Rugby League Commission Fails Its First Test
Written By Bruce Teague Thursday 14th June 2012
Racing people please note: running big sport is becoming a target for change.
The unlikely duo of Labor powerbroker Mark Arbib and General Peter Cosgrove (both retired?) is looking into the governance of Rugby Union. Cricket is still thinking about whether the old-timers should give up their God-given right to rule (for the uninitiated, that means NSW and Victoria) in favour of a more democratic setup. Soccer is in a constant state of flux between billionaire Frank Lowy and billionaire club owners.
But the most dramatic of all has been the dumping of its apparently successful CEO David Gallop by the newly formed ARL Commission â€“ an independent group headed by chairman John Grant, a former player and now successful businessman.
Grant made his view clear, seemingly with the backing of some other board members, with these comments to the Sydney Morning Herald: â€śThe game has been a bit preoccupied with … getting the best outcome on the field … with the logical extension that weâ€™ll generate revenue off the back of that. We want to shift that emphasis, acknowledging that weâ€™ve got a game which is in demand and of great value, so letâ€™s now go and push the revenue lineâ€ť.
Game first, revenue second, versus revenue first, game second. The words are plain but is the meaning straightforward enough? And how do you apply the preferred principle? Fans will always weigh in favour of the game but they also like to see the best and to sit in comfortable seats, both of which cost money. So somebody has to make decisions which satisfy both needs.
How does that affect racing, particularly?
To throw more light on the possibilities itâ€™s necessary first to go back to the ARL. A key element in the recent upheaval has been the negotiation of TV broadcast rights, which are the lifeblood of any major sport. Here, the ARL Commission â€“ prior to the Gallop sacking â€“ assigned three of its number to take over that process. To emphasise the point it also appointed an outside media organisation to advise it.
In other words, it took over from Gallop what had been his domain. He was obviously not happy about it. And why should he be?
Consider the principles involved in the operation of an ordinary board of directors. They have three prime responsibilities:
1. To hire and fire the CEO.
2. To approve or reject major expenditure.
3. To set the organisationâ€™s strategic policy direction.
In turn, the CEO is there to carry out board policy and run the show.
While we do not know the fine detail of all the goings-on, it is plain that Gallop was well along the road in those TV negotiations, only to have the job suddenly whipped away. At the very least, this is a serious breach of protocol. It is one thing to do that after you have sacked the CEO (although even that is dubious), but quite another to do it beforehand.
Secondly, the board is now on a hiding to nothing as any failure puts it under the gun. In any event, and this may be the most critical matter, we donâ€™t know if the board members are sufficiently competent to do the job.
Whatever their personal qualities, their newness means they have no real exposure to running this particular business so they could well miss a point or two on the way. The same applies to the outside consultants.
Properly, the board should have kept a very close eye on TV negotiations, but from a discreet distance. It would always have been able to reject a Gallop proposal as it is a huge investment which it would have to approve in any case. Or it could have pushed Gallop down a different road if it was so convinced.
To do what it has done is to kill the chances of achieving a happy and prosperous organisation.
As another example, can you imagine three Qantas board members peeling off to conduct a study into the relative worth of Boeing or Airbus planes, helped by some outside mob with various skills? The idea is not only preposterous; it rubbishes the worth of expert employees who have been doing that job for years.
Anyway, as Herald commentator Roy Masters put it: â€śThe danger now is that a strong-willed administrator will not put his hand up for Gallopâ€™s old job, for fear that he will be ruled by committee, or by a chairman who believes he is also a chief executiveâ€ť.
But back to racing. Leaving aside Tasmania, which is run by the government, and Queensland where anything is possible, the remaining four Australian states have similar but slightly different board-management structures. In practice, how it works is probably as much a matter of the personalities as anything else.
Nominally, those boards are all independent â€“ if such a thing is possible when the Racing Minister appoints them all. The shareholders â€“ ie the public, including punters and trainers â€“ do not get a vote. Yet the Acts under which racing is conducted all allocate management responsibility to the board. In turn, that board allows the CEO to do certain things â€“ just what, we donâ€™t know because that is never publicised.
But, whatever else occurs, the broad evidence tells us that the boards sign off on a great many things themselves. For example, SA just announced that the board had approved a continuation of the finish-on lure. The purse strings in WA are controlled by RWWA, not Greyhounds WA, which is a completely different organisation. The previous WA Minister also made a goofy decision to ban (later quashed). The Victorian Minister and the GRV Chairman pop up more often than Eddie Maguire to hand out cash and open new toilet blocks. In Queensland itâ€™s hard to remember any decision made by the CEO for the last 20 years. However, a few years ago the chairman classed Betfair as a menace but the code is now happy to accept its dollars. Exactly the same thing happened in NSW. Both chairmen have now gone, of course.
Yet many of the above can readily be classified as operational matters which should be normally the responsibility of a CEO, not of a board of directors.
Perhaps we are in the middle of a long process? For donkeysâ€™ years, the leading employee was known as the Secretary to the Board, and had no management responsibility whatever. Then he changed to what was really no more than a Chief Clerk. Gradually, the title ewvolved to the more impressive-sounding, better-paid CEO, but there is little evidence that much else did. That may be why there has been considerable turnover in otherwise promising CEOs.
History is therefore a powerful influence on authority structures. So is politics â€“ over the years board members have frequently changed with the colour of the government. But the big thing missing is accountability. At heart, racing authorities are responsible to the public, as is the Minister himself. Yet if there is one thing that characterises racing boards of any kind it is that they tend to bypass the public/customers and concentrate their efforts instead on administering to participants â€“ owners, trainers and the like. By default, customer relations are left largely to the TABs, which themselves are prone more to ripping off mug gamblers than improving service levels and product quality.
Nominally, their enabling Acts require racing authorities to ensure progress and development but we have yet to see any useful way of measuring that, or of calling them to account. Arguably, it has not happened. Management by committee is giving us short change.
All of which helps explain why racing had steadily lost its influence over the last two or three decades, and has given way to the growth of other recreational interests, from pokies to sports betting.
Itâ€™s worth repeating: progress in racing will come when there is a major reform to club and authority structures. Not before. Itâ€™s been done quite often in other industries so why is modernisation blocked in racing?