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Julian Pike | Diversity on sports boards: moral issue or financial incentive?

Julian Pike, Partner at law firm Farrer & Co., considers how diversity on the boards of sports organisations can reap many benefits.

Julian Pike

Research by Harvard Business School and McKinsey has consistently shown that diversity is good for business outcomes: boards with a range of talent boost profits by 10-to-15 per cent in the long-term. More specifically, McKinsey’s Diversity Matters report proved that in the UK, every 10-per-cent increase in gender diversity at senior executive level resulted in a 3.5-per-cent increase in earnings before income and tax (EBIT). Discussions about diversity, therefore, are not just a moral issue or a sign of the times, but are essential to any business seeking to become more profitable – and this applies to professional sport as much as any other sector.

However, the sports industry is behind the curve on this issue. Before 2016, when the UK Sports Governance Code was introduced, women on sports boards were the exception rather than the rule. The new Code meant that all centrally-funded sports bodies had to achieve a target of at least 30-per-cent representation of both genders on their boards, or at least show that they were working towards better gender parity, or risk losing their funding. And it worked: our recent research into the gender balance on sports boards showed that as of 2019, 72 per cent of national governing bodies now meet the 30-per-cent requirement.

For professional sports clubs, however, the picture is strikingly different. We found that over half of professional football, rugby and cricket clubs do not have a single woman on their board. On the one hand, this is not a revelation, since commercial clubs do not face the immediate threat of losing funding if they don’t shape up, and there are many historic, cultural reasons why diversity has seen slow progress. However, the rapid growth of the women’s game in these sports – fuelled, no doubt, by better female representation in the FA, RFU and ECB – points towards other positive incentives for commercial clubs to strive towards better diversity in their leadership teams.

If the prospect of increasing a club’s profitability by evening out the gender balance of its board is not enough, it is worth considering how greater diversity leads to better governance and financial performance. It’s common sense that a homogenous group of people are likely to draw from a similar set of life experiences when they make a decision and therefore have a tendency to approach a problem from the same angle. Once again, this is true across all sectors: the Financial Conduct Authority, for example, recently concluded that an all-male, all-white board is probably high-risk for this very reason.

Reducing risk may not sound as exciting to club owners as an immediate increase in profits, but these are two sides of the same coin. Reducing risk becomes easier when a board can draw from a greater variety of experiences and approaches, and in practical terms, often results in reducing costs and avoiding events that can harm a business or its reputation. This feeds back into profitability, and a more diverse board is more likely to see its revenues grow as a result.

At the same time, the tremendous growth in women’s sports across participation and audience figures, sponsorship deals and commercial opportunities, presents clubs with a unique business opportunity. More diverse clubs are better placed to capitalise on this when the female players and coaches are being represented at board level. National governing bodies are already alive to this, which is why they are placing the growth of their women’s games at the heart of their strategies. Their interests are aligned with those of clubs, since both will ultimately benefit from a better developed women’s game; this means their strategies need to be aligned too, both in terms of growing female participation and increasing the number of women on their boards.

Ultimately, however, the primary goal for professional clubs will always be success on the field, which can often seem far removed from issues of governance and diversity. But while we learn from the success of women’s sport last year, we’d do equally well to remember the demise of Bury FC, for which poor governance removed any chance of on-the-pitch glory. More recently, we could look at the success of Tottenham Hotspur in Deloitte’s Football Money League Report, which saw its revenues overtaking Arsenal’s for the first time in almost 20 years. It’s not surprising that Tottenham was the only Premier League club to meet the 30-per-cent threshold for female representation, with 40 per cent of its board made up of women. And while diversity will not be seen to be the reason for its success, the correlation between the two is equally unlikely to be a coincidence.

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