The Sunday Times exposé on 1 June 2014 made further allegations concerning the integrity of Qatar’s winning big to host the World Cup in 2022. The allegations are serious, and carry with them reputational risks not just for FIFA and Qatar, but also for those companies who decide to sponsor the event. But is there a moral of even business case for sponsors to take some responsibility to fight corruption in sport? In reality, the moral and business case probably amounts to the same point - the association with a tainted event results in financial harm by way of negative impact on a brand and ultimately on sales.
It is undoubtedly the case that sports sponsorship can be very beneficial for companies. As the United Nations Global Compact puts it in its practical guide for companies on: ‘Fighting corruption in sport sponsorship and hospitality’:
“Sport sponsorship can help companies enter new markets, strengthen their brand and establish a positive emotional link to a company’s products and services.”
Yet, the upside of sports sponsorship has led to more and more sponsors taking active steps to mitigate against the downside both proactively and reactively. Most recently we saw an immediate and forceful reaction from sponsors of the NBA Basketball team the LA Clippers after the club’s owner was alleged to have been recorded making racist comments. Nearly twenty sponsors suspended or terminated their commercial relationship with the LA Clippers as a result; they have apparently been slow to return. However, the stance of the sponsors has had and will have a major impact on the NBA’s position on Donald Sterling and in relation to future allegations of misconduct by anyone associated with the game. Failure by sporting entities to take robust action to tackle, for example, match-fixing or cheating, can have a lasting damaging impact on the sport – for example, the Calciopoli scandal is blamed by many as the reason for the decline in the popularity of Italian football, and it remains to be seen how long cycling will take to recover from the doping scandals.
We have seen with the Winter Olympics in Sochi this year, that public interest groups will use major sporting events to highlight corruption, human rights and other abuses – as the sporting event looms, the more these causes attract ever greater publicity in the media. These events are used to create greater social awareness of a wide array of issues. It would be naïve to think that, say, the World Cups in Russia, and Qatar (if they indeed are still allowed to host it) will not continue to be used to publicise a number of public interest concerns.
Sport sponsors must take a more proactive approach to both identifying risk, and having a plan in place to react in a positive way to any scandals or controversies that might unfold in connection with a sporting event. Such steps might include:
- Having a media monitoring programme in place to identify potential issues in advance (or as soon as they materialise) that may flow from a company’s association with a sporting event;
- Seeking to include more robust ‘morality clauses’ in sponsorship agreements that provide a right to terminate or ‘auditing rights’, warranties and guarantees about the integrity of bidding processes, warranties about transparent decision-making processes, and even provisions that compel the sporting entity to undertake formal investigations of wrongdoing (such as corruption allegations) and publicise the results – this latter provision might take a similar form as contractual clauses that might require unofficial ambush or parasitic marketing to be combatted by a sporting entity.
- Mapping out in advance what the company’s stance might be if certain issues arise, including in what circumstances a company might terminate the sponsorship arrangement. This will enable a rapid response to unexpected events, thereby ensuring a coordinated strategy and maximum protection of a company’s reputation.
- Engaging with sporting entities to encourage change and greater transparency (if necessary), and to seek to agree on a stance if say, the sporting event is used to highlight non-sporting related abuses in the host country (rather than directly associated to the event itself).
- Reviewing insurance policies to ensure that they cover the costs of terminating a sponsorship agreement, and associated losses.
- Collective action between sponsors, subject to compliance with anti-trust and competition rules, to make it clear the expected level of governance within sports entities, in the same way the UK Bribery Act has forced companies to ensure certain requirements are met by their intermediaries and joint venture partners with regard to internal anti-corruption programmes.
As referred to above, the United Nations Global Compact has produced a very useful document for companies on fighting corruption in sport which is primarily focussed on two areas:
- Corruption in the relationship between the Sponsor and the Sport Entity (e.g. offering or giving bribes to win a Sport Sponsorship) as well as with other business partners;
- Corruption in sport hospitality (e.g. using sporting events as a means to improperly influence third parties for commercial gain).
The UN Global Compact document emphasises perhaps the obvious – that the benefit of sports sponsorship depends to a great extent on the reputation of the sport entity:
“If the Sport Entity is associated with misconduct and illegitimate behaviour, the intended purpose of establishing a positive emotional link with the brand may be negated or even be turned around.”
The World Cup and the Olympics are undoubtedly spectacular occasions uniting fans from different countries, religions and cultures. They should be celebrated. As a result, entities such as FIFA and the International Olympic Committee have significant negotiating power because of the attraction and exclusivity of their sporting events. Whilst sponsors are not under any obligation to police sporting entities, if they are intending to utilise sporting associations to increase their brand profile and ultimately their commercial success, then they would be wise to take action to prevent damaging events unfolding or at least mitigate their impact. Such an approach would not only benefit sponsors but also hopefully increase good governance amongst sporting entities and makes such occasions even more successful for all stakeholders.