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A summary of the impact on stakeholders of Coventry City by the owner's pursuit of profit
By: Gary Austin (Community)
- Updated Friday 16th May 2014
- Posted under Football League clubs
The traditional shareholder view of business states that increasing value for the owners of a firm should be its priority regardless of the impact on other stakeholders. However, an alternative view of how a company should operate is Stakeholder Theory (http://en.wikipedia.org/wiki/Stakeholder_theory). Proponents of this theory believe that, to thrive, firms should aim to take into account the needs of all stakeholders, not just the owners. This model seems particularly suited to football where clubs play such an important part of people’s lives. The club that’s an important part of my life is Coventry City. They are currently owned by SISU Capital, an investment company. The purpose of their business is to make money for their investors. However, SISU are a long way from getting a return on their investment in Coventry City. Following 7 years of their stewardship, the club is now over £60m in debt, all of it payable to the owners. But the head of SISU, Joy Sepalla, remains defiant, reportedly telling The Guardian newspaper “We believe there is immense value creation to happen in the future” (http://www.theguardian.com/football/blog/2013/dec/02/coventry-city-owner...). Unable to achieve profit through success on the pitch SISU are attempting to buy the club’s former home, the Ricoh Arena. This will give them access to additional revenues outside football as well as potential profits from redevelopment of land around the stadium. Attempts to reach agreement to buy the stadium with the current owners, Coventry City Council and The Higgs Trust, a local charity have proved fruitless. SISU are now using legal avenues in their attempt to gain ownership of the Arena. The resulting dispute between SISU and the stadium owners has resulted in Coventry City playing their home matches at Northampton Town’s ground Sixfields, 35 miles away from Coventry. SISU’s actions in the single-minded pursuit of profit are having a negative impact on other stakeholders in the club causing lasting damage to the business. The impact on key stakeholders is summarised below: The fans: The majority of Coventry City fans now boycott home games. Attendances are way below the level they were at the Ricoh Arena. Younger supporters are growing up without a team to support in their City and may well be lost for good to other clubs. The manager and players: Many players have spoken out to say how they dislike playing in the soulless atmosphere at Sixfields. Some have even claimed it was a reason for them leaving the club. Attracting new players is more difficult making the manager’s job harder. The stadium owners: The Ricoh Arena has lost the revenues from hosting Coventry City games. The owners are now attempting to attract other events to the Arena to make up for the loss in revenue. The local community: The Ricoh Arena was deliberately built in one of the poorer areas of Coventry in order to provide a catalyst for regeneration. Coventry City playing elsewhere lessens the impact the stadium has on improving the prosperity of the area. Businesses around the stadium, like pubs, shops and take-aways, have suffered due to the relocation of the club. The Football League: Having been widely criticised for allowing Wimbledon FC to relocate and become the MK Dons the Football League are keen not to allow another club to be relocated. However, sanctioning Coventry City’s move to Northampton damages the club and calls into question the integrity of the competition. The situation has the potential to weaken the Football League brand and make it more difficult for them to gain revenue through sponsorship and TV rights. The current situation at the club could probably have been avoided if SISU had taken a wider stakeholder view rather than a shareholder view. Coventry City have entered a downward spiral under their ownership and show no signs yet of getting out of it. Something needs to change. That could be ownership of the stadium. But even if that is resolved a lot of hard work will be needed to bring all the club’s stakeholders back together to provide the momentum for the club to thrive. Recent history suggests the current owners aren't the right people to do this.
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