A consultant’s view: Sponsor activism in sports governance – a growing trend

It is a regular lament that international sports bodies lack accountability to their audiences as, much of the time, fans, governments and other stakeholders have little direct influence (see, for example Roger Pielke Jr on this topic).

Commentators sometimes identify sponsors as a potential source of external pressure because of their important funding role for certain sports and the fact that large brands are obviously answerable on a daily basis to customers, shareholders and employees. While sponsors have traditionally kept a low profile when the rightsholder bodies they support get into trouble, there are recent signs that brands are adopting a more activist stance. I believe it could become a significant trend with important consequences for sports governance.

A commercial brand which sponsors a sports organisation seeks a collaborative, mutually beneficial association (press releases often talk about “shared values”). If the sports body becomes discredited then there is a risk of reputational damage to the sponsor. A decade ago, brands would occasionally claim that they sponsored the sport rather than the organisation behind it.

My view is that it is no longer viable to make such a distinction. One reason is that Corporate Social Responsibility (CSR) has become more central to the operation of large companies. As Archie Carroll explained a few years ago, “CSR in many firms is moving towards full integration with strategic management and corporate governance” (page 20). Public expectations of corporate behaviour are higher than in the past, at least in the western world.

In addition, companies in some of the heavily commoditised sectors which invest in expensive sports sponsorship deals are now said to rely on a social “licence to operate”: think of oil and gas, telecoms, electricity suppliers and so on. Trust among customers and communities is hard to earn and easy to lose. (Admittedly, this trend is not universal: the natural resources giants in non-democratic states may not feel the same pressure.)

In this context, it is not surprising that some sponsors should be more willing to intervene in sports governance than in the past.

Perhaps the most prominent example of an activist stance is the campaign by compression sportswear company SKINS which in January 2015 joined the New FIFA Now coalition and designated itself as “Official Non-Sponsor of FIFA”. As a challenger brand free from the eight or nine digit sponsorship deals of many of its competitors, SKINS has the confidence to take a bold, ethical stance. 

Reputational risks
When faced with a reputational risk through sponsorship, one of the options for a large brand is to comment publicly. NHL sponsor Air Canada chose this approach in March 2011 but the outcome was not what they would have hoped.

Zdeno Chara, playing for the Boston Bruins, shoved Montreal Canadiens player Max Pacioretty into the boards, causing Pacioretty to collide at speed with a vertical barrier. Pacioretty broke a vertebra in his neck and suffered a severe concussion (fortunately he made a full recovery). The incident was deemed to be foul play and Chara was given a five minute in-game suspension but no further penalty. 

The incident was shocking and came at a time of heightened awareness of serious injuries in the NHL. Many fans and commentators spoke out, calling for a tougher sanction. In an open letter to the NHL, Air Canada wrote:

"Unless the NHL takes immediate action with serious suspension to the players in question to curtail these life-threatening injuries, Air Canada will withdraw its sponsorship of hockey."

Far from causing the NHL to reconsider the disciplinary decision, the letter drew a menacing response from commissioner Gary Bettman, who said that if Air Canada decided “to do other things with their sponsorship dollars, that's their prerogative, just like it's the prerogative of our clubs that fly on Air Canada to make other arrangements if they don't think Air Canada is giving them the appropriate level of service."

In this instance the NHL clearly felt it held the dominant position and perhaps even the balance of public opinion, despite the fact that the lenient penalty for the incident had been widely criticised, including by the Canadian prime minister.

The NHL has subsequently taken some steps to address violence on the ice. Air Canada is no longer a direct NHL sponsor, although it is still heavily involved in the sport.

The course of events serves as a cautionary tale for sponsors considering going public on an issue that is of concern to them.

Rehabilitation of offenders
There are other cases where a sponsor’s intervention has contributed to the outcome which the sponsor sought. One example was the well-publicised episode involving footballer Ched Evans, who played for several clubs including Sheffield United and also for Wales before being convicted of rape and imprisoned in 2012. He was released half-way through a five year sentence in October 2014, at which point Sheffield United initially agreed to allow Evans to train with the club.

Sheffield United supporters and prominent individuals immediately expressed vocal opposition to the prospect of Evans re-joining. In the midst of the clamour, local firm DBL Logistics stated:

“DBL Logistics would end its back-of-shirt sponsorship with Sheffield United if the club employed a convicted rapist.”

Within a few days Sheffield United withdrew the opportunity for Ched Evans to resume training. He was subsequently linked with Oldham Athletic and other clubs but public opposition proved too strong each time.

The case raises difficult legal issues about the rehabilitation of offenders. As one of the club sponsors, DBL Logistics sensed the public mood and acted accordingly. The legal situation was less relevant than the reputational risk. While the action of the sponsor did not in itself force the football club to reverse its decision, it did add to the weight of pressure.

Traditionally, sponsors limited themselves to two options when faced with a crisis in a sports body they supported: ignore the problem, maintaining business as usual, or withdraw.

Telecoms company T-Mobile is one of several to have ended a cycling team sponsorship following multiple doping cases. In contrast, Nike stood by golfer Tiger Woods during his personal problems in 2009 that put off other sponsors.

As the examples from ice hockey and football cited above indicate, there is now a third option for sponsors: to make a carefully worded public threat in the hope of influencing the sports body, simultaneously demonstrating to the company’s stakeholders that it is taking a responsible stance.

Sponsors can exert positive influence on governance
I believe there is significant scope for sponsors to have a positive influence on sports governance behind closed doors, particularly if several sponsors act together. In many cases this will reduce the risk of the embarrassment suffered by Air Canada while potentially giving the sponsors more leverage. In the well-known IOC Salt Lake City crisis in the late 1990s there were some public comments from sponsors but much of the discussion took place in private. Handled well, the rightsholder and sponsors can claim some credit collectively at a later date if reforms result from sponsor pressure.

Before taking on a major sponsorship deal, or renegotiating an existing partnership, sponsors will usually consider the risks and potential response to various types of issues which could occur. Extra clauses may be included in contracts but, as we have seen, it is often the practical situation which matters more than the legal position when things go wrong.

In deciding whether or not to act, the primary consideration is usually the prospect of an immediate impact on sales (what Simon Chadwick calls “market-driven morality”). As consumer boycotts are difficult to organise, particularly for global brands, sponsors rarely feel compelled to take firm action. However, sponsors will also be wary of the potential impact on their reputation, which may be more readily damaged by a sports scandal these days than it would have been in the past.

In my view, many sponsors pay insufficient attention to regulatory risks in deciding whether or not to intervene in sports governance issues. If parliamentarians in the European Union, U.S. and elsewhere are irritated by sponsors failing to take a stand on a particular sporting crisis, it surely increases the chance of an unfavourable decision next time that legislation is debated affecting their industry sector. Painstaking lobbying efforts over a period of years can quickly be undone.

There is also the matter of legal risk. As demonstrated by the $25m USD fine imposed on Beijing 2008 sponsor BHP Billiton in May 2015 in relation to a charge of violating the U.S. Foreign Corrupt Practices Act, adequate procedures and precautions need to be in place. Now that anti-doping and match-fixing are criminal offences in a number of countries, sponsors could also face questions about what they knew and when in the event that people linked to their sponsorship are implicated.

In conclusion, it seems to me that sponsors, together with activist brands that may not have an official role, offer a promising source of positive influence on sports governance, and one which is likely to become more prominent. We may reach a point where sponsors expect to be represented in a formal way in sports organisation structures. Provided that conflicts of interest are recognised and managed, this could be a helpful change.

Big corporations and brands are by no means universally trusted to behave in an ethical way but they are directly accountable to stakeholders and used to dealing with intense scrutiny. Some of this experience and hard-headed realism can benefit sports organisations that the brands support.

The opportunity is there for a big sponsor to step forward and announce that it wants to help a sports organisation, in an appropriate and responsible way, to improve its governance. Adopting such a strategy could mitigate risk and also earn the brand some reputational benefit. Any takers?