How controversial practices get delegitimized

The fall of third-party ownership in football

The gist: A new Academy of Management Discoveries article explores how socially controversial processes lose the battle for legitimacy and get shut down. It follows a specific case – FIFA’s 2015 banning of third-party (investors, hedge funds, etc.) ownership of soccer players. The paper describes how non-transparency creates information gaps, and how these can be exploited by counterparties in setting and achieving their agenda.

Source: https://journals.aom.org/doi/full/10.5465/amd.2022.0176

With football very much on the radar as we reach the finals of UEFA Euro 2024, it seems opportune to turn to a recent Academy of Management Discoveries article “Foul Play? The Rise and Fall of Third-Party Ownership as a Controversial Practice in Football” (June, 2024) which researches how the controversial practice of third-party ownership (TPO) in soccer came to be banned by FIFA in 2015.

The authors, Kerem Gurses, Ferran Giones, Basak Yakis-Douglas and Kandarp Mehta observe that there are plenty of management studies of abandonment or disadoption (why people stop smoking, etc.), but few that deal with neutralization of controversial practices, that is, practices where both sides have a case.

In a typical simple TPO arrangement, an investor puts up money to acquire or develop a young player in return for owning a percentage of his future transfer value. This may also extend to other future earnings. It can mean that multiple parties have joint ownership of a player’s future financial cash flows.

TPO has been a common practice, particularly in South America, since at least the early 1990s. A KPMG study in 2013 reported a FIFA investigation which found “90% of football players in the Brazilian First Division have their economic rights in the hands of external stakeholders.”

Opposition to TPO grew from the mid-2000s, it obviously being considered questionable that a human could be situated in ways like how a horse racing syndicate jointly owns a horse. Some commentators were calling it “trading in human beings” and a form of indentured slavery. Rhetorically, the term “pizza players” i.e. where everyone owns a slice, came into being.

The other TPO concern was financial manipulation, whereby investors might exert pressure on club owners or managers to select or not select, or sell or not sell a player—that is, act for economic not football reasons. This undermines team effectiveness and trust in the game on the field.

However, the other side of the issue is equally compelling. TPO was a social empowerment initiative in many ways. It was a way to get resources into youth football so that talent could be searched out and cultivated. Clubs with limited financial resources maintained TPO investment allowed them to better compete with wealthy clubs. Overall, the practice benefited clubs, leagues, fans and not least the players themselves. Often such players became the economic wellspring their family and communities, lifting many out of poverty.

This then is a controversial practice, with merit on both sides. So how and why do controversial practices become banned?

The researchers come to their assessment via close study of 20 years of media reporting on TPO, supported by interviews. Various themes emerge. The moral judgment, a general and diffuse sense of wrongness in treating people like commodities is clear enough to see. Furthermore, a transnational values-divide as a South American process enters international multilevel governance is part of the issue set.

However, the authors find these factors were not enough to set TPO neutralization in train. The key issue, they argue, was non-transparency. What fundamentally shifts the process was the complex and opaque nature of TPO ownership contracts.

The paper quotes a sports lawyer: “I was shocked when I saw the sophisticated structure and the intertwined financial interests behind the player that my client was trying to acquire.

“The contracts between the third-party investors, the club, and the player included a surprising number of clauses that protected the financial interests of the investors and offered multiple options to realize gains, even in cases where there could be conflicting interests between the involved parties.”

This legal obfuscation and apparent concealment was pivotal in that lack of information and no easy way to get it created a knowledge vacuum. This left a gap that TPO opponents could fill with their narrative: of questionable actors exploiting players, benefiting themselves and tarnishing the integrity of the game. This narrative grew into a public opinion snowball which built an agenda for neutralizing TPO, which FIFA ultimately signed off on

As the authors put it, “opacity leads to different meaning-creation attempts, discursive battles, and power struggles between actors.”

In summary, we have a specific and powerful analysis of a controversial practice becoming delegitimized and shut down. But… how much does this say about the path of controversial practices more widely? It is here, moving from the particular to the general, that the authors don’t fully convince. There are, as the research shows, many overlapping factors at work, with non-transparency being the most salient. But it is not clear that non-transparency will be the decisive element in the next case.

The authors have shown that information obfuscation creates information gaps, and that these can be exploited by counterparties to a controversy. But what appears actually decisive in this case, and perhaps in all controversies, was the weight of public opinion.

This appears to be larger research question still to be answered: what are the factors that move public opinion on a controversial issue, opacity being one of them, and under what conditions does one or more of them become decisive.