Amazingly, it is still only a couple of weeks since we were all in Abu Dhabi at the last Grand Prix of the year, but a lot has happened since then, notably prize giving ceremonies and a load of FIA meetings in Paris. There have been screeds of decisions taken and speeches made, but very little has been reported upon, as access is restricted beyond press releases. We have, however, had the benefit of a transcript of a speech made by FIA President Jean Todt to the General Assembly.
The analysis of speeches is always quite interesting. Generally, speeches at such events are designed to big up the speaker and play down the problems. However, in the playing down, there are always subconscious hints about the things that are worrying the orator, which he feels need to be addressed. Logically, if all is well, no subject needs to be addressed, people do not need to be soothed. These speeches are rarely written by those who deliver them but rather by speechwriters, professional people who know how to string words together and who create sensible, non-rambling, discourses on the matters that the speaker wants included. The primary subjects in Jean Todt’s speech were the attacks in Paris (which he needed to address for obvious reasons) and the question of FIA governance and finance.
“Due to what has happened at FIFA and the IAAF, there will be increasing scrutiny on all global sporting federations,” he said. “And we should not fear this scrutiny. Because of the reforms we have undertaken over the past six years, on the contrary, we welcome it.”
He went on to say that a proposal was recently put to the FIA Senate that an independent external firm should be contracted to review all of the FIA’s internal procedures. This was approved and the consulting firm Deloitte has been chosen to conduct a review, beginning in 2016.
“We have put in place the necessary checks and balances to ensure that our organisation is transparent, democratic and ethical,” Todt said. “This process of critical self-examination and improvement was long overdue.”
This should obviously be welcomed because the last thing this sport needs is for there to be revelations that this person paid this club’s debts before the last FIA election and so on, but the one question I do have is this: who is paying Deloitte? These people do not work for free (far from it) and does not the paymaster always call the tune? Consulting firms will do as they are told. Yes, the firm is external to the FIA, but is it truly independent? Will this review really ask difficult questions? It may spot glitches that the FIA people have missed, but will it really address the stuff we want to know about: why are there two parallel FIA structures, one in France, one in Switzerland? How much time and money is spent on UN work and does the FIA suffer as a result? Are all potential conflicts of interest listed anywhere? There are lots of questions, which as a believer in transparency I do not think we need to have. And will anyone other than the FIA Senate see what Deloitte says in this review?
Some of these questions may eventually be addressed in the public domain if there is an EU Competition Directorate investigation into how the sport operates. The small F1 teams have complained very specifically about the way they have been treated by the Formula One group, but that will inevitably call into question the structures that involve the big F1 teams and the FIA, and will no doubt include things like the Ferrari five percent off the top, and the celebrated veto, the Strategy Group and how it came into being and the commercial arrangements that exist between the Formula One group and the FIA. It is all interlinked. Anyway, it is good news that this is happening, but some would be happier if it was being done by a truly independent body.
It was good to see Todt announcing that the annual revenues have gone up from €45.8 million in 2009 to “in excess of €100 million, the first time in the FIA’s history this has been achieved” and that the federation now has €140 million in reserves, compared to €30 million in 2009. But, he did not say how this has happened. Nor whether tis is a steady figure of has the last year been particularly important? I believe that the revenues from Formula One jumped from €24 million to €44 million in 2013, plus a €5 million signing bonus, so one can trace some of the new revenues, but where has the rest come from? Has the FIA Foundation been giving the federation more cash? It would be interesting to see exactly how dependent the FIA is on money from the Formula One group. And what constitutes “reserves”? Do the reserves, for example, include the value of the one percent shareholding in the Formula One group that the FIA acquired in 2013 for just $460,000? Presumably they do. This has a current value of probably €75 million, so that might be the only reason that the reserves now look strong. But it is not cash and cannot be turned into cash until the group is sold because there are believed to be drag-along, tag-along rights involved.
These are all questions that we should not really need to ask. Similarly, what percentage of the money is coming to the FIA Switzerland entity and what is going to FIA France? This is important because there was a deal struck years ago with the French tax authorities in Paris in order to keep the federation in France. If the tax people get uppity, the FIA is on a sticky wicket. Similarly, will the change of leadership at the Foundation change the relationship between the independent charity and the federation? The new Foundation chairman is the Rt Hon. the Lord Robertson of Port Ellen, a former British Labour Party politician, who was Secretary of State for Defence for two years in the late 1990s before becoming Secretary General of NATO between 1999 and 2004. He is big on road safety (and right with Max Mosley’s gang) but that does not mean that he thinks the foundation’s money is best in the FIA’s hands, as there are plenty of other road safety bodies that need to be helped.
Details are important.
Most sports are jittery in the wake of the FIFA and IAAF investigations and the International Olympic Committee (IOC) has just reacted by issuing a new statement on good governance. Recent incidents have shown that, in the interest of the credibility of all sports organisations immediate action to reinforce good governance is necessary, so the IOC is proposing the following measures be adopted by all of its members and associates (the FIA is one of them). The IOC wants “the basic principles of good governance, including transparent and democratic decision making processes, financial reporting and auditing according to international standards, publication of financial reports and ethics and compliance rules, etc. to be applied during 2016”. It also wants an independent audit system of its bodies. It has asked the International Institute for Management Development (IMD) in Lausanne to undertake research into good governance at the IOC itself. It has called for a complete overhaul of the doping system, to make it independent of sporting bodies.
Elsewhere in the F1 world, Bernie Ecclestone has been talking about “a mandate” that he and Todt have received from the FIA World Council. There was one vote against this (Ferrari, of course) and so the FIA had to describe the vote as being “near unanimous”(which made me smile). This oxymoron is right up there with “the sound of silence”, “bricked-up window”, “electric candle”, “the living dead”, “civil service” and “guest host”. I’m an Apple user myself by I am told it is the same with “Microsoft Works”.
Bernie says that he can do what he likes (a phrase he often uses) and will deal with the fall-out that follows. This can get you into difficulties sometimes, as we saw not long ago in Munich. If it is decided to go down that path, arbitration is a lengthy and expensive process. The question is whether changes could be made before the arbitrators make a decision or whether that would require legal actions to stop changes and once that started the potential for a World Championship-scale domino-tipping contest would be upon us.
Elsewhere, there are other risk factors that need to be addressed. It was interesting to see this week that there are proposals from the European Commission to allow online services to be portable across the EU, and plans to overhaul copyright laws, to make it easier to buy and use content.
“People who legally buy content – films, books, football matches, TV series – must be able to carry it with them anywhere they go in Europe,” said Andrus Ansip, the commission’s vice-president for the digital single market.
One could say the same about F1 coverage. The commission specifically said that sports services would be covered by the regulations. It said it expected the regulations to be approved next year and implemented in 2017. This is a good idea to allow freedom of access within the one market, but it does mean that there could be problems for those who are selling TV rights to lots of individual markets, making more money than might be possible with one big deal.
The involvement of the authorities in sporting matters is never really a good thing but it is also worth noting that some of those involved in the sport have other problems with such things. Force India owner Vijay Mallya has been up to his neck in trouble in recent months and India’s Central Bureau of Investigation recently called Vijay in to answer questions about alleged financial impropriety in relation to a loan from the Industrial Development Bank of India, despite an internal report questioning the financial health of his Kingfisher Airlines. Mallya was questioned for several hours and directed to be available in Delhi for future questioning. In October the CBI raided Mallya’s residences and his offices across India.
On a more positive note, if you are into old racing cars you might like to note that a 1956 Ferrari 290MM, raced by Juan Manuel Fangio was sold in Sotheby’s “Driven by Disruption” in New York for a stinking $28 million.
It may be the off-season now, but there is still plenty going on. If you want to keep up with the nitty–gritty of the sport you can keep yourself informed with the weekly Joe Saward’s Business of Motorsport newsletter, which appears on Monday mornings. Check it out here.