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Take a mirror…

What is happening at FIFA at the moment, with the arrests of a number of key officials in relation to allegations of corruption, should be a wake-up call for all international sporting federations. There has always been potential for trouble with the way these organisations are set up – and much trouble is now raining down on FIFA. One hopes that the organisation will clean itself up as a result and leave football to operate without murky goings-on in the background.

When it comes to governance, motorsport has only one international organisation, the Fédération Internationale de l’Automobile (FIA), headquartered in Paris. According to its statutes, the FIA exists to uphold the interests of its members, in matters relating to automobile mobility and tourism and motor sport. It is headed by former Ferrari F1 boss Jean Todt and is constituted as a non-profit making association under the terms of French law, specifically the Association Loi (1901). This provides for tax exemption for the organisation and the FIA is tied to Paris apparently because of deals struck with politicians in the past. The word is that if the FIA pulls out of France, there will be a hefty tax bill to pay.

However, things are not quite as simple as they appear. In recent years, in addition to the French FIA there is also a parallel legal entity in Switzerland, which has the same membership as the French association, but is regulated by the Swiss Civil Code, its legal status being the same as the other big sporting federations that are headquartered in Switzerland. This means that the organisation can make profits and has to pay far lower taxes than private sector corporations, which is why the sporting federations are queued up in Switzerland.

The FIA accounts that are presented to the General Assembly each year are a combination of the numbers produced by these two parallel bodies, with auditors Pricewaterhouse signing them off. If the results are made public in either country, I have yet to find them, but if one knows the right people in the General Assembly one can get an idea, although there is not much detail included.

The FIA, unlike the IOC and FIFA, uses local accounting standards, rather than the International Financial Reporting Standards (IFRS), which are designed to create common international rules in accounting. IFRS mandates a number of disclosures that aim to create complete transparency in both the organisation and the reporting, including such important elements as declarations of beneficial ownership (who actually owns what) and related party transactions, which highlight things being done by business associates and family of the management. Instituting such things would be very sensible, if only to stop people talking.

Transparency is basically a good thing, if you have nothing to hide.

So what is the FIA doing badly that might cause some worries in a post-FIFA scandal world?

The federation has made much of its recognition in recent years by the International Olympic Committee, but when one looks at the IOC’s Basic Universal Principles of Good Governance of the Olympic and Sports Movement, published in 2008, one sees some anomalies, which would best be removed. The IOC says that it is best to avoid “members of any decision-making body” being influenced by the decisions. This means that people with a personal or business interest in the decision-making should not be making any decisions. The F1 Strategy Group involves various parties that should not be making regulatory decisions, notably some of the competitors. The IOC code also says that it is recommended that there be “adequate procedures” to avoid any conflicts of interests. The same Principles of Good Governance says that “a clear and transparent policy for the allocation of the financial revenues” is essential and that disclosure of financial information should be made on an annual basis, which should be presented in a consistent way in order to be easily understood, and it encourages the application of internationally recognised accounting standards.

The IOC guidelines also suggest that “financial resources which are proceeds of sport should be allocated to sport and in particular to its development” and revenues should be distributed in a fair and efficient manner. The IOC says that this contributes to having balanced and attractive competitions.

There is much logic in all of this because transparency avoids problems. If everything is clear and in the public domain, the sport is healthy. And if the financial statements are in good order it is a good advert for the ability of the management.

It is worth noting, with some reservations, that during the 2013 FIA elections, the candidate David Ward commissioned an organisation called I Trust Sport to look at the FIA using as an assessment tool the Basic Indicators for Better Governance in Sports Organisations (BIBGIS) system, which was developed by the Swiss Graduate School of Public Administration (IDHEAP). It concluded that the FIA did many things well (scoring a maximum in 12 of the 63 governance indicators) but let itself down by not “openly publishing” financial accounts according to recognised international standards, not publishing remuneration details of elected officials and senior managers, not publishing an annual report, outlining the federation’s major activities and not having fully independent, non–executive members of the Senate and World Councils. It is worth noting that the FIA has since beefed up the Senate with four independent directors, although all are presidential appointees, which means that in practical terms the President still controls the Senate if his appointees support him.

Among the other reservations expressed by I Trust Sport were that there was no media partner representation at the FIA, supporters, volunteers and grassroots participants were not represented, there was no confidential reporting mechanism for whistle blowers and various other points that are not relevant to the current discussion.

One interesting point when one compares FIFA and the FIA is that the FIA is ultimately responsible for the commercial activities of the Formula One group, as the rights which this group have leased still belong – in legal terms – to the federation and the World Championship bears the FIA name. Thus, the federation should have a right to know and publish the figures involved. These are public to some extent, but following the F1 company structure leads one into offshore places where it is impossible to see who owns what and where the money goes.

There are other questions that will probably come up soon as a result of Jean Todt’s new role as Special Envoy to the UN Secretary General Ban Ki Moon. This role will involve a great deal of travel, as he tries to raise money for the UN’s road safety activities. The FIA has an expensive executive jet which Todt uses. Will the FIA be paying for his UN activities? As it is a personal appointment, will Todt himself be paying? Or will Ban Ki Moon be picking up the tab? Getting all these things into the open will stop questions being asked.

Who will suffer if there is total transparency at the FIA? Obviously there may be individual deals where the numbers should remain private for commercial reasons, but is it not better for a sport to have everything neat and in the open?

What is now happening in soccer is that the sponsors, the people who are paying the money, are saying that they will reassess their sponsorship arrangements unless FIFA makes changes. FIFA’s reputation is shot to pieces. It is doubtful that the FIA will ever face such a thing, but it is better that all is bright and shiny all the time, leaving no dark corners.

Montreal

Formula 1 is a complicated world, which sometimes leaves fans a little bewildered with all the rules, politics and intrigues. Joe Saward spends his life trying to simplify and explain this complicated world to fans – and to make them feel that they can get closer to the sport. You can ask any question you like about F1 and I will endeavour to answer it. It is not too hard to get there from the circuit and is located down in quaint old Montreal.

This year’s Audience in Montreal will take place on Friday, June 5 at the Pub St Paul, 124 rue St-Paul Est, Vieux-Montréal, Québec H2Y 1G2.

The event will be for a limited number of Formula One fans – on a first-come-first-served basis – who would like the chance to get unique insights into Formula One from one of the sport’s leading journalists, who has not missed a race in 27 years. The format is simple: you ask questions and Joe will answer them: and it can be about pretty much everything relating to the sport.

The event will run from 7pm-11.00pm and a buffet dinner will be served mid way through the evening. Tickets cost CAD$ 60 per head. Drinks will be available at normal bar rates.

The events are hugely popular with F1 fans, so book your tickets while they are still available. It’s great value for money, great fun and a great addition for fans in town for the Grand Prix. You will go to the track on Saturday with a much better understanding of how F1 works and with plenty of behind-the-scenes information about what is going on and why. Joe will also have all the latest whispers from the paddock. You may not be able to get a pass to get into the F1 Paddock, but this is a great way to feel part of the event.

To book tickets, click here

Negotiations

It has been very clear for a long time that Europe is running out of promoters for Grands Prix because of the race fees being demanded by the Formula One group. The business model that is used is to force these numbers upwards and hope that the local governments will pick up the tab. Unfortunately, it does not seem to be working any longer, although this is a little strange given the amounts of money that cities/countries are willing to spend on other events. Whatever the case, the price is too high and so eventually the Formula One group is either going to have to lower its prices (without telling anyone) or convince that the teams that the future is in places like Azerbaijan. Right now, the future of the German, Belgian, Italian and even Spanish GPs look weak at best, and there is always the possibility that the British GP may get a break point in the contract and the promoter may simply decide to sit out F1 for a while. The fewer the European promoters there are left, the stronger their power because Ecclestone needs half there races to be in Europe and/or the United States (as per his contracts). This is why the European GP has been shunted to Azerbaijan because Bernie is running out of options in Europe. It looks like he’s struggling to find a promoter in Monza as well given that the current organisation SIAS says it will not pay the $22 million being asked for. Ecclestone is now casting around to see if he can find someone who will agree to rent the circuit and promote the event instead. Elsewhere, in Spain, the new mayor of Barcelona Ada Colau has let it be known that the city may not be willing to pay the $4.4 million that it currently invests in the Spanish GP, as the money is needed for other things. Ecclestone is hoping that a Singaporean developer may pay for a Grand Prix in Valencia, if it is allowed to build a casino.

One interesting scenario that has not been widely discussed is what happens if Ecclestone runs out of European venues available. The teams have to agree to drop this stipulation and it is unlikely that all would agree so his only way forward would be to get what he could from other venues (France etc) and punish those who dared to stand up and fight. This would be much the same as dropping his prices, but would keep the pressure on. The other option is to increase the F1 footprint in the US, but that would also involve the need for cheaper deals as F1 has priced itself out of the market everywhere apart from Texas (where the wallets are bigger…)

I had a bit of a near-miss on the grid at Monaco. It was really rather frightening, I was minding my own business, chatting to Christian Horner about his “mini-moon” ( a short honeymoon) and grabbing other team bosses who are easy targets when they emerge from hiding. Suddenly a high speed vehicle came straight at me. I had to jump aside at the last minute.

I watched this human pantechnicon pass by. It consisted of some harsh-faced security people (I don’t remember if they were male or female), followed by three bland-faced girls, who looked like they had just left school. They were holding hands and wearing Mercedes hats, and they all looked a bit lost. They were followed by a middle-aged lady, who I presume was a PR handler, as she seemed to be barking instructions and then some tail-end-Charlie security people, lest the convoy be attacked from the rear.

This whole charabanc was followed by a very serious-looking Bradley Lord, the Mercedes F1 PR man, who looked like a man sent to guide but hanging on to keep up. I asked a few people if anyone knew who these people were but all I got were shrugs and “couldn’t care less” responses. No one knew, and worse, no one cared. I presumed in the end that they must be friends of Flavio, as he is generally the person who brings the fakest celebrities into the F1 Paddock.

You can rent pretty much anything in Monaco (If you’ve seen Pretty Woman you’ll get the reference) and I wondered if perhaps Mercedes had dropped into the Monaco office of RentaCeleb, but I could not find any such organisation on the Web. All I got were links to Oscar de la Renta Celeb dresses… I even considered buying the domain name http://www.rentaceleb.com which appeared to be available.

I figured I would ask the Lord (of the Bradley variety) after the race, but as it turned out he was rather busy with his PR fire extinguisher, and it was only on Tuesday that I noted that Lewis Hamilton had spent his post-race evening with the said school leavers that I learned that they were called Kendall, Gigi, Bella and Hailey. This was about as useful as being told that their names were Flopsy, Mopsy and Cottontail (although at least I know who that lot are…)

So I retired to Wikipedia to identify the anonymous starlets, while wondering how they got so many passes to be on the grid? Passes are a major issue in F1 these days with major sponsors having to fight to get their VIPs into a paddock that is often rather too quiet. Why? Not even the Lord knows the answer to that one…

Anyway, Wikipedia informed me that Kendall Jenner is “an American fashion model and television personality” and “part of an emerging trend of social media modelling”. Her only apparent claim to fame is that she has appeared in “Keeping Up with the Kardashians”, which I am told is a completely fabricated reality TV show about people with big bottoms who are famous for being famous. The others were all recent high school graduates who have turned to modelling and are already famous enough to have bodyguards.

Totally awesome, I thought. Is this the best F1 can do for celebrities? Where are Hanks, Cruise, Law, Damon, Pitt, Depp, DiCaprio and Clooney? Where are Lawrence, Jolie, Theron, Cotillard and Johansson? Surely F1 can do better than a bit part player in the Kardashians?

The odd thing is that real talents will trade their presence for coverage of their latest projects, if the right approaches are made. Talkshows the world over trade like this every day of the week. Why not F1? Particularly given that the Cannes Film Festival was going on just down the road…

F1’s attitude is to try to stop the media finding out what celebrities are attending an event rather than using them as a way of promoting the sport.

Figure out the logic in that…

The Monaco weekend

The weekend in Monaco was a fairly pleasant one. The weather was not bad and the controversy was minimal. Monaco is always a buzz although the F1 race was not exceptional although the Mercedes screw-up made for an exciting last few laps and plenty of post-race chatter. Nico Rosberg was an undeserving winner and his celebrations seemed hollow, but as he said, you take what you get. One had to feel for Lewis Hamilton and I felt that he handled it very well. No matter what Lewis does someone thinks it is wrong.

In the paddock, there was some talk about the Strategy Group decisions of the previous week but no-one was getting worked up about them. The consensus was that refuelling is simply NOT going to happen and there were more discussions about the situation regarding customer cars. There was a meeting with Bernie Ecclestone on this subject on Friday morning to which only a handful of (big) teams were invited. They seem keen on the idea, but I just do not understand how any of the parties involved can reasonably agree to such a thing. If there is no way that a small ambitious team can climb the ladder in Formula 1, what is the point in being there simply to make up the numbers? It is wiser to climb other ladders where one can be successful.

And what would happen when one of these big teams decides – as inevitably they will – that they no longer want to be in F1. Or when one team consistently builds better cars than its rivals? If one team is dominant and supplies chassis and engines to rivals, the other big teams will be pushed back to fourth or fifth in the pecking order and, as McLaren is finding out, this weakens them.

The concept has already been gone through before by CART back in the 1980s.

Championship Auto Racing Teams Inc (CART) was running the IndyCar series at the time. Teams built their own chassis. There were some car manufacturers who sold cars to others, but there was great variety with companies like McLaren, Penske, Chaparral, Phoenix, Eagle, March and Wildcat all winners. Others such as Longhorn, Coyote, Parnelli, Lightning, Interscope, Primus and Rattlesnake did not win. However, over time the bigger chassis manufacturers were able to invest more than the smaller ones and so by the mid-1980s the number of manufacturers had thinned out because teams could buy more competitive March and Lola chassis.Even Penske gave up building his own cars. When March hit trouble only Lola remained until Reynard joined the fight in the mid-1990s. There were a few attempts to challenge the status quo along the way, but in the end the money was not there to sustain them and so eventually only Lola remained. CART became a one-chassis championship. Today no-one considers CART to be a rival of F1 as was once the case. Today the technology is unimportant and the series is dominated by a few well-organised teams, which win depending on the engines and who does a better job. Ganassi, Penske and Andretti have won the last 12 titles between them and a 13th will be won by one of those three in 2015. The series is entertainment, but irrelevant and the audience is tiny. The US motorsport scene is dominated by NASCAR, which does the whole show business thing better and even has road cars that look like the racing machinery (even if there is nothing at all the same bar the shape).

The basic logic for customer cars is that F1 cannot support 12 competing constructor teams, all of which are doing what amounts to parallel development work. This is very wasteful, but at the same time this created the cut-throat world that led to the development of the vibrant motorsport industry in the UK. The culture was always one of “must try harder”. The teams at the back of the grid struggle for money because they do not have the results – or more importantly the exposure – to bring in more. These teams tend to be supported by eccentric wealthy folk who either run out money and/or enthusiasm or they make enough of an impact to move up the F1 ladder. Using the same or similar engines is sensible in that it is impossible for everyone to build their own engines, but having a limited number of chassis is not at all the same thing.

It makes sense to the big teams because they see ways to get return on their investment at minimal cost. The problem is that when one takes this idea to its logical conclusion, it makes more sense for the bigger teams to own the smaller teams rather than just being suppliers. Running twice as many cars does not cost twice as much money and the bigger teams will inevitably want as much control as possible over smaller teams, to ensure that they do as well as they possibly can – and do everything that the bigger teams want. Having six constructor teams plus six customers would very quickly change to a situation in which there would be six four-car teams.

So I would argue that having customer chassis does not protect weak teams but rather condemns them to lose all independence. And what happens when big teams quit? At the moment we have Ferrari, Mercedes, Red Bull and McLaren who constitute the “big team” status. One might be able to rely on Ferrari and McLaren because their DNA is F1 (although after Ferrari floats things could change), but Mercedes will go at the drop of a hat if the next chairman is not a fan and Red Bull is already whining about departing because it cannot win races. Two of the four big teams thus cannot be relied upon to be around in the long-term, even if Bernie Ecclestone has written big penalty clauses into their contracts. If they want to go they will go. Toyota did exactly that six years ago. The staff lost their jobs and the team shut down. We also lost Honda, BMW and Renault at the same time (all team owners) but racers like Ross Brawn and Peter Sauber stepped up and kept those teams alive. Thus the idea of pushing out the racers makes no sense at all.

The other thing that makes no sense at all is that the teams have been given power to make decisions about the regulations. This is daft. You don’t ask footballers to decide on the rules of football, do you? Inevitably they will argue their own cases on all occasions and so nothing will ever be agreed. This is why the Strategy Group came along to try to restrict the number of decision-makers, but that is not right either because that means only half the teams in the football league are allowed to change the rules. It’s crazy.

What is required is a governing body that governs, a promoter that promotes and teams that behave like teams. There is nothing wrong with the promoter making some money, but it would be best if this was a sensible kind of promoter’s fee – 10 to 15 percent. Beyond that is simply greedy and to the detriment of the sport. The sport does not need private equity jackals, squeezing every penny out. We need a promoter that works towards creating harmony so that the sport can work as a proper corporation and can then concentrate on being better than other sports, rather than always beating itself up. The key is really fairness.

A good team will beat a bad team no matter what vehicles they race and how much money they have. Thus financial control is absolutely logical. There is no need to waste money. The division of the revenues should reflect success but only in moderation, as the smaller teams will only grow stronger if they can afford to do so. Thus there is an argument that the value of winning should be reduced, or even negated completely because success will bring money from other sources, such as sponsorship. in other words, if everyone gets an equal share of the revenues, the big teams will still have more money.

The other thing that the sport needs is better promotion. Right now promotion is left to the TV companies and race promoters. This puts a strain on both such groups because they are already paying out hugely for rights. These organisations are the ones that deal directly with the public and so they should be allowed more money to invest to put on a better show, or to create a better experience to grow the audience. Cuts in the fees for both would be a good idea because with financial control, an even spread of prize money and a promoter who is not greedy, there would be money available to do these things and make the sport more attractive to the ultimate customers. It would obviously help if TV was not pay-to-view, it would obviously help if the top people in the sport were not swathed in controversy and unseemly matters, such as the new tax battles that Bernie Ecclestone is going through, or the road safety palaver that Jean Todt has created with his ambitions, which seem to be more personal than for the FIA. The FIA already has a very successful road safety operation in the FIA Foundation. There is no need to build a parallel operation. And the conflicts of interest are everywhere, as we have seen already. At Monaco there was another attempt made to make Todt feel uncomfortable and to draw F1 into this mess with the anti-alcohol lobby pointing out that the sport does a lot to promote booze but Todt refuses to do anything about it, while the road safety lobby are desperately keen to stop drink-driving. Todt seems to be on both sides…

Anyway, the race came and went and on Monday we headed home on the highways of France, leaving the Cote d’Azur at eight on a quiet holiday Monday. The long weekend traffic built up as we went and with the Rhone Valley “en accordéon”, speeding up and slowing down because there were too many folk on the road, we decided to do something different and not struggle through Lyons and so turned west instead at Givors and headed down the valley of the River Gier. It was here that the great Georges Boillot fought the Mercedes for victory in 1914 with his outpaced Peugeot, winning himself a place in the pantheon of French racing stars. Further down the valley near Saint-Etienne is a drab little town called St-Chamond, where a youngster called Alain Prost grew up and started his career.

We then climbed up over the hills of the Forez, where there were Grand Prix races in 1946 (won by Raymond Sommer) and then it was downhill almost as far as Clermont-Ferrand before turning north up the A71 to Paris. It was longer in terms of mileage, but we were able to run faster and so we were back in Paris by the early evening, without having to deal with the vast traffic bank holiday jams getting into and across the capital.

The goings-on in Zurich, with the arrest of a number of officials of the FIFA, the governing body of world soccer, with the US Justice Department  understood to be behind the move, send out a strong signal to all sports federations that they cannot be a law unto themselves and that they must obey the rule of law.

Now we are not suggesting that the FIA is doing anything untoward, but the federation – and its agents – are sailing close to the wind with regard to Europe’s competition rules and perhaps it would be best if they went to the European Commission and asked if their arrangements are in order. If the federation is confident that all is well, there is no reason why it should be worried by such a move and it could head off a potential challenge to its finance and governance arrangements and save the Commission the trouble of an investigation.

The FIFA is in the process of showing how not to do things, it is a good opportunity for the FIA to show it should be done.

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The Monaco Grand Prix was an unsatisfying race – particularly for Lewis Hamilton fans. The World Champion dominated the race but a late race Safety Car and a bad call from the Mercedes team strategists left Hamilton in third place in the closing laps, unable to find a way to pass Sebastian Vettel and Nico Rosberg, who had stayed out. There was nothing that Lewis could do about it…

Also in GP+ this week…

– We look at Romain Grosjean’s F1 career
– We search for answers in F1’s political mess
– We review new racing films and books
– And we remember Frank Matich, Denise McCluggage and Renzo Zorzi
– DT feels the pain of the Bianchi Family
– JS is looking for heroes
– The Hack ruminates on F1 marriages

GP+ is the fastest magazine in the Formula 1 world. It is published as the mechanics are still wiping down the cars after each and every race. It appears in PDF format so that you can read it on your computer, your tablet and even on your smartphone, but it’s an old style racing magazine in a modern format. It goes right to the heart of the sport, inside the F1 Paddock. We are there at every race and we get to the people that matter. We are also passionate about the history of the sport and love to share it with our readers.

GP+ is an amazing bargain. You get 21 issues for £29.99, covering the entire 2015 Formula 1 season.

For more information, go to http://www.grandprixplus.com.

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