Governance in Sport

Good governance does not in itself guarantee success on the sports field, but its absence almost certainly guarantees failure.” – Sports Australia

It was enlightening to read the mainstream news media regarding recent upheavals in the Rugby Australia Board, highlighting composition and leadership of the governing body of rugby union in Australia, and its oversight of the organisation, which was in financial difficulty even before COVID-19 restrictions impacted the game.

Mainstream media reported over the past months that private equity specialist Peter Wiggs, who joined the Board in March with the expectation of becoming the next Chairman, resigned because his “captain’s pick” (The Australian) for the next CEO, Matt Carroll, the head of the Australian Olympic Committee, was rejected by the Board.

Carroll was reported as being earmarked for the role “without going through a recruitment or interview process”, (The Sydney Morning Herald), and would replace former CEO Raelene Castle, who resigned suddenly in April.

The nomination process for the Board vacancies, which closed in March and saw three men join the Board, also raised concerns. Former Rugby Australia Board member, Anne Sherry, was reported by The Sydney Morning Herald as saying that the lack of gender diversity on the Board following the recent Board shake-up, was “a tragedy and a missed opportunity”.

If an ASX-listed company was reported on in such a manner, it would immediately prompt cries of poor governance and a failure to address now-established practices of transparency, and diversity. Why should a Board of a major sporting body be allowed to operate differently to what are recognised standards of best practice governance?

The Rugby Australia website says that “the Board is responsible for the activities and performance of Rugby Australia in both the short and long term. The Board operates in compliance with the ASX Best Practice Principles”.

This document is known in full as the ASX Corporate Governance Council Corporate Governance Principles and Recommendations. It was introduced in 2003 and has been revised four times, with the fourth edition being released in February, 2019. The Principles and Recommendations apply to companies listed on the ASX, but over time, has been seen as being relevant for organisations outside the listed arena, including not-for-profit organisations.

The ASX CGC’s Principles and Recommendations operate under an “if not, why not” regime, in which listed companies must report annually in a Corporate Governance Statement as to how the company has met the Recommendations – or offer an explanation as to why not.

One area in which the Rugby Australia Board is not reflecting best practice governance is in diversity of composition. The Principles and Recommendations state that: “The Council ….recommend(s) that boards of listed entities consider other facets of diversity, in addition to gender, when considering the composition of the board. In particular, having directors of different ages, ethnicities and backgrounds can help bring different perspectives and experiences to bear, and avoid ‘groupthink’ or other cognitive biases in decision making.”

There were no female candidates nominated to the Rugby Australia Board this year. As a result, the nine-member Board has only one female director, Sales Force ANZ CEO Pip Marlow, having recently lost its female CEO, and two former female Directors, Anne Sherry and former Australian Sex Discrimination Commissioner, Elizabeth Broderick. “It feels like we are going back into the past, not into the future,” Anne Sherry told The Sydney Morning Herald.

The timing couldn’t be worse, given the ASX200 has achieved the goal of 30% representation of female directors on Boards, and is now hoping to achieve 40:40:20, (40% each men and women, and 20% of either gender).

The goal to have ASX200 Boards comprise 30% of female Directors is the objective of the 30% Club, a global initiative to increase gender diversity on Boards and in senior management teams. It operates in 15 countries including the United Kingdom, the United States and Australia, and includes many male and female Chairs and CEOs as advocates.

In the UK, which has had its share of sporting governance scandals, the Chartered Governance Institute, (ICSA), has been promoting better practices in sports governance, including board diversity.

It’s 2019 report, Future of Sports Governance – Beyond Autonomy, addressed in part the need for the composition of boards of sporting organisations to reflect better the needs of the organisation, and the wider stakeholder and community expectations of boards.

“Even where directors of National Governing Bodies, (NGBs), and local sporting identities are voluntary, it should not mean that they are amateur,” the report sagely concluded. “The athlete seeks every opportunity to gain a competitive advantage…and that same drive for improvement is also appropriate for the boardroom.

“A board must adopt the skills, qualities and practices that are expected not just of multi-million-pound entities, but of organisations that seek to take young people, and shape them into valued members of society.”

Rugby Australia director, Hamish McLennan, a former Network 10 Executive Chairman and the Chairman of the ASX-listed REA Group, will assume the role of Chairman on June 15 this year.

A combination of business, media and Board experience, especially with ASX-listed companies, should serve him well leading the Rugby Australia Board to govern an organisation which is slowly emerging from the COVID-19 crisis.

Joining the Australian chapter of the 30% Club would be an early strategic move.