The author is an investment analyst in New York City and lifelong Manchester United fan.
Manchester United suffered further ignominy this weekend as they were comprehensively beaten by Liverpool. It was a creditable performance, but this consolation of sorts was just another sign of how far the club has fallen. Most vitriol has been directed at United’s de facto CEO, Ed Woodward, and the majority-owning Glazer family. A common complaint is that the Glazers have been excessively greedy, depriving the club of much needed transfer resources. According to this argument, the Glazers are happy to persist with Woodward as long he’s achieving commercial success off the field. Journalist Mark Ogden, for example, tweeted, “For all the criticism directed at Ed Woodward recently, [it’s] worth noting that MUFC share price has gone from $15.33 in October to $20.25 today. That will always be a big tick in his favour with the Glazers. Safest man at Old Trafford.”
But let’s consider an alternative view. MANU (the company’s stock ticker) came public at $14 per share in Aug 2012 and since then (as of 21 Jan 2020) is up 42% to $19.85. That sounds decent, but the S&P 500, the broadest indicator of the US stock market is up a staggering 140% over the same period. By conventional measures, this is an abominable return for MANU shareholders. If anything, one could argue that the Glazers have been insufficiently greedy by persisting with an under-performing CEO over this timeframe. The Glazer family’s 127 million shares are currently valued by the market at roughly $2.5b. If MANU shares had kept pace with the broader market (admittedly a big if in a market most kindly disposed to tech high-fliers), that stake would be worth $4.3b!
The club’s stock price is far from perfect as a metric for fans. For example, the shares popped on rumours of a Saudi takeover, which would be a decidedly controversial outcome for the fan base. But share prices are a useful barometer of the market’s confidence in a company’s long-term prospects, and to that end, responsibility for the club’s sluggish stock price lies as much with its majority owners as it does with Woodward.
There’s another institution which must take blame for the club’s woes. While it tends to escape attention, the club’s board of directors is entrusted with overseeing management on behalf of its owners. This is particularly important in publicly-traded companies where stock ownership is spread among investors who need a way to supervise management from a distance. In addition to selecting the CEO and overseeing senior management appointments, the board is tasked with adopting appropriate compensation policies to suitably incentivize senior management. Finally, the board plays an important role in shaping a company’s strategic vision. Corporate governance experts Milstein, Gregory and Grapsas note that “after agreeing to a strategic course with management through an iterative process, the board should determine the benchmarks that will evidence success or failure in achieving strategic objectives and then regularly monitor performance against those objectives.”
The Manchester United board is, shall we say, somewhat lacking. The board is made up of 12 people, six of whom are from the Glazer family. It is not even remotely plausible that these are the most qualified individuals to guide one of the world’s most prominent sports teams. Of the remaining six, three are company employees – Ed Woodward (Executive Vice Chairman; de facto CEO), Richard Arnold (Group Managing Director; “oversees all commercial and operational aspects of the Company”) and Cliff Baty (Chief Financial Officer). According to the club’s 2019 Annual Report, none of the three independent directors own any shares, which is generally a sign of lack of alignment with shareholders. Finally, every director has been on the board since the 2012 IPO, demonstrating a remarkable lack of revitalisation given the club’s seven-year track record.
Improving the United board would not be a difficult task. A report by executive search firm Heidrick and Struggles, cited by Cornelis de Kluyver, asserts, “A high-performance board governs by continually challenging – in a positive way – every significant aspect of the company’s operations: its business model, strategies, and underlying assumptions; its operating performance; and its leadership development. In doing so, a best-in-class board should seek to create a culture of rigorous, relentless examination, and press for continuous improvement.” At the very least, the United board should reform itself, limiting itself to three Glazers complemented by three executive directors and six independent directors. A genuine search should be launched to identify independent directors capable of shaping the club’s future, with the existing three independents essentially being asked to audition for the job again. This is an incredibly high-profile and desirable role, and it’s clear that some of the world’s best candidates could be assembled in a high-functioning team to create the right strategy and structure for long-term success. Additionally, the Glazer family could convert some of its super-voting Class B shares to Class A shares and sell these in the public market without threatening their overall control of the club. By giving more minority shareholders a greater voice, the club can open itself to more informed criticism. Fans do not expect the Glazers to run the club on their own; rather, it is the failure to appoint a suitable group of people, while relying excessively on the ineffectual Woodward, which has proven particularly irksome.
This may seem to many fans like mere corporate mumbo-jumbo amidst the on-field difficulties. But Sir Alex Ferguson himself placed great emphasis on the board’s role in supporting him. In Alex Ferguson: 6 Years At United, he remarked on the board’s diverse skill set (“United have a wide range of directors and need that kind of input”) as well as the “great spirit in the boardroom”. He even went so far as to say that “it is the working partnership between manager and chairman which is the vital key” to a club’s success. And ever prophetic, he wrote, “Certainly at the end of the day you wonder whether the next chairman will be as good for the managers at Manchester United.” With four managers in seven years, it’s clear that the chairman has indeed not been as good for Sir Alex’s successors. Nor has the board delivered for fans, who are increasingly hungry to see the club returned to its place at the pinnacle of English football. Amidst all the talk of a cultural reboot, it’s the top of the organisation that must begin to first heal itself.