Stephen Chisadza and Alex Constantinou
The Fédération Internationale de Football Association (FIFA) is an organisation that has over the years become so profoundly unaccountable. FIFA statutes[1] have disincentivised any form of national government oversight of FIFA or its member associations and the statutes allow FIFA to suspend any national football associations for ‘‘government interference’’.[2]
The global soccer fraternity was, however, shaken in 2015 when the US Department of Justice (DOJ) decided to charge and arrest high ranking FIFA executives for “rampant, systemic, and deep-rooted” corruption. Nearly 50 counts of corruption were instituted against FIFA officials by the DOJ using the Foreign Corrupt Practices Act (FCPA) and the Racketeer Influenced and Corrupt Organisations Act (RICO). Tools often associated with the US government’s fight against organised crime. But how did the non-profit organisation founded in 1904 that nobly sort to promote the development of football worldwide transform into a powerful international organisation comparable to the mafia?
FIFA generates an astonishing revenue, primarily through the World Cup. It is estimated that the 2014 World Cup in Brazil generated a record US$2 billion, for the tax-exempt organisation. This was nearly double the revenue generated by FIFA during the 2010 World Cup held in South Africa. The main drivers of this growth in revenue are the broadcasting deals and the mega-sponsorship deals that FIFA has with some of the world’s largest brands such as Coca-Cola and VISA.
Figure 1: FIFA revenues (in million U.S. dollars)
Source: FIFA Financial Reports
The DoJ argues that the FIFA officials that have so far been charged allegedly accepted bribes worth $100 million over the past 20 years. Surprisingly, the man that has been at the organisation’s helm for the last 16 years, Sepp Blatter, has not been included amongst those that have been charged. President Sepp Blatter had been successfully re-elected three times prior to the 2015 elections. To date none of the charges brought by the DoJ have implicated Mr Blatter, which leaves one wondering how it is that a seemingly honest man can be at the helm of a corrupt organisation? In order to answer this question it may be useful to look at the FIFA electoral system and how this relates to financial flows within the organisation.
Article 27 of the FIFA statutes sets out the guidelines for the election of FIFA’s leaders, and states that the president will be elected by secret ballot during the FIFA congress for a period of four years. The guidelines do not place an age limit for presidency candidates, nor do they limit the number of times a candidate can be re-elected. The regulations also give each of the 209 federation members one vote regardless of size, football heritage or significance on the pitch. Therefore Aruba, Montserrat and Lesotho are on par with Brazil, England and even the reigning champions Germany in terms of their voting power.
This means that even though sponsors essentially pay billions to see the best 32 footballing countries at the World Cup finals, through the electoral cycle, all 209 members have an equal say on the distribution of the revenue through the elected leadership. Mr Blatter’s genius lies in the fact that his policies appeal not to the top 32 nations that play at the finals but to the footballing minnows who are the majority. Under Mr Blatter, FIFA’s noble objective has been to improve “the game of football constantly”, and promote the game globally by “organising inspiring tournaments”. The success of the World Cup from a financial perspective allows FIFA to pay out “participant contributions” to all member associations that participate in the tournament (from the qualifiers to the final tournament). So in 2001 when American Samoa was beaten 31-0 by the giants of Australasian football Australia, the Football Federation American Samoa (FFAS) was duly compensated for their troubles (read embarrassment) and a contribution was made to develop football in that territory. Participation contributions totalled US$420 million following the 2010 World Cup and US$476 million in 2014.
Whilst the global development of football has its purpose, the catch is that not all of the Federation’s members have clear and transparent systems for dealing with these contributions, which for a small country could be significant. Corrupt football officials therefore have a clear incentive to elect Presidential candidates that will guarantee flow of funds to their associations. The one-country, one-vote system irrespective of size, footballing significance and other factors may, on the one hand, have noble intentions, but on the other hand result in allocative inefficiency through corruption.
Where the FIFA saga described above becomes more disturbing is that the electoral system and its concomitant outcomes may in certain circumstance be not too dissimilar to national electoral systems and their outcomes, particularly in a decentralised democracy such as our own. Funds transferred from national government that are meant for economic development can become particularly fungible when expenditure decisions and accountability are similarly decentralised.