Governance, and in particular sport governance, is increasingly receiving the attention of researchers. Organisational research into governance has burgeoned over the last decade (e.g. Carver, 1997; Ferkins, Shilbury, & McDonald, 2005; Francis, 1997; Schmidt & Brauer, 2006; Shilbury, 2001), with topics covered spanning corporate and non-profit governance settings. The specialised area of sports governance shares some of the general characteristics of governing bodies, but also faces particular challenges. This brief overview starts with coverage of the environmental dynamics relating to governance concerns currently facing New Zealand sport organisations, referring to instances such as high profile governance failures, demands of multiple stakeholders, the legal environment, board structuring and leadership. An examination of the limited studies in sport governance follows, with a more detailed examination of five key themes from the published research: shared leadership; board motivation; board roles; board structure; and board outcomes.
Governance Origins and Themes
The role of the board is to establish a future direction, and not be drawn into other activities within an organisation. Carver (2002) suggests the board’s focus must be at the strategic level, and he warns against taking on other responsibilities within the organisation outside of its core role. Governance is what the board is charged with doing.
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The term “governance” is derived from the Latin verb meaning, “to steer”. Few explicit definitions exist in the empirical literature. To establish a clear understanding of governance, it is necessary to gauge the differences that exist between board issues which are situated in the private-for-profit setting and public non-profit setting. The need to protect and maximise stakeholder wealth has been alluded to in definitions in corporate governance with regard to the for-profit setting (Ingley & van der Walt, 2003), whereas stakeholder representation and stewardship are used in the explanation of the public and non-profit setting (Herman & Renz, 2000). Boards of NSOs, while non-profit, have integrated elements of corporate, public and non-profit governance within their structure. Governance issues are therefore examined throughout these settings in this literature review, beginning by establishing what constitutes good governance. A major contribution to the theoretical foundations of governance has been the development of four key themes of good governance: performance, conformance, policy and operations. These governance themes run through much of the governance literature irrespective of the context (Carver, 1997; Ferkins, Shilbury, & McDonald, 2005; Francis, 1997; Schmidt & Brauer, 2006; Shilbury, 2001).
Performance can be explained as a means of the board initiating a strategic focus for the future. The role of those who hold the governance responsibility is to consider such factors as the external environment and what impact this may have on the organisation (van der Walt, Ingley, Shergill & Townsend, 2006; Stiles, 2001). In the corporate context, Francis (1997) considers that the “… constructive roles directors can play in adding value to their companies …” (p. xxi) that is, the performance role, are “… quite different from those required for a traditional conformance-orientated board” (p. xxi).
Conformance can be defined as the responsibility of the board to observe and monitor. The focus situates on the areas of accountability, compliance, performance managing the chief executive and ensuring policy is being implemented as it should be (Garratt, 1996; Gay, 2002; Shilbury, 2001). Garratt (1996) encapsulates board conformance as “. . . the internal focus of the board on its performance to pre-set goals of accountability to its stakeholders . . .” (p. 10). The need to achieve a balance between the elements of conformance and performance has been a recurring theme in the literature (particularly in the corporate setting) over the past ten years (Bosch, 1995; Francis, 1997; Garratt,
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1996; Shilbury, 2001; Stiles, 2001; van der Walt & Ingley, 2001, 2003; Ward, 1997). Bosch (1995) for example, cited public outrage in Australia at the excesses during the economic boom period of the 1980s and subsequent share market collapse in 1987, which led to a heightened emphasis on conformance. This included calls for increased legislation, tighter regulation and board accountability. An interest in improving company performance by strengthening the board’s strategic initiative developed somewhat later (Bosch, 1995). Francis (1997) is critical of what he considers the over- emphasis on conformance. “Most books, conferences, or pronouncements on corporate governance have focussed exclusively on conformance issues, on the structure and membership of boards . . .” (1997, p. xxi). This, Francis argued, has been at the expense of the performance role of the board and a consideration of how boards can develop the organisation in the medium and long-term future. Ward (1997) observed that while the responsibility of the company lies with the board, the board is most concerned with conformance aspects of its role.
Carver (1997) is perhaps the most noted author on the governance themes of “policy” and “operations”. An early author of non-profit governance, Carver (1997) established a clear distinction between what he termed “policy”, the primary role of the board, and operations, the primary role of paid management. In an explicitly normative approach, the work of Carver (1997) proposed that it was the responsibly of the board to establish policies in four specific areas, that is, organisational outcomes, methods to achieve these outcomes, performance management of the chief executive, and the operations of the board itself. Carver (1997) accentuates the need for the CEO to help facilitate this process and that neither should be involved in each other’s role.
This prescriptive-based distinction between the roles of the board and the chief executive provides a useful point of comparison for empirical work undertaken subsequent to the development of Carver’s model. Hoye (2002), in responding to the Carver model, found that the roles of the board and paid executive are inter-related and subject to ongoing role design.
73 Corporate Governance Influences
The theoretical base of corporate governance can be linked back to investigations of the separation of ownership between owners and managers, known in much of the literature as the “Berle and Means” thesis (Berle & Means, 1968; Bolton & Scharfstein, 1998; Davis & Schoorman, 1997; Frankforter, Berman & Jones, 2000; Sapienza, Korsgaard, Goulet & Hoogendam, 2000; Stiles, 2001). With the advent of the modern corporation, a separation of ownership and control of wealth gave rise to a potential conflict of interest between owners and managers. Berle and Means (1968) argued that even though owners would prefer to manage their own company, it became impossible because of the capital requirements of the modern corporation. Additionally, as companies grew and increased their share capital, the proportion of shares held by the largest shareholder would decrease. This meant that the ability of the large shareholders to control the corporation was reduced, and in turn, the power of management increased (Stiles, 2001).
The corporate governance literature is therefore dominated by discussion on agency theory (Davis & Schoorman, 1997; Eisenhardt, 1989; Finkelstein & Hambrick, 1996; Fox & Hamilton, 1994; Gay, 2002; Jensen, 1983; Jensen & Meckling, 1976; Sapienza, Korsgaard, Goulet & Hoogendam, 2000; Shleifer & Vishny, 1997; Stiles, 2001; Tricker, 1983; Zahra & Pearce, 1989) developed as a consequence of the separation of ownership within corporations and to a lesser extent, stewardship (e.g., Chowdhury & Geringer, 2001; Dalton, Daily, Ellstrand, & Johnson, 1998; Davis & Schoorman, 1997; Gay, 2002; Stiles, 2001; Tian & Chung-Ming, 2001), stakeholder (Donaldson & Preston, 1995; Stoney, 2001; Sternberg, 1997) and managerial hegemony theory (Dallas, 1996; Davis, 1991; Herman, 1981; Mace, 1971; Pettigrew & McNulty, 1995, 1998; Shilbury, 2001). Theories of power and influence (Pettigrew & McNulty, 1995, 1998) are also important constructs used by a number of leading corporate governance scholars. Concerns around ownership and control of corporations, as described by these theories, are relevant for national sport organisations as they seek to clarify the relationship between national and regional entities (National and Regional Sport Organisations) and the agent (paid staff) and board. Historically known within New Zealand NSOs as the “executive committee” or “council”, the contemporary term for the group who are responsible for “creating the future” is now the “board” (Ferkins,
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2007). In particular, the board’s role in strategic development may be impeded by tensions between, and a lack of clarity around the relationship between, the agent (paid staff) and the board, as well as the board’s ability to assimilate the range of stakeholder perspectives (Ingley & van der Walt, 2001; Pettigrew & McNulty, 1998; Stiles, 2001; van der Walt & Ingley, 2003).
Non-Profit Governance Influences
It is necessary to look more closely at governance in non-profit organisations. The outputs of non-profit boards differ in multiple ways from the work of corporate boards. A key difference is that non-profit organisations are not just focused on financial gain (or at least ‘breaking even’), but they also have the responsibility to safeguard service- to-mission aspirations (Inglis, 1997). Context specific research is therefore vital if we are to understand non-profit governance as distinct from corporate governance.
The non-profit literature has been dominated by a prescriptive style of writing (e.g. Carver, 1997; Hardy, 1990; Houle, 1960, 1989). This means that the writer is 'prescribing' something to the reader. It is sort of a 'how to' or 'this is how it is’, and it typically contrasts with ideas such as 'conceptual' or 'critical', or reflective. Areas concerning issues such as organisation and board effectiveness, board power and the relationship between paid staff and voluntary board members in the discharge of their governance duties have been explored by scholars. The Carver (1997) model appears to be widely adopted by advocates of contemporary governance practice in New Zealand and Australian sport (Kilmister, 1999; Australian Sports Commission, 1999). Carver advocated the distinction between board policy roles and staff management roles and believes operational and trivial matters receive an unnecessary amount of focus from boards, suggesting that a board needs to reduce its involvement in the day-to-day activities in an organisation. Leland (1999) criticised this simplistic model of governance and considers the proposition unworkable in practice. She noted that a major flaw of this approach is the lack of system control. Inglis (1997a), however, considered that both Carver (1997) and Houle (1989) provide useful prescriptive contributions to sport governance thinking, but noted that the assumptions regarding board practices are empirically untested. Since the 1990s, an increasing body of research-based knowledge into sport governance has been developing and theory tested
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by empirical research (Bradshaw, Murray, & Wolpin, 1992; Herman & Heimovics, 1993, 1994; Herman & Renz, 1998, 2000; Herman, Renz, & Heimovics, 1997; Inglis, Alexander & Weaver, 1999; Miller, 2002). Such theory relevant to sport governance falls largely within the domain of organisational effectiveness (Chellandurai & Haggerty, 1991). Other constructs considered relevant to areas of this study are power and influence as well as strategic functioning of non-profit boards.
Inglis and Weaver’s (2000) work on prioritising strategic activities on the board agenda provided a view into how particular actions can influence the level of strategic contribution by the board. Hoye and Inglis (2004) presented an overview of non-profit governance models and considered how these models could be adapted for the context of leisure organisations. In doing so, they noted the association between governance models, organisational effectiveness and strategic expectations. The following section explores the sport management literature particularly through the lens of organisation theory in order to seek answers to such questions.
Organisation Theory Influences
The study of organisation theory, as it applies to sport, has been informed by empirically based research of sport organisations since the early 1980s (Slack, 1997). Much of this work has been developed in the traditions of generic management literature and organisation behaviour where aspects unique to sport have been identified. In a study on the size-structure relationship in voluntary sport organisations (VSOs) in Canada, Amis and Slack (1996) identified that unique factors exist within VSOs. These factors were found to consequently influence structural arrangements such as the relationship between volunteers and professionals and the attendant issue of control, something most apparent in the association, or more specifically, the lack of association, between size and decision making (Amis & Slack, 1996).
Key elements of organisation theory as they relate to sport governance have been included, to create connections between what is known about sport organisations and sport governance and to then suggest aspects of sport governance research that warrant further investigation. Some of the most powerful links between sport organisation theory and the strategic role of the board include the bureaucratisation and
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professionalisation of sport organisations (Enjolras, 2002; Skinner, Stewart, & Edwards, 1999; Slack, 1985); organisation and industry structure (Amis & Slack, 1996; Cashman, 1995; Cashman, 1995; Gratton & Taylor, 2000 Kikulis, Slack, & Hinings, 1992; Shilbury, 2000); culture (Doherty & Chelladurai, 1999); effectiveness (Papadimitriou & Taylor, 2000); change and stakeholder influence (Inglis, 1991; Kikulis, 2000; Slack & Hinings, 1992; ); strategic decision-making (Hoye & Cuskelly, 2007; Kikulis, Slack, & Hinings, 1995a,b; Rowe & Lawrence, 1998, Sack & Nadim, 2002) and leadership (Chelladurai &Saleh, 1980; Weese, 1995).
These studies represent substantial theoretical and/or empirical work in this area. Multiple studies have explored how the nature of sport has transformed and how sport has changed in response to environmental influences and thus provided a significant base to understand sport governance issues. The impact of paid staff on voluntary sport organisations has been identified in much of the research. For example, Shilbury (2001) implied that tensions do exist in the change from amateur to professional governance and that this has helped to bring about the requirement to analyse the role of the board of directors within sporting organisations.
In summary, organisation theory applied to sport suggests that the processes of bureaucratisation and professionalisation of sport organisations have created changing roles for those in governing positions. These changes include a rapidly shifting external environment and variable internal dynamics, such as the introduction of paid staff (Thibault, Slack, & Hinings, 1991). The few studies on the nature of strategy formulation and implementation have shown that this work has been, to a large extent, driven by paid staff and funding agencies, rather than the board (Thibault, Slack, & Hinings, 1993, 1994).
Sport Governance
Governance themes that currently exist in the corporate and non-profit contexts coupled with relevant elements from organisation theory provide a background to review the literature in support of the development of a thematic representation of sport governance (Ferkins, Shilbury & McDonald, 2005). Ferkins (2007) in one of the most comprehensive assessments to date proposed three tiers of areas relating to sport
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governance: environmental dynamics, sport governance factors and ultimate governance capabilities.
Ferkins (2007) argues that it is appropriate that sport governance be placed in the context of environmental factors (environmental dynamics). These include the macro influences external to the organisation and, in this instance, associated with the New Zealand environment, and the micro influences internally related to sport and specifically national sport organisations (i.e. volunteer appeal, membership numbers and funding sources). In signifying their importance, professionalization and bureaucratisation appear as the connecting influences across macro and micro factors. The second level of the representation presents the sport governance factors that act as antecedents in building capability and centre on shared leadership, board motivation, board roles and board structure (Ferkins, 2007).
The interaction of environmental circumstances and sport governance factors lead to potentially effective governance outcomes. While it would be tempting to label these purely performance outcomes, a broader perspective views this level in terms of governance capabilities. Governance capabilities have been identified as performance, conformance, policy and operations and are connected by the umbrella notion of strategic development as discussed earlier. The outcome of research relating to sport board capabilities is also included by Ferkins (2007). Ferkins draws on current research to provide a meaningful structure to frame our understanding of the interactions surrounding sport governance. This structure also extends to the mechanisms by which sport governance might be improved. However, the framework has no mention of cultural and ethnic issues and their influence on sport governance. Nevertheless, Ferkins (2007) has done most of the groundwork for an extension of understanding of New Zealand sport governance.
Ferkins (2007) used an action research approach, which is distinctive to this type of study. In addition to creating theory the study served to initiate change within the selected organisations with the goal of obtaining a more extensive understanding of board strategic capability. Key conclusions to take from the work include that board strategic capability is appreciably affected by inter-organisational relationships. It is an
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extensive concept, improved through developing equilibrium in roles and functions which consist of the design, enactment and monitoring of strategic ideas. The context for her study was within the NSOs of Squash New Zealand, New Zealand Soccer and Tennis New Zealand. A minor limitation acknowledged by Ferkins (2007) was the inability to obtain all of the voices initially deemed advantageous. For logistical reasons, this required the participants involved to be restricted to board members and the CEO. So consequently, the knowledge obtained concerning strategic development of NSO boards was restricted to this perspective and does not directly integrate stakeholder perspectives. Finally, Ferkins’ (2007) is relevant to this current research as it calls for the need to investigate the impact of individual skills, competencies and motivations with regard to board involvement. Such research would require an evaluation of the overall skill set of the collective group, made up of the individual and could also capture the issue of diversity at the boardroom table. Ferkins’ (2007) recommendation provides support for exploring the factors that may influence Pasifika and Māori entry for being in positions of leadership in sport; challenges to gaining these positions; and factors which could facilitate their recruitment, retention and development in leadership and governance roles.
Environmental Dynamics
Many environmental factors have produced a tighter focus in board operations within NSOs. These include influences such as greater media and public scrutiny, a larger variety of stakeholders to engage with, a tightening of the legal requirements and an ever expanding playing and business setting (Ferkins, Shilbury & McDonald, 2005). The media publicity that illuminated a failure of governance processes relating to the 2003 Rugby World Cup was an example of how governance concerns can become open to public examination. In this instance, New Zealand’s leading national sport organisation, the New Zealand Rugby Union (NZRU), lost the rights to co-host the 2003 Rugby World Cup because it was unable to guarantee “clean” stadia (i.e. absence of any competing sponsors’ signage). Following an independent inquiry, the chief executive and most of the board resigned (Ferkins, 2007). At issue were board monitoring and decision-making processes and an inability to balance the demands of multiple stakeholders, such as the International Rugby Board (IRB), NZRU sponsors, media and the public (Eichelbaum Report, 2002). This example showed that the
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members of NSOs can no longer assume they are the only group with a “stake” in the success of the organisation and its teams, athletes and events.
Government reports in both New Zealand and Australia (Crawford Report, 2009; Ministerial Taskforce, 2001; Standing Committee on Sport & Recreation, 1997) have identified that sport organisations and their decision-making representatives must endeavour to appreciate the needs of an expanding sectors such as commercial sponsors, media, public sector funding agencies and sport service agencies, clubs, associations,