Saturday 26 May 2018

Olympic tickets debacle shows the real pitfalls of weak corporate governance

The Olympic Council of Ireland’s offices in Howth, Co Dublin
The Olympic Council of Ireland’s offices in Howth, Co Dublin
Richard Curran

Richard Curran

Irish business executives could learn more in one week about the pitfalls of weak corporate governance from the Rio Olympics ticketing debacle than from a decade of MBA courses.

No sooner had the police investigation into allegations of ticket touting begun when we began to see why strong corporate governance systems are important in every organisation that has a budget of any kind.

The police investigation into alleged ticket touting at the Rio Games has caused enormous reputational damage to Olympic sport in Ireland. As the government prepares to put its non-statutory inquiry in place, the Brazilian police retain Olympic Council of Ireland president Pat Hickey in custody and also seized the passports of three senior OCI executives.

Irrespective of the outcome of the criminal investigation taking place, the whole affair has placed a huge spotlight on the operations of the OCI and it has raised a raft of fresh questions about the corporate governance of this partially state-funded sporting body.

Within days of the arrest of THG executive Kevin Mallon, details began to emerge of the complexity and lack of clarity surrounding the relationship between the OCI's previous ticketing agent (THG) and its appointed agent for the Rio Games - Pro10.

Questions also surfaced about the tendering process, if any, applied in the appointment of Pro10 after an OCI-backed application by THG to become a ticket agent at Rio had been turned down.

Minister for Sport Shane Ross may have been "put back in his box" by Pat Hickey when he went to Rio to get some answers about what was going on, but these were questions he was entitled to ask.

The OCI has received €1.7m in State funding over the past four years. It received €500,000 last year alone. The State accounted for nearly one third of the OCI's revenue that year.

Around €300,000 of that funding was for general administrative expenses. Accounts for the OCI show that its president, Pat Hickey, received an Honorarium of €60,000 last year, equal to one fifth of all the State money awarded that year for administration. He has received €360,000 in such payments over the last six years.

Mr Hickey may have contributed a lot over many years to sport in Ireland but surely it has been for too many years.

Regardless of his contribution to the Olympic movement in Ireland, Mr Hickey has been president of the IOC since 1989. Such a lengthy tenure is not healthy from a corporate governance point of view. His deputy or vice president is William O'Brien, a 23-year veteran of the council.

The administration of sport is tricky to get right. It almost always has its background and history in the amateur nature of sport. Naturally those who put most in, often for nothing, might rise to the top in administrative terms.

However, at a certain level, such as the OCI, knowledge of sport alone isn't enough to create a vibrant, well-managed, transparent and accountable organisation.

When you look at the board of the Olympic Council of Ireland, the necessary strength in sporting backgrounds is there, but not the same depth of independent financial skillsets that are also required.

Many members are individuals who have come up through the ranks of their sports or sporting organisations.

Some executive committee members have helpful broad professional backgrounds. John Delaney as chief executive of the FAI is a very experienced manager and administrator. There is also Professor Ciaran O'Cathain, head of Athlone IT, whose sporting background is in athletics and he holds a doctorate in management.

He also has the benefit of having previously chaired the Athletics Ireland finance and risk committee. Yet there is no mention of the OCI even having a valuable committee like that.

There doesn't appear to be a set of independent external experts who are completely outside of the sporting arena.

One of the best and most obvious indications of corporate governance is the level of transparency applied in an organisation. An organisation's website is a good place to start, followed by its annual report. You will not find the annual report of the OCI on its website.

You will find a detailed CV for its president Pat Hickey, which includes when he was elected president for the first time (1989). The profiles of the other executive members from the different sports do not say the year in which they were appointed.

The OCI does file a set of accounts through the Companies Office and its limited liability company called The Olympic Council of Ireland.

This shows the extent of State funding for the operation and other State involvement. This includes a charge registered by the Minister for Sport and Tourism, over the OCI offices in Howth which are pledged as security. This reflects some kind of loan or additional support from the state - another valid reason for a minister to ask questions.

It has been shown in Irish business in the past, that there is a pattern in organisations and companies with deep failings in corporate governance. There is often a long-standing head of the organisation with a strong controlling personality.

He (rarely she) is usually in the role for at least 20 years. He is often surrounded by board members who have been in their roles for very long periods too.

They often do not have a culture of questioning at board level. And when the brown stuff hits the fan, they usually don't want to say anything.

The dearth of public comment from executive members of the OCI since the arrests has been extraordinary.

They might not want to comment when there is a police investigation going on abroad. But there is nothing actually prohibiting them from saying something - anything.

Surely if the highest corporate governance standards were being met, they would have the confidence to say that the allegations being made simply could not be true.

They could say that having been involved in the relevant committees and board meetings, at which there is robust questioning of all aspects of ticketing allocation and sales, there wouldn't be any room for impropriety and therefore, these people are innocent.

Instead, there has been nothing from board members, other than an OCI assertion that the allegations will be defended to the hilt.

After Kevin Mallon's arrest the OCI was going to look into the allegations itself. It has taken the arrest of the president; the seizing of passports of three executives including its CEO; and orders in Brazil seeking the passports of two other board members, for the OCI to hire outside accountants to conduct an investigation.

For real corporate governance to work, outsiders need to be sitting inside at all times, and not just when things go spectacularly wrong.

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