The CEO of the Australian Sports Commission Simon Hollingsworth, was a keynote speaker at Friday’s Australian Athletes’ Alliance conference on sports governance.
This is an edited copy of the speech he delivered to the country’s peak athletes’ unions, including representatives of cricket, rugby league and union, AFL and football players’ associations.
Good morning everyone, and thank you for providing me with an opportunity to address this year’s legal conference with its focus on governance in Australian sport.
It is a pleasure be here and have a chance to speak to those directly involved in sport. I commend the Australian Athletes’ Alliance for organising this event to encourage discussion and debate on a very important topic.
My background means that there is a little bit of lawyer/consultant/bureaucrat and athlete all lurking in my DNA – today I can happily wear all four hats, as the topic of governance is relevant to them all.
Any mention of the word “governance” to an audience risks inducing yawns and preparations for a moment of shut-eye. I’ll do my best to avoid this. What I can assure you is that the Sports Commission’s view is that good governance is a necessary condition of sustained success and growth.
I have been in this role for about 10 months. In that time I have met dozens of CEOs and chairmen of sports: big and small; professional and amateur. The theme of good governance – in terms of both structure, as well as the application of – has been a standout theme.
What has been most interesting to me is that – having as you heard in the introduction about my about my work in business and government – this is an issue that is not the exclusive domain of sport.
The Australian Sports Commission
As most of you will know, the Australian Sports Commission is the Australian Government’s peak sports body. While our operating and authorising environments are complex, our goals are easily expressed and I think well understood.
Our four year Strategic Plan sets out the key goals that we are seeking to achieve:
1. Getting more Australians into sport
2. Helping Australians achieve success on the world stage
3. Assisting sports to become sustainable and successful on their own terms.
4. Building our own capacity, so we can deliver on the above
You will immediately spot my challenge as CEO – The golden thread running through these objectives is that the ASC’s success is about others, and working with others to succeed. My time as CEO of the Commission will be characterised by a willingness to work with our partners.
As the Australian Government agency charged with leading and supporting Australian sport, the ASC is constantly looking for ways to help sports develop their capacity and improve their governance arrangements; a key aspect of Goal 3. This is the area that I’d like to talk about today. In doing this I’ll focus on three central themes: why good governance is important; what happens when it breaks down; and what the ASC is doing to promote good governance.
Why good governance is important
The Commission’s four-year budget is more than $1.2 billion; we own more than $250 million in assets as part of the AIS; and we spend about $150 million each year in grants to sports and direct to athletes. As part of Government, our public accountability is crucial and something we take very seriously. We are not a sport – so us achieving our goals depends very much on our partnerships. You can see therefore, that it is self evident that it is important the ASC has a clearly stated position on the governance of national sporting organisations which receive ASC funding.
The size, complexity and operations of sporting organisations differ, so to optimise individual performance, flexibility must be allowed in the structures and systems that are adopted. We recognise that. This flexibility must be balanced against accountability, contestability and transparency. We consider that there is an obligation for all sporting organisations – through their boards – to explain to their stakeholders why it has adopted any alternative approach to the best-practice principles published by the Sports Commission (we often refer to this as the ‘if not, why not’ obligation). I’ll come back to these principles later.
An important part of the Commission’s role is to work collaboratively with sports and other partners to help strengthen their organisational capability and sustainability.
Governance is the system by which organisations are directed and managed. The ASC recognises that effective sports governance requires leadership, integrity and good judgment. Additionally, effective governance will ensure more effective decision-making, with the organisation demonstrating transparency, accountability and responsibility in the activities undertaken and resources expended. Governance includes:
The process of setting, guiding and monitoring the organisation’s future direction;
Ensuring the organisation operates within its relevant legal and other boundaries;
Driving organisational performance (through the management team appointed by the board); and
Establishing appropriate control processes and accountability systems.
Done well, good governance influences how the objectives of the organisation are set and achieved, spells out the rules and procedures for making organisational decisions and determines the means of optimising and monitoring performance, including how risk is monitored and assessed.
There are a number of reasons to get corporate governance right, including:
Good risk management;
The discipline a well functioning board can bring to an organisation i.e. strategic planning, compliance monitoring; and
ensuring that the organisation does not rely on one individual – a significant risk factor if that individual should suddenly be removed from the organisation
It is commonly accepted that governance structures have a significant impact on the performance of sporting organisations.
What happens when it breaks down?
There are a number of factors that contribute to poor governance – director inexperience, conflicts of interest, failure to manage risk, inadequate or inappropriate financial controls, and generally poor internal business systems and reporting.
Ineffective governance practices not only impact on the sport where they are present, but also undermine confidence in the Australian sports industry as a whole.
Additionally, when governance breaks down it creates a culture of mistrust amongst members. It also results in inefficiencies, duplication of resources, conflicts of interest and those sports with a fragmented business model are often less attractive to outside investors, particularly those in the corporate world, which can impact financially upon an organisation.
Aside from the obvious legal implications of poor governance and the fiduciary obligations of Directors, there are manifest implications.
Putting my athlete hat on first – poor governance will compromise high performance; it risks resources going to the wrong place or being squandered. For the Sports Commission which in part exists to promote international sporting success – this is not acceptable. While I have seen high performance success despite the presence of well-functioning governance, this is rare and certainly not sustainable in a very competitive sporting market. Young athletes have talent, and they have choices: and in the long term they will exercise those choices based on perceptions about how a sport is run.
The other implication of course is that poor governance will impede the future growth of a sport. It is clear to me that all sports want to succeed; want to grow; want to have more participants. This requires clear direction, leadership and investment. Poor governance is not consistent with such outcomes. In my travels and discussions I have observed a number of sports that are failing to reach their potential or really struggling, at least in part due to governance related constraints.
What the ASC is doing to promote good governance
The ASC’s commitment to supporting sport extends well beyond funding – we are actively working with sports in areas including commercialisation, e-capacity and research to support business development and capability building initiatives. For me, this is some of our most important and yet unheralded work. An example includes the ASC’s recently revised Sport Governance Principles I referred to earlier – providing contemporary advice on best practice principles for national sporting organisations. A copy of those principles has been sent to all CEOs of national sporting organisations and they are also available on our website.
The Sport Governance Principles are a guide for sports to ensure they can develop, implement and maintain a strong and flexible structure and approach that meets the needs of their sport, allows for an ethical culture to be established through appropriate self-regulation, and provides members and stakeholders with benchmarks against which to gauge the sports performance.
Compliance with the Principles is not mandatory for ASC funding or support, rather, the Principles reflect what the ASC considers best practice for sporting organisations. Indeed, beyond funding, the ASC looks to have a broader relationship with sports to assist them in delivering on their plans, supporting their growth and achieving success. This support includes business, organisational and workforce development, and resources. Intertwined with this is maintaining the integrity of sport.
In order for the capability building relationship to be effective, for the most part, the ASC divorces it substantially from funding decisions. I recognise that this is a challenge, but we recognise that the best capability building relationship will occur where questions of funding are separated, allowing the capability relationship to develop in an open way. It does not mean, however, a total separation where progress is not evident.
The most significant issue identified while updating the Principles surrounded a sport board’s need to set its strategic direction, follow this, and monitor its performance against the strategic objectives.
Another issue that I should note is that even with the best guidelines and policies; behaviour is the main contributor to good governance. Again, we have witnessed a number of sports with good governance models ‘on paper’ but the application of the model in practice has left a lot to be desired. This is no less damaging than having the wrong governance model.
In some instances, boards are not aware that their behaviour is inconsistent with good practice. Thus, the purpose of these Principles is to:
assist members of boards, CEOs and managers of sporting organisations to develop, implement and maintain a robust system of governance that fits the particular circumstances of their sport; and
to provide the mechanisms for an entity to establish and maintain an ethical culture through a committed self-regulatory approach that provide members and stakeholders with benchmarks against which to gauge their performance
The ASC recognises that supporting the capability and sustainability of sports is an ongoing, continuous cycle, and is therefore committed to assisting sports in the best possible way. The quality of planning, national alignment and collaboration, and performance monitoring and review must be at a high standard within this context.
I am excited by what the ASC can achieve through partnerships. There is an opportunity for us to work more closely than ever before, to pioneer leading practice which will set global standards and re-affirm our reputation as world leaders in sport.
Governance is an important area and I hope what I have said has helped give you a better understanding of the ASC’s position on this issue. Much has been achieved over the past decade, but sports must never stop asking the question “is our governance model the right one for now and the future”.