Sunday, May 31, 2015

FIFA’s Corporate Sponsors: Reliable Ethical Change-Agents?

In the wake of the U.S. Justice Department’s initial arrests of FIFA officials in May 2015 on corruption charges, could the public reasonably expect FIFA’s corporate sponsors to pressure the international governing body of footfall (soccer in the U.S., where “football” is reserved for “subconcussions being inherent to a sport”)? If so, would the pressure be sufficient to rid the powerful international organization of its squalid officials and practices? I contend that these questions come down to how the power was divided at the time between the sponsors and the organization, rather than to the sponsors’ respective ethical positions or even how strongly the executives feel about ethics in business, including FIFA.

Cobus de Swardt, the managing director of campaigning group Transparency International, said after the arrests of FIFA officials on May 27th in Switzerland that the investigation should act as a "wake-up call" for the sponsors and partners pressure FIFA officials to change the organization’s governing structures and practices.[1] Notably, de Swardt explicitly excluded Sepp Blatter from being among the change-agents, not to mention their presider. "FIFA needs a new start . . . These scandals have taken place under Sepp Blatter's watch."[2] It is one thing to say that the most powerful person in sport should go, and quite another to actually push the deed to fruition.

Undaunted, de Swardt puts forth the following maxim as if it were a universal truth: "If you are putting many, many millions of euros into a business, then you definitely have a right and responsibility to demand that you are not tainted."[3] While FIFA’s sponsors and partners would doubtless have insisted on their right to demand changes in FIFA’s governance structure and officials, assuming a responsibility is not as reliable, particularly if it diminishes profits.
Even the possibility of a tarnished brand-reputation by association with FIFA may not have been enough of a possible negative financially to spur executives into action. "When a business sponsors an event or association such as FIFA, it is effectively tying part of its brand with them," said Peter Walshe at Millward Brown.[4] "There needs to be a fit and when trust issues threaten the organization, the sponsor will need to monitor whether that will have a negative effect on the trust of the brand."[5] This is the theory.

In practice, the major sponsors “get an awful lot of exposure and they'll be wary,” Nigel Curry, a European sponsorship and branding consultant said at the time. “(I)f they pull out, one of their rivals will step in."[6] Walking away from FIFA, or having Blatter unilaterally sever the lucrative relationship, could give rivals an opportunity to gain a strategic competitive advantage through a giant in sports marketing: The World Cup.

Therefore, we have good reason to be skeptical of Curry’s claim that the sponsors were “making more noise than they ever used to,” or at least that something other than chatter was involved.[7] A sponsor could easily let Blatter know that the statements are merely for PR purposes, without any power-play being involved. We can also doubt Curry’s optimistic prediction, "I think we'll see the pressure mounting in coming days” and his underlying assumption that executives at the sponsors would be most motivated by their dislike of uncertainty and scandal.  “(T)hey want to be involved in something clean," Curry insists.[8] Sponsors don’t like losing money either, and they may judge the uncertainty and possible taint from FIFA’s scandals as worth staying the course. What is hot news one day eventually cools, and a long-term contract implies taking a perspective that covers the entire interval rather than risks an advantage by tussling with Blatter.

Currie argued that FIFA’s sponsors and partners could make their respective voices better heard if they could act together to urge a clean-up of FIFA's system. FIFA's partners, which support the FIFA through long-term contracts, included Adidas, Coca-Cola, Visa, Gazprom and Hyundai/KIA Motors. They had “the right to use official FIFA trademarks in their advertising campaigns, exposure in and around stadiums and protection against ambush marketing.”[9] Those advantages are not chicken feed; they could easy dwarf reputational or ethical concerns. Second-tier sponsors included Budweiser and McDonald's at the time. They paid to be involved during and around the World Cup tournaments. Neither of those companies would want to rock the boat either.

As a group, however, these companies had formidable combined force; Visa, McDonalds, Coca-Cola, Budweiser, and McDonalds were major players in their own right, so concerted pressure from a united front would be hard for FIFA’s officials to ignore. If FIFA could not afford to lose its sponsors—meaning that replacing them with their competitors and others would mean less revenue—then ignoring the sponsors’ united stand was not something that FIFA officials could very easily ignore. At the time, the sponsors (and partners) provided almost a third of FIFA's revenues. FIFA had generated $5.7 billion in 2011-2014, which encompassed the Brazil World Cup, with sponsors and commercial partners contributing almost $1.6 billion.[10] Left to their own respective statements castigating the corruption, the sponsors and partners ran the risk of being picked off and replaced by a competitor.

Adidas, FIFA's oldest partner, put out a statement claiming that the company is "fully committed to creating a culture that promotes the highest standards of ethics and compliance, and we expect the same from our partners."[11] The company urged FIFA to "continue to establish and follow transparent compliance standards in everything they do."[12] This hardly rocked the boat over at FIFA, as Sepp Blatter had promised as much at his reelection two days after the arrests.

VISA put out a statement indicating disappointment with FIFA in light of the arrests. "As a sponsor, we expect FIFA to take swift and immediate steps to address these issues within its organization," the statement reads. "This starts with rebuilding a culture with strong ethical practices in order to restore the reputation of the games for fans everywhere."[13] Rebuilding a cultural is notably mute on who should do it. Indeed, this statement too is consistent with Blatter’s re-election promise to assume the responsible to change the organizational culture.

McDonald’s statement is more revealing. Matters of ethics and corruption were being taken very seriously. Interestingly, the statement revealed “contact with FIFA on this matter.”[14] Whether collusion or pressure was involved behind the scenes, and, if the latter, which party had the upper hand, would say a lot about the value of Curry’s suggestion of a united front. Of course, as marketing directors were among those arrested, staying with the statements of general ethical principles could protect the companies’ respective reputational capital in more ways than one, while not risking a very lucrative marketing venue.

1. Pan Pylas, “FIFA’s Commercial Partners Urged to Make their Voices Heard,” The Associated Press, May 27, 2015.
2. Ibid.
3. Ibid.
4. Ibid.
5. Ibid.
6. Ibid.
7. Ibid.
8. Ibid.
9. Ibid.
10. Ibid.
11. Ibid.
12. Ibid.
13. Ibid.
14. Ibid.