Earlier this summer FIFA faced a decision that could have changed the face of football forever – certainly from an administrative point of view. The decision was whether to proceed with the presidential election or, as England strongly suggested, postpone the election and hold an internal review into corruption matters.
FIFA opted to continue with the farcical election, which contained just one candidate, and bypassed the opportunity to change football.
Creative accounting
Now UEFA stand at a similar crossroad with regards to their financial ‘fair play’ policy that comes into effect this season. The policy is designed to prevent clubs from spending exorbitant fees and wages that are far beyond their means, which result in clubs becoming entirely dependent on the financial clout of their owners. Under the policy, clubs must balance their books, and effectively make sure turnover is equal to expenditure.
In principle it is a fantastic idea, as no fan ever wants to see their club fall apart for financial reasons. But many pundits have dismissed the policy claiming that it will just lead to creative accounting on the part of the clubs. Manchester City’s recent £400 million sponsorship deal with Etihad is the perfect example of this creative accounting.
Manchester City’s Etihad partnership
The £400 million sponsorship deal over 10 years between City and Etihad is unprecedented in football, the money will be invested in a new academy, sports centre and training campus, all next to the newly named Etihad Stadium.
The area surrounding Etihad Stadium will be known as the Etihad Campus and will include a 7,000-seat youth stadium, bringing jobs and life back to an area of Manchester that has been impoverished in recent years. The positive impact this deal will have on the city of Manchester should not be underestimated; the investment is of a magnitude that any national government would struggle to deliver.
Brotherly love
As the famous saying goes – if it sounds too good to be true, then it is too good to be true. This is no regular sponsorship deal, the reason that Manchester City have been able to secure this incredible arrangement is because the chairman of Etihad, Sheikh Hamid bin Zayed al-Nahyan, who is the half brother of City owner, Sheikh Mansour bin Zayed al-Nahyan.
Outrage
Several notable people have called for the sponsorship deal to be investigated due to the relationship between the parties involved, including Arsenal manager Arsene Wenger, and Liverpool director Ian Ayre.
“If the financial fair play is to have a chance, the sponsorship has to be at the market price. It cannot be doubled, tripled or quadrupled,” Wenger said in regards to the deal.
Ayre echoed Wenger’s sentiments saying: “The guys from UEFA said there would be a robust and proper process about related-pay transactions. Is Etihad, Manchester City and Sheikh Mansour a related party? If they are, then it’s up to UEFA to rule on them.”
Market rates
There is a section regarding the ‘related parties’ in the fair play policy, which essentially states that if related parties (including friends, and so on – not just related family) conduct a deal, that the deal must be conducted at market rates. That is to say, any two ordinary and reasonable people would be willing to strike the same deal, as the two related parties have struck.
The problem that arises here however is deciding what the market rate actually is, which may prove to be an extremely difficult task. Just because the deal is unprecedented, that alone doesn’t mean the deal is not of market value.
UEFA face a massive test in regards to their carefully constructed financial fair play policy. If UEFA allow this deal between City and Etihad to go through, then essentially a precedent that allows for creative accounting is set, rendering the policy worth less than the paper it is written on.
But is it actually beneficial to clamp down on the deal? Hundreds if not thousands of jobs that will be created in Manchester would be wiped away for a start. The fact is that many of the top clubs in the world, including Real Madrid and Barcelona, operate at a massive deficit similar to Manchester City.
Should Manchester City’s sponsorship deal be given the green light?
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