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Boards urged to act over corruption

IoD says sponsors ‘cannot turn a blind eye’ to scandal at FIFA

Sepp BlatterUpdated: One of Britain’s leading business organisations has urged sponsors to take action over the scandal surrounding alleged corruption at FIFA, the world’s governing body for football.

The Institute of Directors says those who pour millions into the game can no longer ‘turn a blind eye’ to the failures of corporate governance at the organisation.

Its intervention comes as global brands such as Coca-Cola, Visa and Adidas have raised their concerns about the adverse affect the scandal may have on their businesses.  Coca-Cola said: “The lengthy controversy has tarnished the mission and ideals of the Fifa World Cup”.  McDonald’s and Hyundai Motor also expressed concern and said they were monitoring the situation.

Nine officials were arrested by Swiss police at a Zurich hotel where they were meeting ahead of a decision to elect a President tomorrow.

The European football body Uefa said it will decide whether to boycott the vote. Incumbent Sepp Blatter has yet to appear in public since the arrests but is refusing to withdraw his candidacy.

The raids were coordinated from the United States where investigations have been led by the offices of the Attorney General and FBI. Russian president Vladmir Putin, whose country will host the 2018 World Cup, today criticised the US’s involvement and threw his support behind Mr Blatter.

Fourteen people were charged by the US authorities on Wednesday. They are accused of racketeering, fraud and money laundering, including charges of receiving bribes to influence the outcome of bids to stage football tournaments, such as the 2010 World Cup in South Africa and the 2016 Copa America in the US.

Jack Warner, a former Fifa vice-president, turned himself in to police in his home nation of Trinidad and Tobago late on Wednesday evening. Mr Warner is accused of soliciting $10m in bribes from South Africa’s government over the hosting of the 2010 World Cup.

Mr Warner, who spent the night in prison after delays in processing his $395,000 bail, says he is innocent of any charges.

The IoD today issued a statement which said the “persistent failure of world football’s governing body to reform, despite mounting allegations of corruption, means that it is now up to the organisation’s sponsors to act.

“The Institute of Directors insisted that the scandal engulfing FIFA is not simply an issue for the international sporting community, but is also a matter requiring the urgent attention of the boards and shareholders of the companies who sponsor the World Cup.”

Roger Barker, director of corporate governance at the IoD, added: “The large multinationals who pour hundreds of millions of pounds of sponsorship into FIFA’s coffers every year cannot turn a blind eye to the gross failures of corporate governance at the organisation.

“These sponsors rightly make great efforts to ensure their own boards and reporting practices are up to scratch, and they have a responsibility to their shareholders to make certain that the company’s cash is not going towards sporting events mired in bribery and corruption allegations.

“In turn, the shareholders of these sponsors must exert pressure on the boards to protect their company from the considerable reputational risk of being associated with this scandal-ridden organisation.

“No business of FIFA’s size and vast revenues could possibly get away with allowing its executives to operate without meaningful accountability, and it is now time for FIFA’s corporate backers to take a stand.”

For a fee now in the region of $24-$44 million a year, the sponsors have guaranteed exposure to a global audience through the World Cup that is well in excess of a billion consumers as well as association with the world’s most loved sporting event.

Brand values for the top sponsors of the World Cup currently total nearly $100 billion (Coca-Cola: $35.8 billion, McDonalds: $22 billion, Hyundai motors: $8.6 billion, Kia: $5.2 billion, VISA: $8.5 billion, Gazprom: $7 billion, Adidas: $6.8 billion, Budweiser: $4.3 billion).

These billion dollar valuations refer specifically to the value of each brand rather than the business entity, and experts at Brand Finance say that, theoretically, all of this value could be lost as it is intangible and contingent upon reputation and continuing consumer goodwill.

That goodwill, says Brand Finance, is ebbing away and only a comprehensive overhaul of the governance of the organisation is likely to reverse it.

It believes FIFA’s own brand is in the most imminent danger of all, being heavily contingent upon the support of its partners and sponsors. It is down to $2.8 billion, having lost $400 million in the last few days alone as the result of the arrests and subsequent negative attention.

Even broadcast revenues could be under threat as the possibility of relocation of World Cups in Russia and Qatar creates significant uncertainty.  A boycott of FIFA by national football authorities has been mooted, which would lead to the collapse of FIFA’s $12 billion franchise.

Brand Finance chief executive David Haigh comments: “Sponsors have partnered with FIFA in order to build their brands, not have their reputations tarnished. The kind of activities that are alleged to have been going on could destroy billions of dollars of brand value.

“A lot depends on what happens in the next few days but without knowing how quickly FIFA are going to clean out the Augean stables, my recommendation to the major sponsors would be to move towards the exit. As for FIFA, if Blatter were to stand down with immediate effect, that go a long way to securing its future and we estimate it would add over half a billion to FIFA’s brand value.”

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