Company democracy v Club democracy

[Zappa 0]

Some interesting thoughts from Alan Harris (aka Brahim Hemdani)

 

According to my online dictionary, democracy, “is a form of government in which the supreme power is vested in the people and exercised directly by them or their agents under a free electoral system.”

 

Rangers International Football Club is a public limited company which is run on democratic lines. In order to participate in this democracy you have to be part of it. Being part of it means you have to buy shares in it. You don't get to take part in this democracy by buying a season ticket or club merchandise. If you own shares in it you can take part in the democracy by electing your representatives at the AGM or EGM specially called for that purpose. Whether you like the result or not (and this is not a comment one way or the other) we have just seen that democracy in action. This democracy is tightly controlled by company law. Any breach of that law is a criminal offence. It is, of course, true that not everyone pays the same price for their share of this democracy but that is how a stock market works and that is where this particular game is played.

 

RST to their credit (and no doubt some will find it surprising that I give RST credit for anything, but I have said elsewhere that I long ago gave up any bitterness towards them) raised £250,000 to buy new shares on behalf of their members and at the same time increased their own membership. However, if my maths is correct, then that £250,000 only purchased less than 0.5% of the issued shares of the plc. It is said that fans purchased new shares to a total of £5m which would be around 10% of the club and a figure of 12-13% has been widely mentioned as being in fan ownership.

 

It is worth noting therefore that individual fans own 25 times the number of shares in their own right, as are owned through RST. If my understanding is correct, RST is still a "one member one vote" democratic body and its share block will be voted in accordance with that one member one vote philosophy. Again, I would commend RST for polling their fans about the AGM resolutions. However, what this does mean is that Kris Boyd, who apparently purchased shares to the value of £5,000 through the scheme, gets the same one vote on how these shares are voted on his behalf, as Joe Bear who bought 10 shares for £7 (or whatever the minimum purchase was). I will leave others to debate whether or not that is democratic; but I would suggest that it was one reason why the RST scheme was not more successful. Many people might think that if you buy 10,000 shares and the next person buys 100 shares, you should have 100 times the say as that person.

 

Indeed that was one of the biggest stumbling blocks we faced with the 2010 RST Scheme because it was said that there were many wealthy fans who had the ability to put up say £50,000 plus (and indeed we were in communication with one such who said he had several hundred thousand to invest but had all sorts of conditions attached thereto) and why we considered a two-tier scheme.

 

So that is company democracy but it is quite different from what I will term club democracy along the lines of FC Barcelona or the German or Argentinian Clubs. All German football clubs, except for some historic works teams that are allowed to maintain their company affiliation, such as Volkswagen's VfL Wolfsburg and Bayer's Bayer Leverkusen, are required to have at least 51% member ownership. All Argentinian football clubs are entirely fan owned. No other form of club ownership is allowed. We didn’t see any hoardings around Glasgow extolling the competing manifestos or visions of David Sommers and Malcolm Murray as potential Chairmen/ Presidents of the Club for one simple reason: those who might see such posters, for the most part, are not their constituency. Most people know that FCB is a member controlled club with upwards of 175,000 “socios” who have the right to be elected to and elect the Board of Directors, to elect the President and, ultimately, terminate the Board and the President’s tenure. The members also vote on how the income passed to the FC Barcelona Foundation is used. Members are expected to contribute to ensuring the Club’s financial position remains sustainable, which includes membership fees and season ticket costs and indeed the capital and assets are the property of the socios.

 

For more details and analysis about the Barcelona model please see http://www.uk.coop/sites/storage/pub...ht3_bara_0.pdf written by Dave Boyle the former SD Chief Executive.

 

Unfortunately for Rangers fans today, those who were around in 1899 did not have similar foresight and chose a privately owned company as the Club’s structure (as did most if not all other such football clubs). Contrast with “cricket and rugby clubs, who chose co-operative forms of incorporation to ensure that the members – the supporters – retained control of the enterprise, and made the key decisions about the club’s strategy.” As is seen more than ever today, the objectives of shareholders do not necessarily reflect what fans might regard as the common good but rather the pursuit of business profit. Football is a business is a well worn phrase but true nonetheless. The challenge for Rangers fans who want a democratic club rather than a democratic company is to come up with a scheme which will raise enough money to buy the business and turn it into a members club.

 

That is a whole other ball game and I and others have written at length about such schemes. In the article that I co-authored with Arnold Black for Gersnet in August, I suggested that “In order to get a scheme off to the best possible start we are of the opinion that all season ticket holders (next season) should be automatically enrolled as club members”. On a seasonal note, that might be akin to the turkeys voting for Christmas; but they (the turkeys) might consider it if it meant that they would get a good feed and get out of the spotlight in the barn after a few months.

 

(Any resemblance between turkeys and the current Board of Rangers International Football Club is purely coincidental.)

 

Boyle mentions a figure of £600 per fan and that is indeed the starting point we had in 2010. Back then we thought that it might be possible to raise £1,500 over 5 years from 20,000 fans to cover the £30m (underwritten by McColl) thought to be needed to buy the club at that point in time. Of course back then there was a willing seller; but who is to say that there might not be willing sellers at some time in the next 5 years? What the price might be would be anybody’s guess but obviously depends on what the sellers paid for their shares. My feeling is that it could be as little as £25m but as much as £75m or more depending on our fortunes in the intervening period. But if every season ticket holder was willing to pay £20/month for 5 years you would be half way there and we have several times that number of fans worldwide.

 

Some food for thought perhaps as we prepare to don our funny hats and tuck into our Christmas fare.

 

Company democracy v Club democracy

[D'Artagnan 173]

An outstanding article - there is just no substitute for expert knowledge.

[plgsarmy 111]

Perhaps I'm taking things to personally but why dwell on the RST scheme and BH's perceived 'weaknesses' and gloss over the fact that about 17% of the shares were bought for 1p and not market value. Imagine if the government decided that general election votes in future was based on the amount of tax that a person paid in the previous year.

Edited December 23, 2013 by plgsarmy

[pete 2,499]

Perhaps I'm taking things to personally but why dwell on the RST scheme and BH's perceived 'weaknesses' and gloss over the fact that about 17% of the shares were bought for 1p and not market value. Imagine if the government decided that general election votes in future was based on the amount of tax that a person paid in the previous year.

 

Unfortunately there are many things based on what you earned in past years. My alimony to my ex-wife was based on years that I worked 12 hour shifts to give her a good life and then paid the penalty because I did it in the years thereafter. That is obviously nothing to do with this situation.

[bossy 0]

BH's 'expert knowledge' notwithstanding, what we have seen at Rangers over the past 12-24 months is a prime example of Agency Theory whereby management pursues their own interests at the expense of shareholder value.