REMEMBER all the effort and expense which went into launching the Gammell/Murray Independent Corporate Governance and Business Review back in January 2020? The glossy, high-spec brochure? The photo-call? The press briefing? The town hall meeting? The former internationalists with hitherto unknown expertise in business command structures who stepped up to support the plan?
Contrast that with the release yesterday afternoon of the second (and final) consultation document on the proposed structure which has been drawn up during the last 14 months by the Scottish Rugby Council’s Standing Committee on Governance – distributed without fanfare in a standard ‘Club Communication’ email, which contained a letter from SRU President Ian Barr alongside some hyperlinks, including one to the consultation document in question and one to a document providing questions which now need to be answered.
The consultation paper contains a block diagram of a proposed corporate structure which was first unveiled in August, along with 12 and a half pages of scanned text which provides a bit more detail on the plan than was previously available. Everything the clubs need to know at this stage to spark a worthwhile discussion appears to be there, but the presentation was basic.
Could it be that the people directing the communications department at Murrayfield are not fully behind this latest attempt to find a structure which can work for everybody – from the lowliest club to the highest paid executive – in a rapidly moving rugby landscape?
Here’s hoping that what has been produced is a triumph of substance over style, because, after years of internecine fighting and several false starts, it is vital that an effective way forward is identified.
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The basic premise of SCOG’s proposal is that the unincorporated association of the SRU will be replaced with a company limited by guarantee (“NewCo”) – just as the rejected Gammell/Murray report proposed, with the key difference being that in this case the NewCo Board is elected by the membership rather than selected internally.
The Trust – which currently owns the shares for Scottish Rugby Union Limited on behalf of the clubs – will be dissolved, and the shares transferred to NewCo, with members of the SRU [the clubs] able to become members of NewCo, taking on a guarantee liability of £1.
The Directors of the NewCo will be called “Custodians”, consisting of the President (as Chair) and four others to be elected by the membership. The immediate past-President will take one of those spots for the first two years of the new structure as a transitional measure.
The role of the Custodians will be to oversee those charged with running the business on a day-to-day basis, and to do that properly they will require ‘back-office’ support for secretarial, audit and legal functions, and so on. It is essential that this support group exists and operates purely on behalf of NewCo and doesn’t end up serving two masters, as often tends to be the case when it comes to the elected representatives and their hired help inside Murrayfield at the moment.
Below NewCo sits Scottish Rugby Union Limited [SRUL], which remains the principal operating entity for all of Scottish Rugby, in charge of running commercial and other delegated affairs of the business, reporting to the NewCo (through the Custodians) four times per year.
Those matters which are not delegated [i.e. remain the reserved responsibility of NewCo] will include the disposal of Murrayfield, sanctioning any decision to drop the budget for the community game below 15 percent of revenue, and sanctioning debt in the annual budget to exceed 15 percent of revenue.
Otherwise, SRUL will have full control of budget and strategy, whereas Council currently – at least theoretically – have the right of veto.
Crucially, the NewCo Board will be responsible for selection of the independent Chair of the Board of SRU Limited and maintain an independent Standing Committee on Governance, which will improve accountability and hopefully serve against any further constitutional gridlocks such as we have seen in recent months.
Populating the Boards
The Chair will be one of the four independent non-executive directors (appointed by the SRUL Board’s Nominations Committee), who will sit on the SRUL Board alongside four non-executive directors elected by the membership (including the President and Vice President), and three executive directors (CEO, CFO and one other).
A curious feature of the consultation document is that SCOG states that its preference is for there to be a complete split which prevents members of the SRUL Board sitting on the Board of NewCo, but reveals that there has been “significantly divergent views from those interested parties that have made representations in this governance review process”.
The alternative view is that a “hybrid” model be adopted which allows there to be cross-over between the two Boards“with, for example, the Chief Executive Officer and Chief Financial Officer of SRUL also sitting on the Board of NewCo”.
Given that much of the recent angst over Scottish Rugby governance relates to the current Board marking its own homework, and to the conflict of interest which exists between Board and Council in relation to areas such as the role of the legal department, this is an issue which needs to be addressed carefully.
If the NewCo is being set-up to provide oversight, should it not stand separately from those it is overseeing?
Then, bizarrely, we are told that: “SCOG would also note that an alternative structure would be for the present member clubs of SRU to become direct shareholders in SRUL. Such a structure would mean that there would be no NewCo holding company.” No opinion is expressed on the merits or otherwise of this proposal, and you wonder why it is there?
It certainly seems like the document has more than one set of fingerprints on it, and we’ve heard claims of Board interference leading to its late delivery, which is problematic because this is meant to be the recommendations of SCOG and if somebody else has a better idea then they really need to own it.
Delegating responsibility
Back to the actual recommendations: SCOG wants the Board of SRUL to delegate responsibility for the club game to a Club Rugby Board [CRB], which will meet at least four times per year and have its own budget, proposed at 15 percent of overall revenue. What that 15 percent encompasses will be crucial because, at the moment, there are a lot of central costs which aren’t assigned to either the ‘Performance’ or the ‘Development’ departments.
There will be a separate Performance Rugby Board [PRB] delegated by SRUL, with SCOG recommending that a liaison committee be set up consisting of figures from both the club and the performance games to work together so that silo mentalities don’t develop.
The suggested membership of the CRB is: the Vice-President (as Chair), forum chairpersons from South, East, Glasgow North, Glasgow South, Midlands and North (ach serving a maximum of 3×2 year terms), Director of Rugby Development and Finance Director.
Membership of the PRB will be at the discretion of the CEO, with SCOG envisaging that the initial membership will include the CEO, CFO, COO, one Non-Executive Independent Director from SRUL, Director of Performance Rugby and Technical Director.
There’s a lot to like about what SCOG has recommended here, but the whiff of interference is concerning, with the current Board appearing to have most to lose – not necessarily in terms of power [in fact it will have more power under these proposals], but in terms of accountability.
We have waited long enough for a governance model which can work for all of Scottish rugby. This most recent proposal must stand or fall on its merits. Barr and the surviving members of SCOG need to be given full opportunity to sell their concept – just as Sir Bill Gammell and Norman Murray were allowed to two years ago – with objections and counter proposals heard and addressed in an open and constructive manner.
This discussion document was initially supposed to be issued on the week commencing 22nd November, with the aim of voting on the final proposal at an SGM before the end of the year. Given the delay, the consultation period will now run until 11th January, giving members five weeks to respond.
The “questions which need to be addressed” document, which was also issued yesterday, is designed to help clubs focus on the key issues which need to be definitively settled.
There is, inevitably, a fair bit of governance fatigue out there amongst club representatives after years of batting back and forth, but this headache won’t go away until a settled and progressive path forward is laid out. The ball is now in the clubs’ court.
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As always, the devil will be in the detail – for instance:
How do you define revenue?
Does Scottish Government Covid money count as revenue?
Does Scottish Government Covid allocated to Club rugby, count towards the 15% of revenue allocated to the Club game?
Difficult to critique SCOG’s extensive work without getting embroiled in points of detail and minor questions arising from language in the drafting of the Updated Consultation Document (2). Much of the detail requires refinement and greater clarity. Some thoughts, following a quick skim…..
1. The overarching shape of intentions & proposals contained in the updated consultation document appear to be satisfactory. Reassuring to note that a “District” format for official elected representation from Members Clubs has prevailed. However…..
2. Notwithstanding the terms of clauses 2.4.1, 2.4.2 and 2.4.3 (1,2,3 & 4) “Reserved Matters”, it would surely be prudent for NewCo to reserve the strongest fall-back rights that would enable it to step forward itself to direct SRUL under certain defined circumstances, in a form of “nuclear option”, e.g. to prevent business matters under the sole control of SRUL becoming detrimental to the fundamental rights and benefit of Member Clubs / the “community game”. Four annual reports from SRUL would not alone provide NewCo with the necessary levers of power to call a halt or change direction on urgent matters of great importance to Member Clubs.
3. SCOG’s preferred proposed “separate entity” corporate structure arrangements at 2.3.1(a) appear much better than the hybrid alternative outlined at 2.3.1(b), in terms of avoiding blurred lines of responsibility, and accountability. The third “participation” alternative described at 2.3.2 is unnecessarily over-complicated and best avoided because it would carry no obvious benefits in practice; this curious option appears to represent a late (3rd party) addition to the document.
4. Given the opportunities for creative accounting and manipulation of the timing, etc. of certain types of contractually-sensitive revenue inflows, setting the stated bar for funding allocations to “community game” via the Club Rugby Board at a minimum 15% of total annual revenues creates a very specific hostage to future fortunes. Such a “strait-jacket” condition also pre-empts future operational and financial management strategies, which by definition require flexibility to address unknown future events.
5. While the very specific stated but unexplained minimum amount of 15% of SR revenues (presumably total annual income, or turnover) requires for practical amnd legal purposes the fullest definition possible, this matter might actually warrant a separate detailed consultation all of its own, if only that were feasible(!). In addition, the drafting of certain clauses in this connection would benefit from greater clarity, e.g. at 3.B.4 and elsewhere. Similarly with the provisions at 2.4.3(3) regarding the annual debt / revenues % ratio ceiling, proposed at the apparently arbitrary but not fully-defined or reasoned figure of 15%.
6. Let’s not forget that good people can make defective organisational structures work well, while a few wrong ‘uns can destroy effectiveness in the best of structures….!
Picking up on Dom’s initial para,my initial reaction seems to be that we appear to have a horse pulling several carts, all vying for supremacy over the horse.
No can do!
There doesnt appear to be much movement from the first consultation paper, so Im finding it rather difficult to make much sense of this version.
What seems to be pretty clear though is that there has been massive maneuverings against SCOG. And this seems to be from within Murrayfield. Governance is a matter solely for Union members (IMO).
To the proposals
Is this better than what we currently have? As outlined not really. TopCo dont seem to have much authority over SRUL. Too much “reporting” to my mind. To be effective it needs to have some approval of strategy and budgets while still allowing SRUL to manage the business.
My other worry bead is in the complexity of the CRB structure. There is the CRB Board, many working groups and area board. This feels at first glance overly heavy and will require a lot of people to make it function.
Im confused with the premise – what are we being consulted on? There is a plethora of views and options being discussed and clubs are invited to provide more. How will SCOG take a view on what comes back if it adds more options to the paper?
The paper stresses that no decisions have been made and that further legal and accountancy advice will be required in any event. That being the case, the draft articles are useless as they could be fundamentally changed follow the next stage of feedback
If I presented this paper in a business meeting I would expect to get a very hard time. Step 1 – the problem we are addressing is…. Step 2 – this is how our proposals will make things better Step 3 – this is how we will deliver – step 4 – here are our KPIs
Dom, while I admit not to fully understanding all the ramifications of this review my concern is what is going to happen this season at club level.
With games already being postponed due to Covid, the worst of the weather still to potentially arrive and the latest Covid news what are we going to do if the leagues cannot be completed.
I could not understand the decision two seasons ago just to scrap the leagues after most were 80%+ completed I strongly feel we cannot let this happen again. Can the clubs address this potential situation arising once again before it is too late. 🐻
Iain. The leagues need to reach 65% completion to be fulfilled in the event that the season is curtailed. This was agreed before the season started to avoid the Biggar/Dalkeith/ Orkney 2020 scenario.
So far tonight 16 games are off due to Covid.
Relevant, but way off-topic!
Iain & Dom – best to pursue specific, focused debate on matters of importance, as in this instance.
Let’s not divert discussions away (or detract attention) from the author’s essential theme. Here, the topic is SCOG’s 2nd consultation document. Needless to say, there are huge implications in all of this, especially for those with concerns about what happens at club level in every imaginable way – Iain’s point.
For most of us not currently involved in the professional game or Murrayfield boardroom, the principal governance and management issues in play here across a broad canvas concern control, representation, balance of power, transparency and independence in so far as it affects those Member Clubs that are in fact the embodiment of the Union – i.e. the “Scottish Rugby Union”.
In this instance, David concludes, succinctly…. “There is, inevitably, a fair bit of governance fatigue out there amongst club representatives after years of batting back and forth, but this headache won’t go away until a settled and progressive path forward is laid out. The ball is now in the clubs’ court.”
Without getting excessively hung up at this juncture on side issues such as seasonal league programmes or occasional misunderstandings regarding the legal capacity to trade of Unincorporated Associations, this really is the time for everyone with a genuine interest in the future of rugby in Scotland to know and understand the “ramifications” of what is not simply a review, but a consultation document, inviting informed feedback and comments. Clubs have an opportunity here to influence their own future…..
Iain, you and I may have disagreed both publicly and privately in the past, albeit always in a respectful and friendly way, about the way in which Scottish Rugby and certain individuals at Murrayfield have undertaken their management responsibilities – but we remain united in our private dialogue and belief that for the future health and well-being of rugby in Scotland, the Game at grassroots / community level across the country needs to be strong, ideally in the long run self-sufficient, but right now crying out for directional, technical, developmental, financial and infrastructural support from a formally-engaged, well-managed, fair and properly-structured Governing Body.