On 31 October, UK Sport and Sport England published “A Code for Sports Governance” (the “Code”) which is intended to be the gold standard for governance for this country’s sports sector. A copy of the Code is available by clicking here.
The Code is one part of the Government’s “New Strategy for an Active Nation” released in December 2015. In that strategy David Cameron stated that he wanted to establish a new governance code that would be enforced rigorously at home and set a new standard internationally.
The Code applies to all organisations within the UK who receive funding from UK Sport or Sport England. Therefore it will apply to the organisers of both grass roots and elite sport. This broad application of the Code presents a challenge for UK Sport and Sport England in designing a code which is robust enough to ensure universal standards for all organisations who receive public funding, without creating onerous compliance and administrative burdens on small organisations.
To address this challenge, the Code adopts a flexible tiered approach to compliance based on the level and duration of funding. Underlying the entire Code are five principles of good governance namely: (i) governance structure; (ii) people; (iii) communication; (iv) standards and conduct; and (v) policies and processes.
Organisations in receipt of less than £250,000 will need only to comply with the basic standards in Tier 1 whilst organisations in receipt of over £1m and where funding is granted over a period of years on a continuing basis, will need to comply with Tier 1 standards and the far more stringent standards in Tier 3. Tier 2 is a broad sector which falls between the two, and organisations within this category will be required to meet all Tier 1 standards and some Tier 3 standards.
Tier 1 standards are mandatory for all organisations seeking public funding. They are broad and not overly prescriptive; thereby giving sports organisations discretion while offering guidance on best practice. For example all organisations are required to have a governing committee that meets regularly. How often this should take place is an internal matter but the Code suggests a minimum of four times annually.
Significantly higher and more prescriptive governance standards are required for organisations in Tier 3, including:
- A maximum board size of 12 persons.
- Subject to limited exceptions, the maximum time a director can serve on a board is nine years (divided into three terms).
- Organisations should maintain an up to date skills matrix dealing with the skills, experience, independence and knowledge required of the board.
- The chairman and CEO must be different people.
- 25% of the board should be independent non-executive directors (“INED”).
- UK Sport/Sport England can require the chairman to be independent.
- A Council’s role should be to consult with and challenge the board; it should not have the power to override its decisions. Councils should also only appoint one third of the board.
- Term limits for Council members are capped at two, four year terms or three, three year terms.
- The board should appoint an audit committee and nominations committee (which should lead the process for board and senior executive appointments). The majority of the members of the nomination committee should be INEDs.
- Each organisation should identify appropriate actions to be taken to support and/or maintain: (i) a minimum of 30% of each gender on its board; and (ii) a strong and public commitment to progressing towards achieving gender parity and greater diversity generally on its board.
- The Chairman and INEDs should be appointed via an open, publicly advertised recruitment process. The board should also inform UK Sport/Sport England about any director or chief executive recruitment process.
- Organisations should publish an annual governance statement.
- Organisations should publish director and senior management pay figures (in the latter case only where the organisation employs 50 or more staff).
- Each year the board should evaluable their performance and every four years this evaluation should be performed by an external provider.
- Each organisation should adopt a directors’ code and this should be reviewed every four years.
Enforcement of the Code
Sports organisations will need to comply with the Code from 2017 onwards. The Code states that separate guidance will be provided on how UK Sport and Sport England intend to monitor and asses compliance. As the Code draws on many standards of good practice included in the UK Corporate Governance Code (which applies to all companies with a Premium Listing on the London Stock Exchange), it may well be the case that a similar approach to enforcement of the Code is taken by requiring sports organisations to comply with the Code or explain why an alternative approach is justified.
Next Steps and Governance Workshop
The Code is far more detailed and prescriptive than any approach previously taken by UK Sport or Sport England. As noted above, sports organisations have until the next funding cycle in 2017 to comply with the Code which will leave some boards with much to do. In addition to updating their constitutional documents, there are numerous policies, procedures and other documents which organisations will need to draft, agree and implement. These include a directors’ skills matrix, written confirmation of the role of the chairman and chief executive, written policies and procedures on board conduct, committee terms of reference, statements and updates on board diversity, procedures for appointing new directors, a director declaration of good character, a statement of director responsibilities, a director induction process, a director remuneration procedure, a governance statement, a stakeholder engagement strategy and annual review, annual staff surveys, a directors’ code, policies regarding legal compliance and financial policies and procedures.
To assist sport organisations with the introduction of the Code and to consider other examples of governance best practice, we will be holding a sports governance workshop in early 2017. This is not just aimed at organisations in receipt of public funding but all sports organisations seeking to improve their governance standards.