Corporate Social Responsibility of Barcelona Football Club - Research Paper Example

Corporate Social Responsibility – Barcelona Football Club Introduction The concept of corporate social responsibility (CSR) underlines the creation of a form of self-regulation within the business model of an organization. The created policy is designed to allow a business to monitor its adherence to various ethical standards, laws and international regulations that form the crux of the industry they are involved in (Kotler & Lee, 2005). Furthermore, CSR policy aims to provide an identity to the organization in context to its role in the wider community, in addition to the core business services or products that it develops or supplies. The activities undertaken by the organization are assessed against their impact on the environment, consumers, stakeholders, employees, as well as the economy in general. Businesses that have a concentrated focus on CSR promote the interest of the public into the general activities, allowing them to become a major part of the wider community. By doing so, there begins an expectation that the organization would undertake tasks to push for the growth and development of the community, as well initiate projects that can resemble the overall outlook the business holds for the wider public (Crowther & Rayman-Bacchus, 2004). The topic of CSR beckons a lot of debate. Those who support the ideology of an active corporate lifestyle that blends into the general community see it as a means of instilling ethical standards across the board, while providing a distraction from the short-term approach that business usually adopt. This short-term approach refers to the immediate profits that any business is likely to be more interested in, since the primary objective is to achieve self-reliance and higher returns for service or sales of goods. On the other hand, those who object to CSR argue for it being nothing more than eyewash in the face of regulators and government institutions, responsible for ensuring equal competition and the obedience of rules. Large multinationals are viewed as using various CSR tactics to pre-empt the role of public institutions, in order to seek favourable results for their purpose, role or cause. Despite the existence of either side of the debate, the core understanding for CSR is to follow the general rules of business ethics, whereby development of the business is undertaken in line with the regulations and has parallel initiatives which allow for the community that the business benefits from to receive something in return (Kotler & Lee, 2005). A key factor to understand when discussing CSR in reference to large organizations is the value of stakeholders. The term stakeholder is broader than that of stockholder, and refers to each individual or entity that in some way or form is impacted upon by the activities of the organization (Friedman, 1962). Hence, for any business the stakeholders would be more than the people linked with the organization; it would also include those whose environment is used in the processes of the business, as well as those that come into contact with the organization, whether as suppliers, buyers or consumers. However, the philosophy of stakeholders has a number of critics, especially on the business front. The key argument is that the motive and relationship of CSR is adverse to the underlying stockholder theory that is the basic foundation of any business model. The theory, which was forwarded by Milton Freidman, states that stockholders provide capital to corporate managers, whose responsibility is to act as agents of the stockholders and advance their interest. Hence, the idea behind the theory is that stockholders provide investment to a business to enable it to operate, and it is the primary responsibility of the business to look into the benefits of the stockholders before any other relative entity. “There is one and only one social responsibility of business; to use its resources to engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition, without deception or fraud.” (Friedman, 1962, pp. 133) In light of the stockholder theory, donating goods could be seen as adverse to the core requirements of the organization or business, and hence result in the concept of CSR coming at the expense of the shareholder. But the key thing to remember is that the conflict arises solely due to the factor that business in its rawest form only acknowledges the existence of shareholders as the key entity, while the concept of CSR accepts all involved entities as stakeholders in the overall dynamics of the business. This conflict displays the complexity of the modern business world, where the matter of which entity holds dominance over the other dictates the fundamental workings of the business system altogether. The rise of social accounting standards in recent years is an example of the changing dynamics that CSR seems to be bringing to the modern transactional business world (Wolk et al, 2007). The basis of the concept is to establish a communication platform to describe the social and environmental effects that an organization’s economic actions have, making it an important CSR element. The underlying notion of this concept is towards corporate accountability and transparency; holding an organization’s management responsible for all decisions and actions undertaken, especially in light of activities that have an effect on other entities in the community apart from the business circle. In its rawest form, social accounting can be defined as: “An approach to reporting a firm’s activities which stresses the need for the identification of socially relevant behaviour, the determination of those to whom the company is accountable for its social performance and the development of appropriate measures and reporting techniques.” (Scarlett, 2009, pp. 187) Another accounting concept that has come to be closely linked to an organization’s commitment to CSR is triple bottom line (TBL). Also referred to as “people, planet, profit”, the concept of TBL provides a spectrum of values and criterion for measuring an organization’s success on different fronts: economic, ecological and social (Henriques & Richardson, 2004). With ratification of the United Nations, TBL has begun to play a role on understanding the reporting organization’s commitment to society, especially when compared to the revenue and profits that the business is generating. The effectiveness of the TBL policy has been widely debated, especially in reference to its implementation in the developing or poor parts of the world, where the concept of conserving of natural resources goes against the provision of basic needs. However, supporters of the concept have dictated that the success of any CSR concept lies in the hands of organizations and the well-to-do entities, which are required to show the willingness and financial resolution towards supporting and improving the society in general. Company Background With its proud Catalan heritage, Football Club Barcelona (FC Barcelona) also known as Barcelona FC, plays a major cultural and social role. Its name is synonymous with passion, creativity and universalism, and the club is regarded as one of the world’s premier football teams (Burns, 2000). FC Barcelona has a rich history that begins with its foundation in 1899. Over the last 110 years, the club has experienced its fair share of ups and downs (Burns, 2000). More recently, the 1990s proved testing times for the club with below-par performances on and off the pitch, ending with a crisis situation in 2003 that brought forth the question of the survival of the club at the top flight of the game. Issues in areas of governance, organization, corporate structuring, management, fan relations, media and marketing all combined to bring the club on the verge of financial breakdown. With these problems at the business front, the resultant effect on the social initiatives and brand development was not positive. One of the key factors that was seen vital to the future survival of the club was an understanding of the changing dynamics of the football world, with the sport having slowly expanding past the realms of Europe and gaining significant interest from the large populations of Asia and the East. One of the most common terms that describe the corporate structuring of FC Barcelona is: “By the fans, for the fans” (Burns, 2000). The ownership structure at the club is quite distinct and regarded as a model of an ideal football club. It is a balance of member democracy, commercial strategy, corporate social responsibility and sporting performance. The biggest factor that demonstrates its amalgamation of all factors is that despite being one of the most successful European football clubs, it remains a not-for-profit entity and utilises its revenues in improvement of the core business as well as investing in other social reforms across the dimensions of its global reach. There are no group of shareholders who maintain control over the club (Hamil & Walters, 2009). Instead, Barcelona FC is owned by over 150,000 members known as socios, who each pay 150 Euros every year to remain as recognized members of the club. The key distinction to be placed here is between members and fans. While members are also fans of the club, they hold a voting right in the running of the club and form an oversight entity that ensures accountability of the decisions taken by management in the running of the club. There is no payout from the club to each member nor does any one of them own a part of the club’s revenue or profit, explaining why they cannot be termed as shareholders. The core function of this member base is to keep the club solvent and run according to the norms that have been established. Due to the large number of fans of Barcelona FC, the choosing of a member is done similar to many other balloting processes (Hamil & Walters, 2009). A large number of applicants forward their interest, and the club performs a computer ballot to award membership to a certain number each year. Members are the only supporters who can purchase season tickets to the football games played by their club, as well as being offered discounts to other events that take place at the club’s stadium, Nou Camp (also known as Camp Nou). There is no expiry for the membership of an individual, provided they continue to renew and pay the fee each year. As it is not possible for all members to be present for board meetings, a randomly-selected group of twenty-five members meet with the management board, and vote on behalf of all members on various matters. All major decisions require a vote, from sponsorship to finance, and even sporting affairs. On the other hand, the president of the club who is the official representative at the national and global stage is elected by a poll process that registers the vote of each member. This process takes place every four years, with interested candidates campaigning for support by outlining their vision and aim for the club. At an annual delegate’s assembly, the board is joined by the twenty-five selected member representatives as well as former presidents and officials, to discuss key issues, review future projects and approve the annual budget. This level of transparency allows for all members to possess the knowledge of the workings of their club (Hamil & Walters, 2009). While some aspects of the Barcelona FC corporate model are copied by other clubs, there is no identical structure in the sporting world at this stage. Most Spanish football clubs vote for the president of the club; some English clubs have a similar format of member representation on the management board that gives them a say on various matters. However, no other football club is completely under the member control in terms of decision-making and accountability. Barcelona FC holds the distinction of pioneering this particular format of ownership and management. At its inception in 2003, the concentration of the corporate management at Barcelona FC was on four key strategic areas, over a period of five years (FC Barcelona, 2010). These were: Assertion of member democracy in the club and improvements in transparency of the governance system Implementation of an innovative series of CSR initiatives to demonstrate FC Barcelona’s recognition of its obligations to the wider society and culture Prioritization of sporting success, with a revamp of the football playing and management team to remain in line with needs of the time Implementation of an aggressive commercial strategy to increase revenue generation from off-field activities and improve financial performance of the club At a review in 2009 of the achievements since the re-invigorated Barcelona FC was begun, the performance against the four points listed above was quite clear. The inception of member-based democratic system of ownership had been established with great success, in many ways due to the emotional support that existed among the local Spanish football fans, as well as many around the world. According to research, after Real Madrid which had a 32% Spanish population following, Barcelona FC was in the hearts of almost 25% of the local population (FC Barcelona, 2010). This large portion of loyal supporters enabled the corporate management to push with rather ease the first strategy, and enabled the running of the club to become as transparent as possible. The issue of social responsibility could not be avoided by the club, due to the fact that it was now run by members who came from varying backgrounds; both socially and culturally. In many ways, Barcelona FC had now an undue obligation of giving back to the people who had and were helping it remain a viable entity and reach new levels of success on the football field, as well as a functioning business organization. Over the years, the club has taken the steps to establish community centres and focus on youth, in a bid to provide a strong medium for the budding talent that is available across the world (Burns, 2000). In order for any of the changes to be effective, it was important for the core function of the club to reach its previous peaks of dominance. In the football world, the relation between a team’s performance and increased revenue is directly proportional; this means that a club performing well on the field is able to entice better sources of additional revenue from various business functions, as well as diversify its operations to fuel new streams of funding. For Barcelona FC, this happened with a change in team strategy towards stability as the driving factor for long-term results. The playing team was a mix of youth and experience, while the management was a blend of past greats and those who understood the values of the club and its members. The commercial strategy organized by the management of Barcelona FC called for an aggressive direction to be adopted (Hamil & Walters, 2009). This was to be done on two levels: within continental Europe and worldwide, especially the Asian nations. While the primary focus was to seek further revenue from merchandise sales and fan club memberships, there was also importance given to raise the profile of the club in the nations, and promoting the CSR activities that Barcelona FC was involved or interested in. Additionally, the revered corporate structure was one of the biggest draw-cards in terms of marketing the club and its approach to the business world, enticing fans by the knowledge that they were an active part of the overall functioning of the club. In relation to the topic at hand, Barcelona FC’s approach to corporate social responsibility demonstrated significant links with the TBL accounting theory. People, society and profit were the pillars that the club created its strategies around, although the word profit here simply referred to the net revenues that were generated by the entity, which were used for future expansion or improvement. Many analysts remark that Barcelona’s success with the CSR initiative is linked to the lack of any lobbying shareholders who would drive the management focus towards own goals. The principle-agent theory of economics could be referred to here, where the agent is hired to perform an activity that is beneficial for the principal as whole, but deviates towards completing an activity with a goal that is primarily beneficial to the agent. In the corporate world, there are numerous examples of this and the football world is also filled with clubs that have lost out on strong financial foundations due to the lack of transparency and the deviation of management towards objectives that are more profit-driven. Analysis Sports organizations of the present age have developed a triple personality that allows them to surpass and survive any negativity from society and the market. This triple personality is team, club and institution. The key factor that comes with sports consumers is that they are unlike other products consumers; their loyalty to their team means that they are likely to stand up in support despite what the results are. The evolution of any sports organizations is around this consumer. For a team to reach the level of a club requires certain criteria of management and organization to be fulfilled. But the level of an institution is the reason every club exists. To become an institution, the organization must reflect a conscious approach that exceeds the simple goal of promoting a particular product, while succeeding in getting its values across to the community. When assessing the CSR profile of Barcelona FC, one of the most interesting aspects to note is that the organization is the only leading football club that doesn’t look for sponsorship, but instead have taken the approach of sponsoring their own charity out of its revenue. This refers to the long-standing arrangement that Barcelona FC has with UNICEF, who form the principal logo on the team’s playing shirts (Hamil & Walters, 2009). The move taken in 2006 identifies the club’s vision of giving back to the global community out of its earnings, as well as increasing the awareness of an organization that is part of the United Nations, with a focus on improving the educational needs of children in the developing and under-developed nations. The stance to ignore the commercial gain of millions of Euros that are normally associated with payments sponsors make to have their logo on team’s shirts, is one of the most dominating examples of CSR exhibited by any organization in any industry sector, sporting or not. For Barcelona FC, the decision set an example of the vision that the new management and its large number of members wished to fulfil with its operations. However, to remain viable and competitive in the world, Barcelona FC has to partner with commercial entities. Even in such cases, the club ensures that it details the assets/rights, opportunities and events that are available to corporate partners, who are interested in aligning their brand with the football institution. At each stage, efforts are made to ensure that the partnership does not derail the club’s objectives and vision as a responsible organization, and transparency is maintained at all levels to maintain accountability for actions taken by the management (Hamil & Walters, 2009). Unlike other football clubs, there is no added pressure on Barcelona FC to generate profit for shareholders (Burns, 2000). Instead the sole focus of the playing team is to provide entertainment to the fans and members, and win trophies for the larger community. This means that most decisions made are done with the long-term benefit in mind, instead of short-term commercial gains. The member structure in itself is one example of this social responsibility that has become the norm for the club. In addition to the annual fee for being a member of Barcelona FC, members purchase season or game tickets at cost price without any profit margin being applied to the figures by the management. This is in line with the vision of giving the members that have helped resurrect the club return in entertainment on the football ground, instead of generating funds from them for lavish purchases. For all consumer-focused organizations, communication remains vital to the successful functioning of the business and Barcelona FC recognized this as a key facet to work on in order to maintain an even field in terms of the global image and reach that it wanted to achieve. In this respect, a new customer service centre or Supporter’s Office was established, that by 2008 was fielding around 800,000 calls each year (FC Barcelona, 2010). The introduction of technology to various processes simplified the efficient processing of various requests. One such introduction was establishing a web-based system that allowed members to return game tickets for when they were unable to attend particular matches, in an effort for those to be utilised by other fans or members. This process linked with the CSR approach taken by the club with the aim of allowing more people access to matches and the entertainment that the team provided on the field. The outcome of the process was a spike in membership numbers, which by 2009 had swelled to 170,000. Additionally, the efficient return process yielded an increase in the overall revenue, with an average of 20,000 more tickets becoming available for other fans to purchase (FC Barcelona, 2010). The decision by Barcelona FC to partner with UNICEF demonstrated a shift in corporate sponsoring altogether. The move however validated the principle of retaining the club’s brand as a ‘social club’, instead of transforming itself into a commercial entity like all the other clubs in the sporting world. Additionally, in terms of CSR, it provided a valuable partner for the club to learn from, while developing their own strategies in terms of social uplift and development. But there’s even more to this partnership. Barcelona FC envisioned football as a tool to improving the social structure globally and professed the linkage of sports, solidarity and support to a borderless and supranational institution like the United Nations as a means of fulfilling World Federalism (Hamil & Walters, 2009). This meant unifying all cultures and backgrounds with the common love of the game of football. Hence, instead of inviting one of the several commercial entities that were looking to sponsor the club, Barcelona FC agreed terms with UNICEF to carry its logo on its official team shirts, in return for a percentage of the revenue that club made each year, which equates to multi-million dollar payments, seeing that Barcelona FC generated revenues of approximately $386 million in 2009 (FC Barcelona, 2010). The strategy adopted reflects even better when understood in depth of the benefits that it brings to the thousands of children through the humanitarian projects run by UNICEF, in addition to displaying a grounded image of Barcelona FC and sport of football in general. The factor of image is quite important in context of CSR, as often the sports world is criticised for its excessive spending and lack of understanding for the environment and the people around it (Desbordes, 2007). The step taken by Barcelona FC has paved way for many other clubs to follow suit, displaying another positive for the CSR activities in terms of enticing others to make similar moves and thus increasing the reach of support that can be extended. Additionally, it displayed a club’s resolve to break barriers and establish new norms in the business world by creating a communication link with international bodies and institutions for benefits that are not simply of monetary value. As an independent entity, Barcelona FC created the Barcelona Foundation, as a vehicle to drive active participation of the club in all aspects of the community (Burns, 2000). This was not merely the donating of funds, but a more hands-on approach by each member of the Barcelona FC organization. Players and even the president of the club were asked to be involved in the various social projects, one of which was the integration of migrants. This was not only important to the club, but also to the sport in general and is one of the principle projects still being worked on by the Barcelona Foundation. The underlying message of the project is to stamp out racism and accept individuals of all backgrounds and cultures with open arms. In reference to this, Barcelona FC took the step of internalising their memberships, allowing individuals from outside Spain to apply for becoming a member, and in effect one of the several thousand owners of the club. The flexibility of the clubs structure, along with its transparent and accountable management functions, and its standing on various social activities allowed for rapid growth on the international front. As of 2009, almost 8% of Barcelona FC’s members reside outside of Spain. This, in return, has been a low-cost fuel for driving the publicity of the club in many nations across the world (Hamil & Walters, 2009). Football clubs divide their income sources into three parts: match day revenues, media rights, and sponsorship & merchandising (Desbordes, 2007). The match day revenues and merchandising is linked with the fans and supporters, who pay for these. The rest is linked to corporations who associate themselves with the clubs in order to gain a share of revenues for themselves, knowing that the established network of consumers provides for an ideal market to target. The model applied by Barcelona FC is similar to this, as it offers more value to the fans and supporters without placing any heavy financial burden on them. However, several football clubs use an alternative model where the higher portion of the revenue is actually sponsor-funded; this is due to the low number of fans that are available to generate high gate fees from entrance to matches. The pioneering work that Barcelona FC has undertaken in relation to accommodating social responsibility at the core of its business model can be witnessed from the extensive charity projects that the institution has undertaken in all corners of the world (Burns, 2000). The advent of globalization has become a blessing for the club in furthering its image as an international champion on the football field, as well as an organization in sync with the community and the needs of the people. Apart from joint projects with UNICEF directed towards social and ethical causes, Barcelona FC has successfully initiated several local learning programs and summer tours to the United States, with the objective of helping the community relish from entertainment, while allow for talent to be harnessed and provided a chance to excel. The utopian democracy that Barcelona FC demonstrates in today’s corporate world of sports is justified by its famous slogan of ‘More than just a club’. Its effective version of accountability and transparent governance, coupled with strong community links and grounded approach towards development and understanding, provides the optimum example for all other sporting clubs to follow. Conclusion The concept of corporate social responsibility requires organizations to delve further into two aspects of their operations. These are: An analysis of the quality of management that exists, reflecting both on the personnel and the processes that govern the completion of daily activities The nature of work that the organization is involved in and its associated impact on the various circles of the society Without both aspects being understood to the core, any actions to incorporate CSR within the operations of the organisation will remain ineffective. Effectiveness can only be achieved when the process is accepted a continuous medium that must be referenced at the onset of each action (Werther & Chandler, 2006). The example of Barcelona FC is quite the contrary to most other organizations that form the corporate establishments of the world (Farred, 2008). In respect to CSR, Barcelona FC cannot be questioned to a large degree since it follows the principles of social development as part of the core values of business. However, one reason for this is the unique member model of ownership that it possesses, which allows for the institution to be more people and community focused than other organizations. This reasoning could also hold true when comparing the club with other football institutions like Real Madrid or Manchester United. As mentioned in the introduction, the concept of CSR is in reverse to normal business practices, which is why critics hit out at most organizations. Even in the case of Barcelona FC, there have been analysts who feel that the social programs run by the club are merely a marketing tactic designed to feed on the emotional connection that people have, or may have, with certain development issues. This ‘eyewash’, as put by some critics, allows for the club to swiftly penetrate into new markets and gain a larger fan-base. However, such critics have been silenced by the annual reports and UN reviews that signify the contributions of the club, as well as the work and time volunteered by members of the club including its players and board members. Add to this the fact that as a not-for-profit organization, any additional revenue generated by the Barcelona FC is cycled back into improving the facilities of the club as well as initiating further development projects, provides a strong answer to remove any doubts over the objectives that the club has in regards to expansion. A valuable assessment that arises from this paper is whether Barcelona FC provides the ideal corporate business model to counter Friedman’s shareholder theory and establish CSR as one of the norms of ethical business standards. There could be the argument presented over the validity of using the club as an appropriate example, especially since it runs on a not-for-profit model or does not, in a certain sense, possess shareholders. Well, the latter can be disputed on several counts since each paid member being an owner of the club, has a voting share in the operations of the institution. As there is payment involved in acquiring this role or status, it can be argued that the member is similar to the shareholder of any publicly-listed company, barring the monetary benefits that could be associated with the latter. In regards to the business model adopted by Barcelona FC, it is easy to state that it is unique in its context, especially for the industry the institution is involved in. Since no other example exists of a sporting club that does not profit from its operations, one can state that Barcelona FC adoption of social responsibility at its operational core is the ideal business model that should be replicated by other organizations in order to better adapt to the changing environment that they are involved with. While many sporting bodies have moved to incorporate some degree of CSR in their activities, the clash of commitment comes when shareholders are able to let go of their vested interests in the overall benefit of the club or the sport. At this stage, it is more than likely that social activities will take a backseat to the desires of the shareholders. Recent examples of where sporting clubs have lost their touch with the local community and failed to deliver completely on social responsibilities can be seen in Liverpool and Manchester United; private ownership of the clubs has resulted in them being heavily in debt and profit-driven (Rodriguez et al, 2007). The recent demonstrations by supporters of both clubs voiced for a change in the management and corporate structure to resemble that of Barcelona FC. While revenue remains critical to the long-term operations of any business entity, incorporating CSR instead of profits seems to portray a better model for businesses to follow. This is evident from the case of Barcelona FC; an institution that surpasses the realms of normal business organizations. Bibliography Burns, J. (2000) Barca: A People’s Passion, Bloomsbury Crowther, D. & Rayman-Bacchus, L. (eds) (2004) Perspectives on corporate social responsibility, Ashgate Publishing Desbordes, M. (ed) (2007) Marketing and football: an international perspective, Butterworth-Heinemann Farred, G. (2008) Long Distance Love: a Passion for Football, Temple University Press FC Barcelona (2010) FCBarcelona.com, Available at http://www.fcbarcelona.com/web/english, Accessed on 20 April 2010 Friedman, M. (1962) Capitalism and Freedom, University of Chicago Press Hamil, S. & Walters, G. (2009) “The Model of Governance at FC Barcelona: Balancing Member Democracy, Commercial Strategy, Corporate Social Responsibility and Sporting Performance” in Hassan, D. & Hamil, S. (eds) Who Owns Football? The governance and management of the club game worldwide, Taylor & Francis Henriques, A. & Richardson, J. (eds) (2004) The triple bottom line, does it all add up?: assessing the sustainability of business and CSR, Earthscan Kotler, P. & Lee, N. (2005) Corporate Social Responsibility: doing the most good for your company and your cause, John Wiley and Sons Rodriguez, P., Garcia, J. & Kesenne, S. (2007) Governance and competition in professional sports leagues, Universidad de Oviedo Scarlett, R. (2009) The Official CIMA Learning System: Performance Operations, CIMA Publishing Werther, W. & Chandler, D. (2006) Strategic corporate social responsibility: stakeholders in a global environment, SAGE Publications Wolk, H., Dodd, J. & Rozycki, J. (2007) Accounting Theory: Conceptual Issues in a Political and Economic Environment, Sage Publications Read More