Systemic value and corporate governance. Exploring the case of professional football teams.

This paper aims to analyze how systemic thinking might contribute to investigate the interaction between company internal organization, financial structure and corporate governance. We focus our analysis on professional football teams as this special business combination provides an evident example of companies whose performance cannot be evaluated considering only financial returns or shareholder value. The investments of a professional football team are mainly in intangible resources, first and foremost in the skills and the competences of players, coaches, the general manager, and the medical staff. At the same time, the final outcome will include, both financial income, and intangible assets, like experience, popularity, reputation. The latter will pertain not only to the shareholders but to all the professionals involved, who will benefit of a higher market value for their services. Furthermore the supporters are an important component of the firm’s value too, because a substantial portion of future cashflows depends on the presence of a loyal customer base, whose claims cannot be disregarded without consequences on the economic value created by the organization. The traditional economic approach, correlating residual claimants with residual control rights and therein corporate governance, cannot be applied in presence of residual claimants who are different from shareholders. A professional football team strategy requires a multi-constituency systemic approach to be effectively implemented and to correctly evaluate its performances. Nowadays football is a business and several professional football teams are listed companies. Nonetheless many of them are experiencing financial losses, high debt and difficulties in funding their investments. Are these symptoms of a failure in creating economic value? Financial statements only give a true and fair assessment of value reporting assets and liabilities at their historical value, but where is the real value? How can we reliably assess the economic value of a football team? And who really owns those intangible assets that represent the largest fraction of its economic value? Moving from these considerations, can we reasonably imagine that a good corporate governance model should take into account only shareholders’ interests? According to our conclusions this is not the case, not only for professional football teams but also for many other businesses whose underlying logic cannot be understood without the lens of a systemic approach.