ROI of Olympic Gold ??

We've just seen a great Olympics. Granted, us Belgians did not have much to cheer about, but given that half my family is British, we still had plenty to celebrate. 

The question needs to be asked, though: was it all worth it?  

A couple of news articles caught my eye in this respect: First there was this report by Richard Anderson of the BBC, focusing on what each gold medal cost the nation. And we're not talking about the value of the gold that makes up the medal - an estimated GBP450. It concerns the investment (funded about 60/40 by the National Lottery and by the UK Exchequer, i.e. tax contributions) in elite training programmes. 

Of course, the funding is not equally spread across all individual sports. It's a "chicken-and-egg story" where funding is awarded on the basis of (past) successes.

Let's have a look at the table (data courtesy of UK Sport, based on a study by prof. David Forrest of the University of Salford):

Bottom line: each medal cost on average GBP5.9 million.  As Richard Anderson pointed out: "you won't find too many Britons complaining" since that works out as less than 10p per UK taxpayer.

Now, contrast that with this, and other similar stories on what olympic success will bring to the likes of Jessica Ennis and Mo Farah: sponsorship deals valued at up to GBP5 million per year!

"Fair enough" you say? 

Consider the following: Would a government invest taxpayers' money in building a bridge to a scenic island and then let a privately-owned company charge access fees to visitors without having to pay anything back to the government (other than taxes)? Or would a company invest shareholder equity in developing a brand or an invention and then allow one of its employees or business partners commercialise that brand or invention, without having to pay a royalty or commission? No way, indeed. It just doesn't make sense for one to bear the costs (and risks) of such investments if the rewards will go to someone else anyway. On any investment, there has to be a fair return - commensurate with the risks taken.

My contention is: if money is invested in making people successful as athletes (and by extension: as researchers, tv-celebrities, craftsmen, etc.; see also my earlier blog) then they owe a dividend out of their future earnings to those investors. 

The investments made by UK taxpayers (as well as sponsors) into Team GB constitute a shareholding into their future commercial success, which obviously includes individual sponsorship deals. In that way, the athletes would also become accountable - to their shareholders - regarding how they perform both on and off the field! 

And even when top-earning talents were to move to Monaco at the soonest opportunity to minimise their tax-bills (effectively obliterating any investors' ROI from taxes in their home country), their home nations could and would still benefit - as shareholders.

Corporate Governance in Belgium: painfully missed opportunities

Over the past few months and years there have been several instances where executive (and non-executive) remunerations have been criticised for being out of touch with the economic reality; cases like Dexia, BNP Paribas Fortis, Belgacom, Bekaert, to name but a few, have resulted in headlines that are reminiscent of those in the late eighties and nineties, where much focus was given to executive remuneration in the wake of the corporate governance movement (cf. Cadbury Report and Greenbury Report in the UK). 

Such cases furthermore demonstrate that these instances are not confined to the banking sector, widely blamed for triggering the recent worldwide economic troubles, nor to the private sector.

What's interesting, however - and perhaps rather unfortunate - is that the Belgian codes of corporate governance happen to be named after Baron Lippens and Baron Buysse, two protagonists in the aforementioned companies ! 

Interesting because they do not appear to know - or want to apply - what's in 'their' codes.
Time and time again the chairmen of the respective boards stressed that their "executive remuneration was perfectly and scrupulously in accordance with the law", and could not understand nor agree with the public backlash. But time and time again they chose to miss an essential cornerstone in any code of corporate governance: namely that such code aims to address accountability and (socially) responsible behaviour on the part of corporate officers well beyond their legal obligations. Codes of corporate governance always complement the law, especially where additional legal restrictions or obligations would be difficult if not impossible to draft, let alone implement. As the Code Lippens says, in relation to CEO's 'golden parachutes'  "which are very difficult to regulate through legal initiatives due to their impact on other remuneration systems": a code of corporate governance can be more effective (than the law) and offers the necessary flexibility to make appropriate recommendations on a case-to-case basis.

It is therefore but a diversionary tactic, to claim that everything was done within the law: Of course it was! But was it in accordance with good corporate governance, or with socially responsible behaviour?