Kroenke’s £3m: The Quest For A Straight Answer. Part 37.

You’ll recall the £3m that Stan Kroenke awarded himself last year from Arsenal profits. You may recall I submitted a question about it at the AGM last October, and was fobbed off with a prepared answer read by Sir Chips.

My question read: It’s reported that Arsenal paid KSE £3m for advisory services. Was a competitive tender issued for these services and can you tell us specifically what the services were, why they were needed and whether such fees will become an annual feature?

The answer, according to The Daily Telegraph’s live blog of the event, which I’m sure is substantially correct, was:
“The £3m fee to was proposed by myself and Lord Harris in respect of wide range of services offered by Kroenke Sports Enterprises. They have an extensive experience and it is of upmost (sic) important (sic again) that we use it to best advantage, There was no competitive tender – they were available to us, so competitive tender was not needed. We are entirely satisfied. In terms of future fees, it will depend on the services provided.”

So no competitive tender was issued, no reason as to why the services were needed was given, no list of services was given (but apparently there were ‘a wide range’), and of course they can’t rule out more fees in the future, because “it will depend on the services provided.”

The services that you can’t tell us about? The wide range of things that you can’t name?

So to recap: two members of the Board who own no shares between them proposed that the company they purport to run on behalf of all shareholders, pays £3m to the majority shareholder (who allows them to sit on the Board) for services that can’t be defined but have never before been needed in 127 years of Arsenal history.

And there are people who actually say that there is no need for regulation of the activities of people at Arsenal. No need for accountability. Amazing.

The Board had another chance to explain what the £3m was for at the Supporters’ Forum meeting on 14 March. The minutes of this meeting were finally uploaded to the Arsenal website on 7 May, after a reminder from the AST rep. Arsenal seemed to have forgotten. Anyway, this was the question tabled:
Can the Club provide more detail about the consultancy services Stan Kroenke provided for his £3m fee? Is Ivan Gazidis addressing the reasons that this capability cannot be delivered by the in-house executive teams?

Chips doesn’t attend the Supporters’ Forum, but Ivan Gazidis does, so he answered this time – again a pre-written answer, not off the cuff – and according to the minutes eventually published by Arsenal, he said this:
The fee was paid to Kroenke and Sports Enterprise [I think he means Kroenke Sports & Entertainment] which is one of the largest, most respected and successful sports organisations in the United States, operating in the most sophisticated sports business market in the world. Their central team has extensive experience in the finance, digital, broadcast, ticketing, stadium operations, facilities and analytics areas amongst others. At Arsenal we have a very good and capable management team but we run a tight ship based on the scale of our operation and it would be irresponsible not to draw on this additional expertise that is available to us. In terms of any future fees, that would depend on the nature of the services provided. It was a proposal by the Chairman to pay a fee for the wide range of services provided to Arsenal Football Club by Kroenke Sports and Entertainment. He felt it was good governance to pay a fair fee for these services.

There’s that phrase again: Future fees will depend “on the nature of the services provided”. But the thing is Ivan, YOU STILL HAVEN’T TOLD US WHAT THE SERVICES WERE.

I understand from your answer that you believe KSE are more experienced than you, with your years of experience in the MLS and Premier League, and your management team, with their many, many years of experience in the Premier League – and shall we just ignore that Arsenal have bought their own specialist sports analytics company in the States? But what did KSE actually do for the £3m? Let’s see a list of services, how many days were spent on them and what value they added. Because if you can’t measure the value, where was the figure of £3m plucked from?

Even if the KSE consultants charged £2,000 a day you could rack up 1,500 days to get to £3m. That’s six full time consultants every working day of the year at two grand a day. What are they doing, Ivan? You must be able to tell us SOMETHING they’ve done.

Already we’re nearly at the end of another season, and another financial year for Arsenal will end in three weeks (31 May). So the Board must know by now whether KSE have once again provided these mysterious services in the current financial year. The next Supporters’ Forum meeting is next Monday, 11 May. I wonder if Ivan will be good enough to tell us the answer. Then if it’s ‘Yes’ we can wait with bated breath for Stan to tell Sir Chips what to give him, I mean for Sir Chips to pluck another figure from the air, no I mean for Ivan to carefully calculate the value of services provided by KSE so they can be fairly recompensed. Just like last year.

I am not so naïve as to think there ever were any services. I just wish Ivan had more of a conscience so he didn’t treat fans and Arsenal’s small shareholders like imbeciles and come out with this tripe.

Please don’t waste my time and yours by responding that ‘It’s Kroenke’s club, he can do what he wants’, or ‘No one would care in any other form of business’, I’m not interested. If that’s what you think then you’re part of the reason this happens, and why football CLUBS are no longer run as clubs – ie for the benefit of members. I know it’s how things happen. And just like politics or anything else, unless people object it will always be how things happen.

Twitter: @AngryOfN5

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10 thoughts on “Kroenke’s £3m: The Quest For A Straight Answer. Part 37.

  1. “…Please don’t waste my time and yours by responding that ‘It’s Kroenke’s club, he can do what he wants’, or ‘No one would care in any other form of business’, I’m not interested. If that’s what you think then you’re part of the reason this happens, and why football CLUBS are no longer run as clubs – ie for the benefit of members. I know it’s how things happen….”

    On the contrary, things like this would get people fired at many real companies. Why do they happen in football so much. They happen in football because fans still go to the games anyway. Fans are under the delusion that this is still a community enterprise, despite all this. It’s called “cognitive dissonance”.

    Have you been to any games since this happened? Quite a protest then.

    By the way, David Dein’s son was also an “agent” to players and benefiting from transfers and salaries paid by Arsenal, while his father was on the board and then head of the board.

    You went to games back then too? Oh.

    But other people are the problem here?

  2. I think the more important question that should be asked on this issue is, Did Arsenal make more than £3M from the advice and services provided by KSE and if so how much more than £3M, and if not then what was the point or usefulness of the services provided.

  3. what evidence have you that services were not provided, not knowing what the services are does not mean they were not provided

  4. Really struggling to find things to get angry about Phil? Sir Chips would just have proposed paying for services rendered which was seconded by another board director in a conventional board approval motion. The directors have a fiduciary responsibility, for which they can be held personally liable, to act in the best interests of shareholders. Therefore it is not legally possible to approve a payment where services are not rendered as this would be a breach of fiduciary responsibility and potentially a criminal act of deception. There maybe a question of whether this payment represents fair value but again this is a matter for the directors, acting under the obligation of fiduciary responsibility, to determine. Shareholders can call the Directors to account but given the shareholding it is a matter of interest really only to R&W Securities. The smaller shareholders are less relevant and largely impotent if the major shareholders have approved it. Anyone of the small shareholders could still take action against the board if they so wished but most would know it’s unlikely that it would reveal any malpractice. In the end to what extent has Kroenke really benefited from this payment. An amount of £3m has been paid from a company in which he has a 70% interest to one in which he has a 100% interest. It’s all really small time stuff.

  5. …and annuver fing! It should be noted that these figures are in accounts that have been audited. Auditors of course also have a legally responsibility to verify that transactions are genuine and would have been obliged to satisfy themselves that these services were provided before signing off the accounts. Similarly the law obliges transactions between related parties to be formally disclosed in such accounts which was of course why this matter entered the public domain. In approving the payment the Directors would have known that the transaction would be subject to greater scrutiny not least by the auditors. There’s nothing new in such transactions though. Go back to 2006 and you’ll find a one-off payment of £21m made for costs related to the fees, advise et c., in refinancing the stadium and discharging of prior financial arrangements. A much larger sum but no more detailed in public explanation. Have you sought explanation in as much detail for this payment Phil?

    Perhaps we could speculate on what services KSE might have rendered. The website was redesigned – KSE have experience in this field. The Armoury was re-fitted as part of the sponsorship discussions with Puma. KSE have a great deal of experience in retail environments around stadia they would most certainly have had some input there. An advantage of using ‘in house’ expertise is that you build and retain that expertise internally. Any external company gaining expertise through working with Arsenal would be able to sell that expertise to competitors hence there is a degree of logic in the relationship between KSE and Arsenal which probably wouldn’t benefit either if precise details of transactions were broadcast in great detail.

  6. Keep it up, Kroneke needs to stay within the remit of an English football club owner, and you are doing a fine job reminding Arsenal of their responsibilities. Examining your past posts, you should consider returning to debating what we want from the owner. Do you still think Kroneke is in this for the long term? And in 60 years’ time will his great grandchild ‘inherited’ Arsenal? And will the family have input any of their own money to the club in this time. Or will they have started to syphon lots of cash out of the country? I hope you are chasing Jed for the £10 bet he made that Kroneke would have sold off by July 2015! And what about your first post – do you still want Arsene to remain as manager? Enjoyable read. Thanks

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