AGM 2.1 preview: it’s a numbers game and we need some clarity

Scottish Rugby's Chief Executive Mark Dodson will be expected to deliver some clarity on how the business is shaping up at tomorrow's meeting

SRU Chief Executive Mark Dodson alongside SRU General Counsel Robert Howat at last year's AGM. Image: © Craig Watson - www.craigwatson.co.uk

SCOTTISH RUGBY’S Annual Review, which was issued to clubs last Thursday, was high on gloss and low on substance. Along with President Ian Barr’s welcome, there is a ‘review’ from Interim Chairman John Jeffrey, and two further ‘reports’ from Chief Executive Mark Dodson and Chief Operating Officer Dominic McKay, yet no detail on the two critical issues of funding and player numbers – and no mention whatsoever on strategy or budget.

We are told that –

  • “Your Board and Council have had to plan for every conceivable scenario around the financial implications of matches played behind closed doors with reduced number of supporters.”
  • “That planning has been and continues to be robust.”
  • “Radical and tough decisions were made.”
  • “As a result, our audited statements are still being finalised and will be contained in our Annual Report which will be circulated as soon as possible.”
  • “We are not out of the woods yet, but with a fair wind we have the correct plan in place.”

Sounds great, but –

  • What are the detailed financial implications of matches being played behind closed doors?
  • What were the radical and tough decisions that were made?
  • When exactly will the financial statements be circulated?
  • What is this plan?

We already knew that the accounts would not be available in time for tomorrow [Thursday] night’s AGM2.1, but we have been promised a presentation on the current financial position. The clubs will be expecting something more meaningful than the management speak in this document.

“The deal with CVC to become a partner in PRO14 not only provided funds to Scottish rugby at a time when cash flow was restricted , but by working with commercial investors , we hope to drive new levels of fan engagement and experience across the game.”

What does that mean?

Vice-President Colin Rigby’s note to the clubs following the Council meeting on 12th November tells us that –

“Whilst the accounts had been prepared and were well advanced, additional steps were needed before the accounts could be signed off. It was noted that none of the additional requirements were a cause for concern, and indeed would provide an additional level of assurance in the current pandemic.”

Does the Board’s Audit & Risk Committee, chaired by Lesley Thomson QC, share this view – and will she be saying so at the meeting?

Certainly, Scottish Rugby was ill prepared for the coronavirus pandemic. The financial model was predicated on the assumption that future ticket income, broadcast revenue, sponsorship and advertising sales would meet present operating needs. Net current liabilities were shown as £6.9m in May 2019 statutory accounts.

As TOL warned on 15th August 2019: “The Operating Surplus for 2019 was down to just 0.9% of turnover which is simply unsustainable. There are no Capital Cash Reserves whatsoever.” And that was before anybody had heard of Covid-19.

Yet whilst the other Home Unions have addressed the Covid threat pragmatically and propitiously – 139 redundancies at the RFU, a £20m bank loan at WRU and government support for the IRFU –
all we have heard from Dodson has been the suggestion on 7th August that he could save £14m through belt-tightening and that there would be no need for redundancies. That seemed fanciful at the time for a business which directed 52 percent of last year’s £60m costs towards wages, and now we learn that the headcount has jumped from 401 in May 2019 to 458 in May 2020 (compared to 295 in 2012).

The missing accounts

It is now six months since the financial year-end and despite the four month requirement stipulated in the Union’s bye-laws, the clubs have still not had sight of the accounts.

The Annual Review tells us that the Chief Financial Officer has missed nine out of the last 18 Board meetings. We wish Andrew Healy well, but this is a problem which needs to be addressed, and if it has been addressed then the stakeholders should be told who is the nominated individual managing the finances at one of Scotland’s key sporting institutions. Is he/she speaking tomorrow when we receive the update?  Has assistance been sought from external accountants/auditors?

The clubs also need to know when they are going to see hard audited figures – especially as the three-month extension of filing deadlines granted by Companies House now means that the statutory accounts need not now be lodged until the end of May 2021.

Director remuneration

There has been a change in policy this year in the decision to publish details of director remuneration prior to lodging the accounts at Companies House.

We are told –

“Remuneration of Executive Directors is decided by the Remuneration Committee [currently comprising David McMillan (chair), William Gardner & Lesley Thomson] with core remuneration packages consisting of base salary, allowances and pension entitlements. Packages are designed to be competitive in the marketplace taking account of the skills and experience of the individuals but without paying more than is considered by the Committee to be necessary or appropriate to attract and retain the individual.”

Mark Dodson’s package dropped from £933k to £454K – but he remains the highest paid CEO in the Home Unions, ​even though the SRU’s total revenues are the least of the four Unions.

The non-executive directors (David McMillan, Lesley Thomson & Julia Bracewell) and the Council directors (Graeme Scott, William Gardner &  Dee Bradbury) appear to have taken a 20% ‘Covid’ cut in their £15,529 fees – but, interestingly, the WRU accounts reveal that their counterparts in Wales give their time and knowledge free gratis, for the love of the game.

Chief Operating Officer Dominic McKay, we are advised, has been appointed a non-executive director of Old Glory DC – ‘the recently founded Major League Rugby team based in Washington DC’ – but there is no indication of how much SRU cash has headed across the Atlantic.

The Annual Review also reveals the criteria for Dodson’s notorious Long Term Incentive Plan (LTIP) – but whilst the detail is welcome it raises huge questions over the process. You can put lipstick on a pig, but it is still a pig – and likely to be a serious problem if/when Scottish Rugby eventually heads towards Holyrood, begging bowl in hand.

The Remuneration Committee has “substantial discretion over how the LTIP operates” and we are told that targets were agreed against the objectives set in the strategic plan, but we can only draw our own conclusions on the rationale applied  –

  • Winning Team: ‘Consistent improvement in men’s and women’s international XVs and the pro teams over the 5-year period and measured against specific tournament outcomes and rankings’
    • In the 2019 Six Nations, the Men’s, Women’s and Under-20s Scotland teams played 15 games with two wins, one draw and 12 losses. The U20s finished last in the World Championship in Argentina last summer (meaning relegation to the second tier World Trophy competition), and the senior men’s team then failed to qualify for the knock-out stages of the World Cup in Japan, leaving them rated 9th in the world last November. They rallied during the Six Nations with two wins over Italy and France to climb to eighth in the world when lockdown arrived.
  • Revenue and Asset Growth: ‘Consistent growth in revenue and generation of surplus in accordance with a rolling 5-year plan.’
    • In the four years to 2019, WRU enjoyed revenue growth of 20.1%, the RFU 15.3%, IRFU 12.7% – and SRU only 11.1%. As JFK pointed out: ‘A rising tide lifts all boats’. 
    • Net Operating Surplus dropped from 6.3% in 2011 when Dodson took over, to 0.9% in 2019.
  • Developing Talent: ‘Delivery and development of the new Academy structures and pathways, coaching and referee development pathways and internal employee development and succession planning.’
    • The two pro-teams continue rely heavily on non-Scottish journeymen, and the national side on project players.
    • Both pro-teams are coached by non-Scots.
    • Scotland now has more referees (and refereeing appointments) in the PRO14 Elite Referee Squad, but has still not produced a men’s international referee since Malcolm Changleng oversaw South Africa versus Samoa in 2007 (although Mike Adamson was down to do England versus the Barbarians last month before a Covid breach intervened). Hollie Davidson is now a regular on the women’s international circuit.
  • Growth of the Domestic Game: ‘Creation and development of new Youth and Schools programme structures and the women’s programme.’
    • The Schools and Youth Conferences have been up and running since 2014, but not really evolved over the last six years.
    • The women’s programme appears to be focussed on finding English clubs for top Scottish players. The women’s domestic season got a new structure in 2018 and now has a winter break, which is nice. Meanwhile, Murrayfield Wanderers – a longtime the benchmark of the women’s club game in Scotland – fell off the side of a cliff when the club was evicted from Murrayfield two years ago.
  • Sustainable Clubs: ‘Consistent growth in club support and development funding together with delivery and development of various sustainability programmes including Agenda 3 projects, club sustainability awards and the club sustainability fund.’
    • Club Support & Development dropped from 6.3% of turnover in 2016 to 5.1% in 2019 – compared to 13.3% in Ireland and 6.8% in Wales.
    • Male adult playing numbers have dropped 26.6% from 7,275 in 2012-13 to 5,340 in 2018-19.

SRU President Ian Barr clarifies Council’s position on AGM motions

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David Barnes
About David Barnes 2133 Articles
David has worked as a freelance rugby journalist since 2004 covering every level of the game in Scotland for publications including The Sunday Times, The Telegraph, The Scotsman/Scotland on Sunday/Evening News, The Herald/Sunday Herald, The Daily Mail/Mail on Sunday and The Sun.

15 Comments

  1. What is behind the huge drop in adults players? Not to defend the shambles in charge but is any of it due to better registration Ie are all this lost players actually lost or were they never there? If all lost in 6 years that is spectacular – why?

  2. Well.
    That’s no longer tenable, it’s a disgrace. Get rid of them.,no direction no forward thinking, as people see through the bullshit, Bye.

  3. Well.
    That’s no longer tenable, it’s a disgrace. Get rid of them.,no direction no forward thinking, as people see through the bullshit, Bye.

  4. First of all thank you David on producing such an outstanding article. The guys in the know within the SRU may nit pick, and they will, but we the punters now have the bigger picture. And it stinks.

    If I was a director anywhere is this setup I would either be seeking personal professional guidance if I cared enough or I would just jump ship. My ignorance as a director of exactly what is going on is no excuse, and my liability could be personal and limitless. The blazer is not worth the risk. In fact if I was a director there I would go home tonight and have a chat with my wife explaining the situation and how our house and assets may be at risk.

    Many aspects terrify me. Some thoughts based on my prevous real experiences.

    1. Salary (and perks) as a control tool
    Get staff in key positions. Pay them 25% above the going rate. Throw in a few prostitutes, all expenses paid business trips around the world business class and they will do exactly as they are told. I know and they know they won’t get a comparable job with similar benefits elsewhere. And once these people are in place their positions are protected Covid or not.

    And of course if their salary is inflated, mine needs to be equally inflated.

    I would like to go through all the people in the £75K to £200k plus groups, see what they do, do their deliver value? Really?

    2. Chief Execs salary and perks
    That graph says it all. There is no need at all to pay above the going rate.
    If he was in charge of a well oiled machine there might be an argument to be made. But if he can’t even get a set of accounts out, what the hell is he doing?
    And for all the reshuffling of the deckchairs where are the benefits to be seen? Just watch any Irish province playing and there is a pipeline of outstanding young guys from ages 19/20 upwards ready to slot into the national team. Munster v Glasgow this week is a prime example with two 20 year old halfbacks on the winning team. Still Glasgow have another South African prop.

    2. Overseas ‘investment’
    This ploy is well used to shuffle money. Donald Trump employs this technique. And the members of the SRU don’t even know what money if any was invested there. What is the legal setup there? Please make sure it has the same accounting period as the SRU. Otherwise it is easy to ‘hide’ funny stuff. But hiding things seems to come easily to the high heid yins at Murrafield.

    3. The manyana argument/ the real soon now proposition
    We are finanacially in trouble but ….”a really big order is coming in” or “£20million will be here from X in 6 months”. We all rub our hands together not realising that both are always six months away.

    4. Audited accounts
    Yes they have a legal purpose but for good reasons. If you don’t know (independently approved) figures of the state of the business how can you react or plan for the future? The organisation is in the dark but still making decisions. I would like to understand the basis of budgets for each part of the SRU. Are these just makey up figures or real? Best guesses?

    5. Finance Director
    In such uncertain times this role is critical. For whatever resaon if the Finance Director is in absentia, I would suggest getting experienced temporary cover (a safe pair of hands) alongside him to keep the organisation planning ahead for the future while protecting the present.
    At least this is better than the finance director I encountered once who was first in, last out, never took full holidays, still ‘popped in’. Now that did turn out to be expensive.

    Not suggesting any of these apply to the SRU, but with a grudging transparency and a lack of audited accounts the space created only generates rumours and tittle tattle. The less we know the more we invent trying to make sense of it all.

    The rugby fraternity of Scotland who care about the game do not want to see all this nonsense.

    10
  5. First of all thank you David on producing such an outstanding article. The guys in the know within the SRU may nit pick, and they will, but we the punters now have the bigger picture. And it stinks.

    If I was a director anywhere is this setup I would either be seeking personal professional guidance if I cared enough or I would just jump ship. My ignorance as a director of exactly what is going on is no excuse, and my liability could be personal and limitless. The blazer is not worth the risk. In fact if I was a director there I would go home tonight and have a chat with my wife explaining the situation and how our house and assets may be at risk.

    Many aspects terrify me. Some thoughts based on my prevous real experiences.

    1. Salary (and perks) as a control tool
    Get staff in key positions. Pay them 25% above the going rate. Throw in a few prostitutes, all expenses paid business trips around the world business class and they will do exactly as they are told. I know and they know they won’t get a comparable job with similar benefits elsewhere. And once these people are in place their positions are protected Covid or not.

    And of course if their salary is inflated, mine needs to be equally inflated.

    I would like to go through all the people in the £75K to £200k plus groups, see what they do, do their deliver value? Really?

    2. Chief Execs salary and perks
    That graph says it all. There is no need at all to pay above the going rate.
    If he was in charge of a well oiled machine there might be an argument to be made. But if he can’t even get a set of accounts out, what the hell is he doing?
    And for all the reshuffling of the deckchairs where are the benefits to be seen? Just watch any Irish province playing and there is a pipeline of outstanding young guys from ages 19/20 upwards ready to slot into the national team. Munster v Glasgow this week is a prime example with two 20 year old halfbacks on the winning team. Still Glasgow have another South African prop.

    2. Overseas ‘investment’
    This ploy is well used to shuffle money. Donald Trump employs this technique. And the members of the SRU don’t even know what money if any was invested there. What is the legal setup there? Please make sure it has the same accounting period as the SRU. Otherwise it is easy to ‘hide’ funny stuff. But hiding things seems to come easily to the high heid yins at Murrafield.

    3. The manyana argument/ the real soon now proposition
    We are finanacially in trouble but ….”a really big order is coming in” or “£20million will be here from X in 6 months”. We all rub our hands together not realising that both are always six months away.

    4. Audited accounts
    Yes they have a legal purpose but for good reasons. If you don’t know (independently approved) figures of the state of the business how can you react or plan for the future? The organisation is in the dark but still making decisions. I would like to understand the basis of budgets for each part of the SRU. Are these just makey up figures or real? Best guesses?

    5. Finance Director
    In such uncertain times this role is critical. For whatever resaon if the Finance Director is in absentia, I would suggest getting experienced temporary cover (a safe pair of hands) alongside him to keep the organisation planning ahead for the future while protecting the present.
    At least this is better than the finance director I encountered once who was first in, last out, never took full holidays, still ‘popped in’. Now that did turn out to be expensive.

    Not suggesting any of these apply to the SRU, but with a grudging transparency and a lack of audited accounts the space created only generates rumours and tittle tattle. The less we know the more we invent trying to make sense of it all.

    The rugby fraternity of Scotland who care about the game do not want to see all this nonsense.

  6. Well that was an interesting meeting

    And yes Sceptic 9 – Scottish Rugby are talking about loans. Or “reframed banking facilities” to quote MD

    I should have played [email protected] bingo would have had a full house

  7. Very useful article.

    I would note it’s perfectly normal to have a financial update in advance of the release of the full accounts. Nothing to see here at all.

    It is interesting that other commentators have commented that why are we bothered about what other Unions do? We should concentrate on ourselves. That’s akin to looking at the 6N league table and being unconcerned about your league position.

    What the other Unions have done well is get ahead of the story. They were early with their projections of massive losses, preparing all for the bad news. Whilst we have been given tales of nothing to worry about, a quick cut of £14M will solve that (with zero detail in how that would be achieved or why the Union was spending that amount of money for seemingly no reason)

    For an organisation that prides itself on its communications, the review document is a curious beast Mr Dodson is doing the everything will be ok with Mr McKay seems to be flashing the red flag. To quote Mr McKay “ There is no disguising, therefore, that the economic damage of the coronavirus pandemic has been acutely felt by Scottish Rugby.
    Deprived of income through our turnstiles as we have had to play almost entirely behind closed doors and the knock-on effect to other aspects of our commercial operation, it has been a very tough year.”

    So which is it?

    6
    1
  8. Wonder what the reaction from Scottish rugby fans would be if:

    a) The SRU had amassed sizable reserves over time at the expense of investing in the game, arguably its raison d’etre; NB Dodson inherited debt on the balance sheet that the union has been paying down over time (granted it does not appear to be debt free as the top brass have suggested, but improvements have been made)
    b) If Dodson had announced job cuts in a similar manner to the RFU or WRU; presumably total opprobrium?

    A lot of good points raised but there is a lack of balance and nuance from the start

    2
    9
  9. more and better info needed, and provided more expeditiously.

    Beyond that, what is wanted? A bank loan? A Govt subsidy/donation/bale out? A Government
    subsidy/bale out? Redundancies galore?

    That’s the problem with this article, short on proposals. Th easy bit is to criticise (fairly) but bottle putting proposals or discussing the alternatives

    1
    15
  10. Very useful article.

    I would note it’s perfectly normal to have a financial update in advance of the release of the full accounts. Nothing to see here at all.

    It is interesting that other commentators have commented that why are we bothered about what other Unions do? We should concentrate on ourselves. That’s akin to looking at the 6N league table and being unconcerned about your league position.

    What the other Unions have done well is get ahead of the story. They were early with their projections of massive losses, preparing all for the bad news. Whilst we have been given tales of nothing to worry about, a quick cut of £14M will solve that (with zero detail in how that would be achieved or why the Union was spending that amount of money for seemingly no reason)

    For an organisation that prides itself on its communications, the review document is a curious beast Mr Dodson is doing the everything will be ok with Mr McKay seems to be flashing the red flag. To quote Mr McKay “ There is no disguising, therefore, that the economic damage of the coronavirus pandemic has been acutely felt by Scottish Rugby.
    Deprived of income through our turnstiles as we have had to play almost entirely behind closed doors and the knock-on effect to other aspects of our commercial operation, it has been a very tough year.”

    So which is it?

    3
    1
  11. Excellent piece David. Really forensic considering the tosh that has been made available. It does highlight how incompetent the current leadership team are, and how far removed our union is from the realities of the modern game.

    It also highlights the distinct lack of transparency, which leads to a complete mistrust of the incumbent leadership.

    I think it is a moral duty of the clubs and members to remove the leadership team through a vote (if possible), and replace them with an interim team that can manoeuvre the union back to good governance and a solid footing. This should also include a re-write of the code of conduct for the board, and create the transparency that is needed. From there a future board should be selected as part of an unbiased recruitment process that stands up to membership and public scrutiny.

    15
    1
  12. Outstanding work – chapeau, David!

    Article says it all. We simply cannot go on under the present thoroughly discredited regime.

    15
  13. David in world of fake news, what an outstanding piece of journalism.
    It is:
    Logical
    Well researched
    Benchmarked
    Accurate
    Clear and Concise

    Bravo, Three Cheers.

    Timely too: it sets an excellent benchmark against which to gauge tonight’s presentation on the financial position.

    Well done again.

    20
  14. We need to stop whinging and move to a vote of no confidence in the Chair and the Board.
    At any level, the organisation is not being led effectively or in accordance with the Nolan principles.
    The annual review was rugby’s answer to ‘Twinkle’- a collection of wishes and fairy stories.
    There needs to be a vote of no confidence and, subject to the result, the appointment of a capable and credible chair and an interim exec team who understands its role in a governing body as opposed to thinking it’s a family business to be plundered for their own benefit.
    I hope I get the chance to progress the vote of no confidence- I suspect I won’t, given the politburo- style control of questions at the agm.

    18
    2
  15. Without the signed off accounts, AGM2 is as good as pointless.

    But at least it should help the SGM achieve a quorum.

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