Independent Governance Committee

C/o Basel Institute on Governance Steinenring 60 4051 Basel, Switzerland Phone +41 (0)61 205 55 11 Fax +41 (0)61 205 55 19 info@baselgovernance.org www.baselg overnance.org

Basel, 6 February 2013

FIFA GOVERNANCE REFORM PROJECT

SECOND REPORT BY THE INDEPENDENT GOVERNANCE COMMITTEE TO THE EXECUTIVE COMMITTEE OF FIFA

FIFA GOVERNANCE REFORM PROJECT SECOND REPORT BY THE INDEPENDENT GOVERNANCE COMMITTEE TO THE EXECUTIVE COMMITTEE OF FIFA

TABLE OF CONTENTS
1 2 3 4 5 Executive Summary .................................................................................................................................................... 3 Introduction FIFAs Governance Reform Project and the Role of the Independent Governance Committee ............................................................................................................................................. 4 Phase One of the Governance Reform ................................................................................................................. 6 Phase Two of the Governance Reform ................................................................................................................ 7 Next Steps ....................................................................................................................................................................... 9

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1 EXECUTIVE SUMMARY
FIFA has started to implement the first essential steps towards the creation of a framework of good governance and controls. It has introduced the notion of independence and separation of powers in the Ethics Committee and has created a credible Audit & Compliance Committee. The corresponding decisions by the Congress in 2012 have triggered an internal consultation process with regard to the remaining governance reform proposals. The time between now and the Congress in May 2013 when the 209 Member Associations of FIFA will decide on the outstanding recommendations is critically important for the overall success of FIFAs governance reform project. Fundamental reforms and change require leadership. In the case of FIFA, the responsibility for convincing its members that the proposed changes are adequate to FIFAs premier position in the world of sports and necessary to restore confidence amongst all FIFA stakeholders lies primarily with the members of the Executive Committee. The IGC expects the members of the Executive Committee to personally and actively support the project in their respective spheres. Whereas public regulation initiatives are focused on the most obvious forms of misuse of sports, such as match fixing, illegal betting and doping, the governance of sports governing bodies is largely left to self-regulation. The recently published report by the Swiss Federal Office of Sports also comes to this conclusion1. However, organizations like the OECD, the Council of Europe, the UN and many NGOs urge countries to implement more stringent rules to fight corruption and to support transparency and accountability both in the public and the private sector. In addition, FIFAs stakeholders, including millions and millions of fans and the public at large, expect FIFA as the keeper of one of the worlds most popular sports to take a leading role in the regulation of sports governing bodies. In that sense, FIFA is in a unique position to prove that self-regulation can work. However, this opportunity represents at the same time a great responsibility for FIFA, its controlling bodies and its members. FIFA has chosen to refer the ongoing consultation process to an ad-hoc group, composed of the General Secretaries of the 6 Confederations. The IGC understands the need for consultation as part of a democratic decision-making process. However, the IGC is of the opinion that the Executive Committee has a responsibility to continue to lead FIFAs governance reform process by clearly communicating internally and externally its support of the remaining steps towards the implementation of a framework of good governance and controls. The IGC strongly encourages the Executive Committee to support the governance recommendations as set out in the draft FIFA Statutes distributed for consultation at the Congress 20122. In the eyes of the IGC it is fundamental at this point in time that the Executive Committee members demonstrate leadership and act in the interest of FIFA and football overall. In a next stage, FIFA will need to prove its resolve by seriously implementing the newly adopted program and its ability to continuously improve and adapt rules and procedures based on operational experience, learning from investigations and strategic developments. It is important

1http://www.baspo.admin.ch/internet/baspo/de/home/aktuell/bundesrat_genehmigt_korruptionsbericht.parsys.83108. 2

downloadList.8434.DownloadFile.tmp/28529.pdf. http://www.fifa.com/mm/document/affederation/bodies/01/62/05/78/cenclenglisch.pdf.

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that this ongoing process is continued to be supervised and supported by an independent body of governance experts, such as the IGC.

2 INTRODUCTION FIFAS GOVERNANCE REFORM PROJECT AND THE ROLE OF THE INDEPENDENT GOVERNANCE COMMITTEE
FIFAs challenge is to adapt its governance structure to its economic growth and its political and social significance. Internal discussions about modernizing the organizations governance started some time ago, particularly during the 2002 Congress in Seoul. While major steps have been taken on an administrational level to upgrade operational structures and processes, FIFA continued to be publicly criticized for its overall lack of good governance and transparency, reinforced by a sequence of allegations and incidents of misconduct by football officials, such as the ISL/ISMM case, showing a lack of clear ethical rules or the processes and culture to enforce them. As a consequence of issues and allegations around the bidding process for the 2018 and 2022 World Cup, leading to the suspension of six FIFA officials, two of which were Executive Committee members, as well as issues related to the election campaign of presidential candidate and Executive Committee member Mohamed Bin Hammam, leading to a life-time ban of Mr. Bin Hammam from all football related activities, FIFA submitted some proposals to the 2012 Congress in relation to governance and transparency. The Congress approved those proposals, thereby initiating a broader governance reform project. In August 2011, FIFA mandated Prof. Mark Pieth to analyze FIFAs existing governance structure, to express an opinion on its standard and to make recommendations for improvements. The resulting report was delivered to FIFA on September 19, 2011 and was subsequently made public3. In October and December 2011 respectively, the FIFA Executive Committee formally ratified a governance reform project. At the heart of this project was the establishment of four internal Task Forces, supervised by an external, independent body. The Task Force Revision of Statutes was appointed to review the FIFA Statutes, with a view to integrate recommendations on the improvement of governance. The Task Force Ethics Committee was appointed to review the FIFA Code of Ethics and to strengthen the powers and independence of the judicial bodies. The Task Force Transparency & Compliance was mandated to look into the general procedure for conflicts of interest, improving internal control mechanisms, increasing the transparency of FIFA development programs and the commercialization of FIFAs rights, as well as exploring confidential reporting mechanisms and the status of the compliance function. The Task Force Football 2014 looked at technical aspects of modern-day football with a view to improve the game at all levels.

http://www.baselgovernance.org/fileadmin/FIFA/governing_fifa_mark_pieth.pdf.

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In addition, FIFA came to the conclusion, that its governance reform project needed to be supervised by an independent body. In November 2011, FIFA asked Prof. Mark Pieth to establish a group of independent governance experts and stakeholder representatives the Independent Governance Committee (IGC). After a thorough and intensive search and selection process, including due diligence on candidates, Prof. Pieth presented a group of 13 persons to form the IGC; 6 members representing the legal, the compliance and the investigation disciplines and 7 members representing various football stakeholder groups , i.e. Member Associations, Leagues, Clubs, Players, Media and Sponsors. The Executive Committee acknowledged in its December 2011 meeting the composition and independent role of the IGC and FIFA acknowledged IGCs selfdeveloped charter document on January 27, 20124. Since the establishment of the IGC, two members left the group. In order to preserve the independence of the IGC, Lydia Nsekera, President of the Football Association of Burundi, decided to step down after she has been elected by the Congress as a member of the Executive Committee in May 2012. In January 2013, Seung-Tack Kim, former Executive Vice President and COO of Hyundai Motor Company, withdraw his membership from the committee since he moved to a new position within a subsidiary of Hyundai Motor Company. The IGC is currently evaluating the replacement of Mr. Seung-Tack Kim with another representative of FIFAs sponsors. The seat of Ms. Lydia Nsekera will not be replaced since FIFAs member associations are still represented at the IGC. The IGC held its first meetings in January and February 2012 (January 18 19, 2012, February 21 23). In addition to establishing procedural rules and a financing mechanism guaranteeing the operation of the committee while maintaining its independence, the group reviewed documents and held hearings with key officials and staff in order to understand how FIFA handled various types of alleged misconduct in the past. The IGC also reviewed in detail the reform proposals made by FIFAs Task Forces5. The result of this work is summarized in the first report by the IGC, dated March 20, 20126. Given the short timeline between the publication of recommendations in March 2012 and the Congress 2012 (May 31 & June 1, 2012) and in order to ensure an informed and democratic decision-making process by the 209 member associations of FIFA, the IGC supported a phased approach in the implementation of its recommendations. In a first phase, key proposals relating to the judicial and oversight bodies, i.e. the Ethics Committee and the Audit & Compliance Committee were proposed for submission to Congress 2012 and immediate implementation thereafter. In a second phase, the remainder of recommendations was proposed to be submitted to Congress in 2013. The Executive Committee followed this approach and the Congress approved the first part of recommendations at the Congress 2012 (for details see section 3). After Congress 2012, the focus of the IGC was to supervise the implementation of the first key decisions. For that purpose, the IGC held several meetings and phone conferences with the new and

http://www.baselgovernance.org/gov/governance-in-sports/fifa/independent-governance-committee-charter/ The IGC decided that the proposals of the Task Force Football 2014 should not form part of its remit. 6 http://www.baselgovernance.org/fileadmin/FIFA/first_report_by_igc_to_fifa_exco.pdf
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independent chairs of the Ethics Committee and the Audit & Compliance Committee, to share with them its expectations and to ensure adequate support by FIFA as well as access to information and resources. The IGC did also review the adaptation of implementing policies, such as the Organization Regulations and the Regulations for Development Programs. The IGC held formal meetings in September and November 2012 (September 2728, November 2223) and conducted several phone conferences. The decisions at the Congress 2012 triggered an internal consultation process on the outstanding governance reform proposals. FIFA has chosen to refer those discussions to an ad-hoc group, composed of the General Secretaries of the 6 Confederations and lead by Theo Zwanziger, who previously chaired the Task Force entrusted with preparing the revision of FIFAs statutes. The IGC understands the need for consultation as part of a democratic decision-making process. However, the IGC is of the opinion that the Executive Committee has a responsibility to continue to lead FIFAs governance reform process by clearly communicating internally and externally its support of the remaining steps towards the implementation of a framework of good governance and controls. The IGC has sent a letter to the President and the members of the Executive Committee in December 2012, summarizing the most important points (see section 4) and offers its active participation in the ongoing consultation process by further explaining the rationale behind the recommendations or to discuss any other topics with the Executive Committee, representatives of the Confederations and Member Associations. In addition, the IGC is of the opinion that it should continue to oversee the effective implementation of the newly adopted rules, structures and processes.

3 PHASE ONE OF THE GOVERNANCE REFORM

The goal of the first phase of the project was the establishment of independent and professional judicial and financial/compliance oversight bodies respectively, including leadership by independent and internationally renowned experts in their fields. The IGC made several concrete recommendations in that respect, which have been supported by the Executive Committee and approved by FIFAs members at the Congress in 2012: The Ethics Committee has been divided into an investigatory and an adjudicatory chamber; Both chambers are now be chaired by independent7 (in accordance with an new definition of independence) persons, meeting the necessary professional requirements; The Ethics Committee has been given the competences and resources to discharge its purpose. Specifically, the investigatory chamber is able to draw up a budget at its own discretion in order to conduct professional investigations with internal or external resources;

http://www.fifa.com/aboutfifa/organisation/bodies/news/newsid=1664989/index.html

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The Ethics Committee is empowered to investigate and adjudicate past issues or behavior and the investigatory chamber has the power to open investigations completely independently from any other FIFA bodies or officials; The Code of Ethics8 has been revised and put into force to reflect these structural and procedural changes and to describe the rules of conduct and expected behavior (e.g. conflicts of interest, gifts and other benefits, bribery and corruption) more clearly; A confidential reporting mechanism in order to systematically manage complaints and allegations of all kinds has been activated at the beginning of February 2013; An Audit & Compliance Committee has been established with the typical supervisory role of an Audit Committee and the additional responsibilities for a Compliance Program as well as for Compensation & Benefits9; The Chairman of the Audit & Compliance Committee is independent and meets the necessary professional requirements10; The Audit & Compliance Committee has been given the competences and resources to discharge its purpose; it has access to persons and information and can decide on the support of external advice at its own discretion.

The IGC regards it as extremely important that FIFA, as a first step in its governance reform, has decided to create a professional and independent investigation and adjudication function as well as a credible Audit & Compliance Committee. The Chairmen of the Investigatory Chamber and the Adjudicatory Chamber of the Ethics Committee and the Audit & Compliance Committee are the kind of independent and professional chairpersons the IGC has been suggesting. The revised Code of Ethics and Organization Regulations are important instruments for the effective work of those bodies. The IGC held several meetings and phone conferences with the new chairpersons, to share with them its expectations. Positive feedback was received in terms of FIFA providing adequate support and access to information and resources to the new bodies. The IGC would like to express the appreciation of FIFAs decision to take the first essential steps towards the creation and implementation of a framework of good governance and controls. The IGC would, however, like to point out that the reform process is far from completed and the overall success of the project is dependent on the approval of the remaining recommendations and their effective implementation.

4 PHASE TWO OF THE GOVERNANCE REFORM

Given the complexity of the task and in order to efficiently start the implementation of the governance reform project, the IGC supported the approach to focus in a first phase on the most pressing recommendations. However, without implementing the remaining recommendations,

http://www.fifa.com/mm/document/affederation/administration/50/02/82/codeofethics2012e.pdf http://www.fifa.com/aboutfifa/organisation/bodies/news/newsid=1678423/ 10 http://www.fifa.com/aboutfifa/organisation/bodies/news/newsid=1635565/

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included in the first report of the IGC11 and the draft FIFA Statutes12, FIFAs governance reform project will not succeed. The need for increased transparency and accountability The IGC has already in its first report of March 201213 indicated that FIFA continued to be publicly criticized for its lack of good governance and transparency, reinforced by a sequence of allegations and incidents of misconduct by football officials. This statement should be taken very seriously indeed: the lack of transparent structures and the culture of patronage affects the reputation of the organization and undermines its ability to lead on the way to ethical sports governance. Based on the recent declaration of the 53 Member Associations of UEFA14, the IGC is not convinced that some of the key opinion leaders in football have fully grasped the consequences, as it falls short of fundamental requirements of modern governance in essential parts. Key Recommendations In addition to the detailed recommendations contained in its first report and taking into account some of the feedback received from the internal consultation process with the Confederations, the IGC would like to emphasize and clarify again the most important outstanding recommendations: It is of utmost importance for FIFAs future and its reputation that all members of the Executive Committee and the Standing Committees undergo an integrity check performed by FIFA centrally. A decentralized solution would not provide for the necessary consistency and would immediately and rightly be negatively judged FIFAs critics. It would also not appropriately reflect the fact that these officials are members of the governing bodies of FIFA; In order to underline their role and responsibility as members of FIFAs executive body, the members of the Executive Committee should be confirmed by Congress upon their appointment or re-appointment by the Confederations; It is essential that the Chairman of the Audit & Compliance Committee has access to and can participate as an observer in all committee meetings within FIFA, including the Executive Committee. In fact, the IGC would prefer at least 2 independent members to be added to the Executive Committee. The reason for having independent persons on the Executive Committee is to safeguard proper decision-making on behalf of FIFAs members. In that respect it is important to note that the Confederations, which are delegating the Executive Committee members, are not members of FIFA. The observer role of the Chairman of the Audit & Compliance Committee is a compromise, which had been agreed with the Task Force Statutes. A deviation from this compromise is unacceptable to the IGC; It is reassuring to learn that the introduction of terms of office is basically supported by the Confederations. However, it is of fundamental importance that terms of office are not

http://www.baselgovernance.org/fileadmin/FIFA/first_report_by_igc_to_fifa_exco.pdf http://www.fifa.com/mm/document/affederation/bodies/01/62/05/78/cenclenglisch.pdf 13 http://www.baselgovernance.org/fileadmin/FIFA/first_report_by_igc_to_fifa_exco.pdf 14 http://www.uefa.com/uefa/mediaservices/mediareleases/newsid=1913701.html

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limited to specific officials (e.g. the President) but that they apply to all governing bodies mentioned in the draft Statutes, including the Executive Committee; The IGC supports the view of the Confederations that introducing age limits is less important in case terms of office will be implemented; The IGC supports the redesign of the bidding and decision process for hosting decisions as well as for the governance of development projects, marketing and procurement activities. The corresponding policies need to be reviewed by the IGC; The IGC welcomes any steps to make the IFAB more democratic and transparent; Finally, the IGC would like to stress the importance of transparency in the area of Compensation & Benefits. The establishment of an expert subcommittee to the Audit & Compliance Committee is an important step. However, decisions by this sub-committee need to be made public, to the same degree as in not-for-profit organizations and other international organizations.

5 NEXT STEPS
The points listed in section 4 are crucial to make the governance reform of FIFA a success and they are essential for the IGC to perform its task professionally. The IGC offers its active participation in the consultation process up to the Congress in May 2013, to further explain the rationale behind these recommendations or to discuss any other topics with the Executive Committee, representatives of the Confederations and Member Associations. In addition, the IGC will continue to work closely with the Chairmen of the both chambers of the Ethics Committee and the Audit & Compliance Committee to ensure that the changes to FIFAs governance are implemented effectively.

_______________________ Prof. Dr. Mark Pieth Chairman Independent Governance Committee

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Disclaimer
The purpose of this Report is to provide the Executive Committee of FIFA with an independent assessment of FIFAs governance reform project including specific recommendations regarding the improvement of FIFAs governance. The information forming the basis for recommendations contained in this Report has been obtained in good faith from FIFA representatives and from interviews with its officials and employees. The information in this Report is, in the IGCs professional judgment, an accurate presentation and analysis of the information provided to us. However, the authors accept no responsibility for any information that has been withheld, knowingly or otherwise.

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