Mel Morris: an example

[IslandExile]

What Mel Morris has done to our club......racked up millions in debt and then just walked away - shows just what is wrong with corporate governance in this country (and probably others), let alone governance of football and football clubs.

The club (the supporters and the community) is being punished, not the person who created this mess.

I think it was Gary Neville who said (blimey, I am agreeing with Gary Neville....just give me a minute to come to terms with that) that clubs should not be treated like ordinary companies but more like listed buildings.

BUT even companies should not be treated like this - there are always employees, creditors, suppliers, customers etc who would suffer under similar circumstances.

What penalties will be imposed on Morris, the person? Barred from being a director? Investigated by the Financial Services Authority or other legislative regulator?

An owner/director cannot just do this and then walk away - or rather - should not be allowed to do this.

[LazloW]

Ok

[IslandExile]

2 minutes ago, LazloW said:

Ok

Sorry, rant over.

[MackworthRamIsGod]

2 minutes ago, IslandExile said:

Sorry, rant over.

Why are you sorry?

The people who stood by and allowed this to happen should be the ones to apologise.

To this day there are still people defending Mel.

 

[RadioactiveWaste]

Football as an industry is pretty unique in the way the vast majority of clubs lose money year after year.

You don't need an economics degree or to be a chartered accountant to think that sounds like a rum business.

 

[duncanjwitham]

9 minutes ago, IslandExile said:

BUT even companies should not be treated like this - there are always employees, creditors, suppliers, customers etc who would suffer under similar circumstances.

What penalties will be imposed on Morris, the person? Barred from being a director? Investigated by the Financial Services Authority or other legislative regulator?

An owner/director cannot just do this and then walk away - or rather - should not be allowed to do this.

The problem is, by that argument, nobody should be allowed to own a company unless they can personally cover the entire companies operating costs themselves.  If you want to start a company, you basically need to be richer than the company can ever possibly be before you're allowed to start/own it.

So if you start a little bedroom company, and you get to the stage where you're doing well and have got a few employees etc.  Congratulations, the company is now potentially going to cost you more than your entire personal wealth if anything bad happens (like a global pandemic, maybe?). Should you be forced to close the company?  

Like it or not, Limited companies exist for very good reasons, and the upsides of having them far outweigh the risks.

And as for penalties on Morris, there won't be any (as long as hasn't done anything outright illegal, like stole from the pension fund or something, which I don't believe he has).  That's literally the point of limited companies.

If you want to start arguing that football clubs shouldn't be limited companies, then there's maybe some mileage there. But I guarantee you, we would have no bidders at all if the new owners were required to personally guarantee any future losses.  And neither would a lot of clubs.

[PistoldPete]

20 minutes ago, IslandExile said:

What Mel Morris has done to our club......racked up millions in debt and then just walked away - shows just what is wrong with corporate governance in this country (and probably others), let alone governance of football and football clubs.

The club (the supporters and the community) is being punished, not the person who created this mess.

I think it was Gary Neville who said (blimey, I am agreeing with Gary Neville....just give me a minute to come to terms with that) that clubs should not be treated like ordinary companies but more like listed buildings.

BUT even companies should not be treated like this - there are always employees, creditors, suppliers, customers etc who would suffer under similar circumstances.

What penalties will be imposed on Morris, the person? Barred from being a director? Investigated by the Financial Services Authority or other legislative regulator?

An owner/director cannot just do this and then walk away - or rather - should not be allowed to do this.

Limited liability is an important principle for Companies but maybe some form of licensing of football owners should have been in place as recommended by Parliamnetary sub committe after the Bury debacle.  Like everything else, EFL ignored that recommendation. 

[IslandExile]

13 minutes ago, duncanjwitham said:

The problem is, by that argument, nobody should be allowed to own a company unless they can personally cover the entire companies operating costs themselves.  If you want to start a company, you basically need to be richer than the company can ever possibly be before you're allowed to start/own it.

So if you start a little bedroom company, and you get to the stage where you're doing well and have got a few employees etc.  Congratulations, the company is now potentially going to cost you more than your entire personal wealth if anything bad happens (like a global pandemic, maybe?). Should you be forced to close the company?  

Like it or not, Limited companies exist for very good reasons, and the upsides of having them far outweigh the risks.

And as for penalties on Morris, there won't be any (as long as hasn't done anything outright illegal, like stole from the pension fund or something, which I don't believe he has).  That's literally the point of limited companies.

If you want to start arguing that football clubs shouldn't be limited companies, then there's maybe some mileage there. But I guarantee you, we would have no bidders at all if the new owners were required to personally guarantee any future losses.  And neither would a lot of clubs.

I agree with principle of limited companies but where do you draw the line with "responsibility". It seems that building a debt to unmanageable proportions is irresponsible.....surely there has to be some limit to that behaviour.

For companies but especially for football clubs.

Limited liability should not equal limited responsibility.

Edited February 3, 2022 by IslandExile

[Anon]

15 minutes ago, RadioactiveWaste said:

Football as an industry is pretty unique in the way the vast majority of clubs lose money year after year.

You don't need an economics degree or to be a chartered accountant to think that sounds like a rum business.

 

I'm really losing patience with a lot of the discourse around finance in football. Talking heads like Neville will blather on all day and night about regulations, tv money etc... but no one ever thinks to suggest that maybe, just maybe, footballers shouldn't be paid a normal year's salary in a month. Football clubs will continue to lose money year after year. Owners will continue to gamble. Fans will continue to worship players for "working hard". Fans will moan about the price of tickets, but also moan if their teams don't sign big name players.

[duncanjwitham]

4 minutes ago, IslandExile said:

I agree with principle of limited companies but where do you draw the line with "responsibility". It seems that building a debt to unmanageable proportions is irresponsible.....surely there has to be some limit to that behaviour.

For companies but especially for football clubs.

Limited liability should not equal limited responsibility.

I do think you need to be careful about drawing general conclusions from extraordinary times.  My understanding of what happened is that pre-COVID, Morris was putting in £1-2m a month to cover overspend in wages etc.  Then when we hit lockdown, and revenues dried up completely, that number skyrocketed.  And at some point, Morris decided he either couldn't afford to, or didn't want to, carry on putting in that much and stopped completely. And the debts piled up as a result of the overspend not being covered.  (That's just a statement of facts, not a defence or anything.)

So are we saying that Morris shouldn't have been able to cover overspend at all, and we should have been self-financing at all times? Because we weren't even self-financing after GSE had finished driving down costs to a minimum.  Or should the owner automatically be responsible for covering all overspend, even if you literally have no customers for a year?  Because we're right back to nobody ever wanting to start a company again.

[IslandExile]

11 minutes ago, duncanjwitham said:

I do think you need to be careful about drawing general conclusions from extraordinary times.  My understanding of what happened is that pre-COVID, Morris was putting in £1-2m a month to cover overspend in wages etc.  Then when we hit lockdown, and revenues dried up completely, that number skyrocketed.  And at some point, Morris decided he either couldn't afford to, or didn't want to, carry on putting in that much and stopped completely. And the debts piled up as a result of the overspend not being covered.  (That's just a statement of facts, not a defence or anything.)

So are we saying that Morris shouldn't have been able to cover overspend at all, and we should have been self-financing at all times? Because we weren't even self-financing after GSE had finished driving down costs to a minimum.  Or should the owner automatically be responsible for covering all overspend, even if you literally have no customers for a year?  Because we're right back to nobody ever wanting to start a company again.

Fair argument.

But regards debts rocketing as a result of COVID.....that's true - and will have been true for other clubs. Some are already putting out warnings regarding their finances (e.g. Bristol City) and I wonder if others will soon declare how much difficulty they're in. (I understand revenues were hit harder for Derby because of their higher than average attendances).

However, a lot of the issues were already there with Derby County, necessitating the sale of the stadium and so on, the breaking of FFP in pre-COVID seasons.

Edited February 3, 2022 by IslandExile

[IslandExile]

13 minutes ago, duncanjwitham said:

Or should the owner automatically be responsible for covering all overspend

or not overspend - in the non-extraordinary years

[RadioactiveWaste]

15 minutes ago, Anon said:

I'm really losing patience with a lot of the discourse around finance in football. Talking heads like Neville will blather on all day and night about regulations, tv money etc... but no one ever thinks to suggest that maybe, just maybe, footballers shouldn't be paid a normal year's salary in a month. Football clubs will continue to lose money year after year. Owners will continue to gamble. Fans will continue to worship players for "working hard". Fans will moan about the price of tickets, but also moan if their teams don't sign big name players.

Clubs just need to stop paying the salaries beyond what they can afford.

Dave bigboots is going to be the same player on five grand a week that he is on fifty.

The football "marketplace" decided Dave bigboots could be paid 50K a week out of fear that their rivals might sign him and they'd be left with only John quitegood on £45k a week.....

All the clubs only start paying what they can afford to pay and the salaries, fees and wages will go down.

[duncanjwitham]

5 minutes ago, IslandExile said:

However, a lot of the issues were already there with Derby County, necessitating the sale of the stadium and so on, the breaking of FFP in pre-COVID seasons.

Honestly, I think there are a whole load of issues that lead to administration - Morris-sanctioned overspending (and the way the money was wasted on bad signings and manager merry-go-rounds), Morris's bull-headedness with the EFL, the EFL's incompetence, COVID etc. A fair few were down to Morris, but not all of them.  If you have one or two less of those happening at the same time, then we probably get through this without going into admin. We've either already been sold by now and Morris is gone, or Morris is taking a hit on selling a League 1 club (following points deductions etc).

2 minutes ago, IslandExile said:

or not overspend - in the non-extraordinary years

But like I said, we were overspending in the later GSE years by ~£7m a year, and people were up in arms about the lack of investment.  Imagine what it would be like if we had to cut even more.

[Gritstone Ram]

I do think a few outside influences have played there part. 
COVID and grounds closed for a season and a half has caused a few problems. 
The EFL and Middle Borough issues have caused a problem too. I think these were avoidable and alarm bells should have been ringing. Even though we were assured we were within FFP I don’t think enough questions were asked about how this was so. 

[Day]

14 minutes ago, duncanjwitham said:

Morris was putting in £1-2m a month to cover overspend in wages etc.

As of today, we are still requiring funding of around £1m per month to keep the lights on for a team that without points deduction would be sat in  16th.

One place above a club that's losing over 400k per week.

So before we even think of bringing players into the club to rebuild, we're looking for an owner(s) that are willing to lose a minimum of £12m a year, on top of the purchase price and the stadium.

The minute they walk through the doors, they will have fans in the summer asking for a 20 goal a season striker, a keeper, a centre back, some creative players.

If we pull off the impossible and manage to stay up this season and have any Premier League ambitions?

We have to compete with clubs which could be given up to £45m in the first season they are relegated.

Not impossible, but a tough ask.

So kiss goodbye to the Premier League payday whilst waiting for the next owner to get tired of losing £12m a year for mid table Championship football.

Realise this post isn't exactly on topic, but it's a stark reminder of what we're currently looking for....a benefactor.

Football finances needs to be looked at, stop being seen as unique businesses where it's accepted they lose millions per year.

As @Anon said, player wages, that has to be the starting point. You have Lingard on over £100k a week at United and can't get a game.

That's more than the average household would bring in per year, can Lingard look at himself in a mirror and say the work he has done this week is worth £100k?

Those kind of wages have a trickle down effect into the Championship, it just can't continue any longer and until the world of football comes together and puts a stop to it, Derby County will not be the only club to find itself in this situation.

We need a global wage cap per club and that has to be based on a percentage of turnover, it's unrealistic to ever have a level playing field, Man United can't have the same wage budget as Crystal Palace to get any kind of agreement.

The EFL needs to move first on this, the PL won't as the clubs won't be able to compete in Europe.

Players would be forced to accept lower wages outside the Premier League or find themselves out of work or moving their families abroad. 

72 clubs under it's control, show the football league a sustainable 3 league model and others will follow. 

Whilst we're there, clubs paying agents fees needs to be outlawed, if a player wants an agents services, they pay them directly out their own pocket.

Stoke paid over £5.5m on agent fees between February 1st 2019 and January 31st 2020.

They have also just reported losses of over £90m. 

One morning the Coates family could wake up and pull the plug, what are they gaining from owning Stoke City? The fans are on their backs for poor managerial appointments, signings etc.

Anyway, the tl;dr is football is broken.

[BaaLocks]

Football needs to learn.

I get that it is a financial leviathan now and the days of living next door to one of the starting XI are long gone but we have to have auditing of forecasts (not spend), maybe some governance on investment but let's not forget we were all on Mel's side three years ago, all shouting from the rooftops that FFP and parachute payments was a blocker to progress. And while we might have nothing but derision for Mel we would all agree he forked up trying to make Derby a top flight club, he wasn't here squeezing every last penny out of the club.

And, I guarantee you that if we get out of this we will only be a few months before someone or other is shouting that we only need ten million of investment, three new signings and a couple of loans from Chelsea to help us in our charge for promotion.

Edited February 3, 2022 by David
Removed quote from a deleted post and section of post referring to the quote.

[IslandExile]

15 minutes ago, David said:

As of today, we are still requiring funding of around £1m per month to keep the lights on for a team that without points deduction would be sat in  16th.

One place above a club that's losing over 400k per week.

So before we even think of bringing players into the club to rebuild, we're looking for an owner(s) that are willing to lose a minimum of £12m a year, on top of the purchase price and the stadium.

The minute they walk through the doors, they will have fans in the summer asking for a 20 goal a season striker, a keeper, a centre back, some creative players.

If we pull off the impossible and manage to stay up this season and have any Premier League ambitions?

We have to compete with clubs which could be given up to £45m in the first season they are relegated.

Not impossible, but a tough ask.

So kiss goodbye to the Premier League payday whilst waiting for the next owner to get tired of losing £12m a year for mid table Championship football.

Realise this post isn't exactly on topic, but it's a stark reminder of what we're currently looking for....a benefactor.

Football finances needs to be looked at, stop being seen as unique businesses where it's accepted they lose millions per year.

As @Anon said, player wages, that has to be the starting point. You have Lingard on over £100k a week at United and can't get a game.

That's more than the average household would bring in per year, can Lingard look at himself in a mirror and say the work he has done this week is worth £100k?

Those kind of wages have a trickle down effect into the Championship, it just can't continue any longer and until the world of football comes together and puts a stop to it, Derby County will not be the only club to find itself in this situation.

We need a global wage cap per club and that has to be based on a percentage of turnover, it's unrealistic to ever have a level playing field, Man United can't have the same wage budget as Crystal Palace to get any kind of agreement.

The EFL needs to move first on this, the PL won't as the clubs won't be able to compete in Europe.

Players would be forced to accept lower wages outside the Premier League or find themselves out of work or moving their families abroad. 

72 clubs under it's control, show the football league a sustainable 3 league model and others will follow. 

Whilst we're there, clubs paying agents fees needs to be outlawed, if a player wants an agents services, they pay them directly out their own pocket.

Stoke paid over £5.5m on agent fees between February 1st 2019 and January 31st 2020.

They have also just reported losses of over £90m. 

One morning the Coates family could wake up and pull the plug, what are they gaining from owning Stoke City? The fans are on their backs for poor managerial appointments, signings etc.

Anyway, the tl;dr is football is broken.

Excellent post. I agree with all of that but.....I'm sure you're not really expecting the EFL to provide the lead.

Football governance is under the spotlight - more so because of our case - but it really does need addressing. That will not come from the EFL - who are not fit for purpose - or the Premier League - who are purely self serving.

I don't know what the answer is - perhaps a government imposed regulator.

After all that works well for the railways, energy suppliers........oh wait.

 

[MarRam]

I was thinking maybe they should do something like what happens with Banks, where they take in deposits and lend them out.

The Banks have to lodge a certain % of the total money lent out each night with the Bank of England, and that comes from their own resources - so if it goes belly up then at least their own money is at risk to reduce the debt.

If club owners were made to do this with a central football regulator ( with ,say, the amount of debt calculated quarterly) it would make them think again about running up huge losses as they would personally be on the hook for some of it.

 

[Day]

1 minute ago, IslandExile said:

Excellent post. I agree with all of that but.....I'm sure you're not really expecting the EFL to provide the lead.

Football governance is under the spotlight - more so because of our case - but it really does need addressing. That will not come from the EFL - who are not fit for purpose - or the Premier League - who are purely self serving.

I don't know what the answer is - perhaps a government imposed regulator.

After all that works well for the railways, energy suppliers........oh wait.

 

I don’t expect anything to be honest, but it needs to be done to save football clubs. 

The issue is, the EFL is the clubs, they all have a vote and will all use their votes to look out for their own best interests. 

We need to move away from this structure, we need a governing body that’s interests are nothing but the good of the game, be it the government or appointed board.

Erm hey football club owners, you know that power you have, would you mind handing it over so we can fully control the game? 

I’m not sure how you can possibly and legally restructure the league, does the government have the power? Are they the best to even decide? Bring in the expensive legal teams for that one as you would also likely have to be ready to block any attempts to form a break away league.