Manchester United - fighting for organisational legitimacy against citizen power

I am not up in sports PR but it is fascinating to watch the way that Manchester United as an organisation is fighting for its credibility.  Not as a club - only this week it continued to be as successful as ever on the pitch - but its  present ownership structure is rapidly losing credibility in the face of its own fans, wider supporters of football, undoubtedly the sports media as well as the government - all concerned by the high level of debt on its balance sheet.  

It is yet another example - Trafigura was an earlier one - where organisations depend on a "licence to operate" which is not given by the courts or bought in the market but which depends on the way that an organisation engages with its stakeholders and the wider community to earn respect and support. 


It is no longer too far fetched to see that the fans who have no legal power in the ownership of Manchester United as presently structured i.e a private company; may force the Glasers to sell over the next 12/18 months.  Might this be the first Citizens Takeover in a stakeholder age?  Might the concept get an airing in the forthcoming election?

Financial PR and investor relations in a stakeholder environment?

The growth in interest and prominence of the stakeholder approach to organisations (as highlighted at the recent World Economic Forum), in contrast to a shareholder focus, poses an interesting problem for f inancial PR and in particular investor relations.  How do they adapt to this new environment as both have grown and become highly profitable parts of the PR industry (investor relations would see themselves as a different profession) in an environment where shareholder focus has been dominant?  Will their role change; will they become less powerful and influential within the communications framework of major publicly quoted companines and how will they reconcile the stakeholder agenda? 

Of course it could be argued that stakeholder communications is a fig leaf for organisations in their dealings with society and that shareholders and the requirements of financial markets are going to dominate, whatever organisations say in public.  We can see this in the recent acquisition of Cadburys by Kraft.  The Chairman of Cadbury's was able to say without embarrassment that the board of Cadbury's had done their fiduciary duty to shareholders by selling the company.  Although in a later speech to the Said Business School at Oxford he did highlight his concerns that so many key shareholders by the end were just hedge funds.  .

However, there are more fundamental issues at work which need to be considered.  Both financial PR and in particular investors relations are a product of the "efficient market theory" which is that markets are inherently efficient and the price of an asset fully reflects the information available.  Markets by implication are also ently hungry for information to further improve market pricing and their overall efficiency.  

Caption: Alan Greenspan, former Chairman of the Fed and strong supporter of the efficiency of markets. (Google Images).

In this context, the role of both professions can be seen as assisting market professionals in the efficient working of markets by providing information, admittedly from the company's perspective, which have been seen to date to enhance market efficiency.   However, now efficient market theory is badly discredited as a result of the financial crisis, if not before.  The significant asset bubbles in property were not properly priced and a recent piece in the Financial Times shows how badly - with 90% of one of the most toxic form of derivatives, CDOs were issued in 2007, having defaulted.  A clear example of not market efficiency but information asymmetry with buyers understanding a great deal less than sellers about the assets they were buying.

It will be interesting to see how this develops and whether both professions are starting to rethink the implications of the financial crisis.  I have not seen much evidence of a debate going on but would welcome hearing about this if anyone has further information on the subject.  It would be an interesting subject for a one day conference at Greenwich.

In the meantime it is interesting to note that the Walker Review of Corporate Governance, a potentially influential report, published November 2009, by a senior City figure commissioned by the UK Treasury, uses the word "stewardship" in terms of the role of major shareholders.  Now "stewardship" is a term, normally associated with great Estates where they are passed from one generation to another, with no idea of selling the assets which you have inherited.  The same principle can be seen with many family firms, where inter-generational transfer is a key requirement.  Shareholders as stewards - that takes some thinking about and what are the implications for financial PR and investor relations practice?