THE FOOTBALL DISASTER THAT CONQUERED THE WORLD OF SPORT / THE FINANCIAL TIMES COMMENT & ANALYSIS

June 11, 2014 6:27 pm

The football disaster that conquered the world of sport

By John Gapper

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Fifa has been a stunning success in spite of flaws that have been exposed as never before

©Ingram Pinn

Welcome to the World Cup in Brazil, brought to you by Fifa, a corporate governance disaster that is also one of the most successful multinational enterprises on earth.

The contrast between the Fédération Internationale de Football Association’s cronyism, managerial entrenchment and corruption, and its achievement in spreading the British version of football around the world (leaving the US game in the dust), is striking. It demonstrates that Fifa has enormous strengths as well as egregious weaknesses.

The decision to award super-hot Qatar the 2022 World Cup has pushed Fifa’s contradictions to their limits. That choice is now disowned even by Sepp Blatter, its 78-year-old president, who covets a fifth term as “supreme leader” (Fifa’s ayatollah-like job description). If Fifa cannot reform, much will be lost.

The intriguing thing about Fifa is that a Swiss non-governmental organisation, which has operated in an unaccountable way, with a highly conflicted (and in some cases corrupt) relationship between its leaders and the football associations that are its closest equivalent to shareholders, has done so well.

Soccer captured 43 per cent of the worldwide sports event market by value in 2009, compared with 13 per cent for American football and 12 per cent for baseball, according to AT Kearney, the consultancy, and is growing faster. It has even started to penetrate US consciousness thanks to television coverage of European games.

Fifa is fortunate in having a superior product to market: football is a more elegant game than the complex strategy and head-crunching violence of American football, and is easier to play in parks or in schools. The accessibility of the amateur game helps to reinforce the professional sport.

But that is not a sufficient explanation: basketball and baseball are played casually, and Venezuela and other countries have shown that it is possible to ruin even a fail-safe commodity – in that case oil and gas production – through rent-seeking cronyism. Soccer could have been similarly cursed.

Fifa has avoided this fate until now because it has two competitive advantages over US sporting bodies. The first is that football is integrated – amateur and professional games are unified through associations. 

Professional soccer leagues such as Serie A in Italy and Germany’s Bundesliga are powerful and their clubs are wealthy, but they do not control the national game.

This sounds arcane but it makes a huge difference to the incentives: leagues exist to advance their own interests and those of their member clubs, while the central task of the associations is to cultivate the game. 

The state of baseball is of secondary interest to Major League Baseball; football is Fifa’s raison d'être.

Fifa’s second advantage is that it is truly multinational – it launched a sustained push into emerging markets before US and European multinationals such as Coca-Cola and Adidas, two of the big World Cup sponsors. It adjusted early to the shift in the global economy.

“Fifa took resources and put them into Africa and Asia, and that has paid great dividends,” says Stefan Szymanski, professor of sport management at the University of Michigan. “US sports have remained American because there has been no money to expand overseas.”

Fifa’s advantages have given football strength in depth and reach, and transformed the World Cup into a global tournament on a par with the Olympic Games (also run by a Swiss-based sports association).

All of this could be undermined by Fifa’s flaws.

Since 1961, when it was reformed in a cack-handed way, it has been managed through a structure that seems ideally designed to encourage cronyism and dysfunction. “Fifa is a patronage organisation. The people at the centre disburse financial rewards to those at the periphery responsible for electing them,” says Roger Pielke, a professor at the University of Colorado.

No board of directors oversees its president and executives. Instead, a 24-member “executive committee” of national association representatives, which is embroiled in allegations (and some confirmed cases) of corruption, wields patronage in an opaque fashion. Blatter, like Fifa presidents before him, has exploited this to entrench himself.

It should be swept away but it suits too many insiders to keep things as they are. Meanwhile, Fifa is bitterly divided between European countries, particularly the UK, that want Mr Blatter to resign and Fifa to combat corruption, and African and Asian officials who portray this as an attempt by the west to seize control of the game.

Trouble looms. The Sunday Times has accused Mohammed bin Hammam, the Qatari former Fifa vice-president, of paying bribes to African officials to bring the 2022 World Cup to Qatar. Mr bin Hammam stepped down in 2012 after Fifa found that he paid for votes. The newspaper has published emails allegedly showing that bribes were paid from a $5m slush fund.

Sports associations and leagues have proved fragile before and it is easy to imagine a Fifa split. What if the World Cup were removed from Qatar, and it held a tournament for resentful African and Asian nations at the same time? The European leagues, with their €20bn annual revenues, could sever their links with the rebels.

That would be a tragedy, not only because it could be avoided through governance reform, but because it would destroy Fifa’s achievements since 1904. It is a blatantly flawed enterprise but it has achieved great things. Think what it might do if it were run properly.

Copyright The Financial Times Limited 2014.