually added to a squad of seasoned internationals – but incredibly it took journalist Laura Scott, then at the Daily Mail, to break the story by checking Companies House for information on the joint ventures holding companies, which listed players and Wray as directors.

Transparent as muck

Indeed, overall one of the most glaring issues has been the total lack of transparency by everyone involved. Transparency is a fundamental principle of governance. It’s a key tenet of UK Sport’s ‘A Code for Sports Governance’ (although Saracens is not actually at the specific behest of this), while Lord Moynihan, former Sports Minister and Chairman of the British Olympic Association, told me transparency is the first 'building block for good governance'. He added ‘the decision-making process and the outcomes of those in charge of sport need to be wholly transparent and we are a long way from that point.' This sentiment is certainly true here.

How exactly the cap had been breached, by how much and when, was not initially disclosed, and only now has the full 103-page judgement from Lord Dyson been published, following a tit-for-tat between the two sides over who it was holding it back from publication (or not).

And it is not the first time. There was a previous investigation back in 2015, where a confidential deal and a commercial settlement struck between some clubs over salary cap differences. The details of that investigation have still never been public. Former England player Brian Moore wrote in the Telegraph at the time: ‘In a moral maze of which Kafka would have been proud it is scarcely believable, but true, that Premiership Rugby won’t tell their own clubs the amount of the settlements or confirm the methods.’

Pulling the drawbridge up does no one any favours. Moore went on to conclude ‘fans are left without answers and the rest of the Premiership is drawing their own conclusions. Financial doping, cheating, uneven playing fields are terms being widely used about this sordid compromise.’ For many months, that statement was as true today as it was four years ago. At least some progress has been made in the past week.

Rampant culture

It also feels particularly galling because Saracens, as a club, promised so much more. They sold the rugby and wider community a seemingly more-enlightened vision of what a club could be. They were led by values and a vision, they worked hard to create an ethos which everyone involved at the club lived, both on and off the pitch. They saw themselves as a ‘wolfpack’ not an employer and employees. They also worked harder than any other club to prepare their players for a life after the game and were active in their community.

And while they did all that, they didn’t forget about the rugby. They invested in their academy and brought through promising young talent; they developed the core of the current England test side. Crucially, they also won.

That work, like their trophies, will now be forever tainted, intertwined with the shame of this scandal.

And arguably this positive culture and Wray, the owner’s, benevolent attitude contributed to this in the first place. In Wray’s own words ‘my intention with co-investments was always to support players beyond their playing careers.’ But whatever the morality of the intentions, whether potentially hubris clouded judgment in the belief that others would recognise their way as the right one, their actions were wrong. Governance structures are, in part, there to stop a rampant culture from eating itself and careering down the road to ruin – just as the Silicon Valley culture of to 'move fast and break things' contributed to issues at tech firms like Uber, Tesla, Facebook and Theranos.

Broken systems

In retrospect, Wray’s position as Chairman when he was also the owner should be called into question. Did his undisputed passion for the club, coupled with the power of the chairman role prevent some of the governance checks from working. There was potentially a lack of independence on the board full stop.

So, it is at least encouraging to see Saracens’ new Chairman Neil Golding’s focus on governance, stating unequivocally ‘my top priority is to ensure that our processes are robust and stand up to the highest level of scrutiny going forward.’ Golding brings new independence to the chairman role and plans to strengthen the board with the appointment of further non-executive directors.

While Premiership Rugby mentions a formal whistle blowing policy on its website, where people can speak to the Salary Cap Manager via email on a confidential basis, surely this needs reviewing given the failure for anyone to raise the issue in the last four years. It could be argued there is also a lack of effort by the league to educate club staff on the salary cap so someone would be able to recognise a breach.

New balls please
Saracens acceptance of relegation may be an attempt to draw a line in the sand, but this debacle is threatening to rumble on. Saracens’ interim CEO Edward Griffiths has just resigned after 26 days in charge, while there is the suggestion that the national body, the Rugby Football Union, is considering a further charge of misconduct.

Sport has a history of scandal – from FIFA to athletics and the IAAF, Formula One and many others – and as Lord Moynihan says, ‘The common denominator of all those major problems was weak governance.’ This story is no different. Because of poor governance, failure to communicate and an absence of transparency, Saracens have taken an unedifying fall from grace.

Moore’s 2015 comments once again feel appropriate: ‘fans will not forget which clubs are culpable and the fact that they did not have the balls to be transparent. It is the cover-up that has done most damage and the cynicism it generated will be difficult to remove.’

The author of this blog is Henry Ker, Editor-in-Chief at Emperor, an employee-owned corporate communications agency, former Editor of Governance and Compliance magazine, and columnist for The Rugby Blog.

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