Welsh Rugby Union chairman Gareth Davies is grappling with reform of the game and has already declared an intention to slim down a bloated system. But Geraint Powell argues it’s how the various parts of that system fit together that really counts.

 

Last month, I looked at the question of Welsh Rugby Union governance modernisation (http://www.dai-sport.com/welsh-rugby-reform-needs-unity-not-war-money-men-blazers/), particularly the need to build aligned devolved/decentralised regional board structures to help underpin the WRU board and to replace the outdated and non-aligned WRU districts system. 

This will facilitate the member clubs electing a slimmed down strategic main WRU board based on director skill-sets in business as well as rugby. 

If that is the internal challenge facing the WRU chairman, he has an even greater external challenge in also modernising the woefully unfit for purpose and non-aligned governance within and across the long troubled regional tier. 

It is possible to analyse the various serious governance problems under six main headings. 

 

1. Commonality  

 

We talk about the four pro regions, vaguely defined in the WRU articles of association, as if they are one structural model.  In fact, they are four very different businesses. 

The Dragons region is now a wholly owned subsidiary of the WRU, WRU Gwent Rugby Ltd, subject to fresh external equity purchases in due course.   

At the other end of the spectrum, the Cardiff Blues and Scarlets regions are the Cardiff RFC and Llanelli RFC clubs as incorporated in the 1990s save for those companies being re-named Scarlets Regional Ltd and Cardiff Blues Ltd.   

There are still club heritage protections, and numerous small shareholders that view their region as the club they originally bought into.  The Blues have the additional problems caused by the Athletic Club minority shareholding. 

Ownership reflects this club history, where there is no shareholder in control at the Scarlets and Peter Thomas only effectively controls the Blues via his loans rather than via his minority shareholding and which is constitutionally capped. 

In between we have the Ospreys region, and their Llandarcy Park (Ospreys) Ltd holding company that is owned by about a dozen private investors without any club heritage protection.

They speak of “Ospreylia, the one true region”, a term which they have successfully commercially weaponised in the past.  

The reason for this – if we are being polite – “lack of uniformity” across the structure is because David Moffett’s attempts in 2003 to start with new debt free regional companies were blocked by the funding directors that had accumulated equity and granted repayable loans between 1995 and 2003. 

By any governance model commonality standard in relation to the regional rugby tier, this is all a complete shambles.   

 

2. Impartiality

 

These chaotically different businesses have had an obvious negative impact upon the required governance impartiality in relation to the pyramid below them, both perceived and real, and especially in relation to the pivotal regional player development pathway role. 

Justice must not just be done, but it must also and equally be seen to be done. 

Between 2004 and 2017, Newport RFC half-owned and operationally controlled their Gwent region team.  Neath RFC and Swansea RFC each have a token shareholding in Ospreys Rugby Ltd, and the parent company of the Ospreys now fully owns Bridgend Ravens RFC. 

It was 2016 before Llanelli RFC was separated into a separate subsidiary company from the Scarlets region. 

And, unbelievably for many upon first discovering, Cardiff RFC is still not a separate subsidiary of the Blues but instead the business is held within the same regional company.   

Any region owning a key feeder club as a subsidiary is unsatisfactory, but severance into a subsidiary must be the minimum requirement even in a poor governance model. 

Impartiality above the club game is lost, where there should be complete severance and transparent neutrality, and there becomes widespread suspicion and cynicism amongst club fans over the agenda of the regions when they have had a partisan commercial stake in the club game.   

The Dragons are the only professional region now severed from the club game below, and surely the other three regions will need to follow suit if they wish to remain designated regional organisations?

 

3. Interface

 

An obvious governance flaw in the Welsh model of regional rugby is the poor interface with the rest of the WRU pyramid, both the club game below and the Test tier of the pro game above. 

Compare with the more successful ring-fenced representative models above the club game, notably Ireland’s provincial branches and the role of the provincial unions in New Zealand’s far more advanced and time limited regional rugby franchise model.  

The only connection is through participation agreements with the WRU centre, currently the six-year 2014-20 Rugby Services Agreement, and these contracts have usually been renewed in periods of conflict between a WRU board/executive and regional funding directors with a radically different vision for the next stage of pro regions rugby in Wales. 

In a climate of distrust, the pro region funding directors do not want WRU directors on their boards.  The WRU certainly do not want to purchase regional equity, unless lock stock & barrel as with the Dragons, given the ‘debt’ mountains at the pro regions. 

It becomes a stand-off.  Additional WRU investment is then heavily via an asset purchase, shared ownership of player contracts under marquee dual central contracts.  The charade of a payment for services rendered mechanism is now exhausted but for inflation adjustments.  Market value dictated by a monopsony buyer that does not need to buy and to whom the sellers cannot afford not to sell. 

The pre-existing devolved WRU districts are no longer fit for purpose, in need of replacement by powerful regional rugby boards elected and appointed by the member clubs in each region and which can heavily interact with the pro regions. 

 

4. Accountability

 

These factors have all combined to create an accountability problem in our pro regions tier. 

There has been only limited accountability towards the WRU centre, for participation agreements have been as much power politics as long-term regional commercial strategic planning.  And, as we all know, the immediate priority of a union centre is always the “financial engine” of a Test team. 

Accountability towards the union devolved, the WRU districts in Welsh rugby, has been practically non-existent.  Some of the pro regions have adopted commercially unsuccessful and narrow identities that would never have been tolerated in the more mature NZ regional governance model.  WRU regional boards cannot come quickly enough, in terms of regional accountability. 

And to compound matters, as if governance could not get any worse, three of the regions – until the WRU takeover of the Dragons – had significant numbers of historic club individual shareholders.   

It is no criticism of these individual small shareholders that some of them will think and act in terms of a perceived club interest.  This would inevitably be the case for those that still emotionally view their region as their historic club. 

But some partisan minority shareholders can become more troublesome as a result of there being no meaningful governance accountability towards WRU devolved regional structures. 

No wonder David Moffett wished to avoid this problem through pro region new companies or Newco’s in 2003.

 

5. Renewability

These governance flaws within the tier have inevitably led to a renewability problem. 

Welsh regional rugby has become synonymous with conflict, perhaps inevitably given the 2003 fudged structure, and with little success but with significant financial losses. 

All funding directors depart the rugby scene eventually, whether through death, ill health, retirement, a reduction in their main personal wealth, or debt fatigue and/or disillusionment. 

But, whereas the current NZ regional franchises will automatically expire unless renewed at the end of the 2020 Super Rugby season, requiring that the model be attractive for the renewal of current investors or able to attract replacements, the Welsh funding directors simply have to find their own additional funders and/or their successors as “benefactors”. 

This is not an easy task, as we recently saw upon the retirement of Tony Brown and Martyn Hazell, albeit there were other factors at play in Gwent including the long-term on-field performances and the unfortunate group structure.

 

6. Incentivising

 

Finally, the non-aligned Welsh regional rugby governance model has been seriously lacking in incentives. 

There has been little incentive for the WRU in the regions becoming more successful.  The same demands for funding will be made, the same sums payable under the participation agreement.   

Four Six Nations titles have still been secured since 2003, despite a troubled regional tier as the final piece of the supply chain.  That has acted as a disincentive to WRU led reform.   

What are the incentives at feeder clubs for their pro region to become more successful?  There is no equity in their region, no impact upon WRU funding, in some regions often not even a token emotional commitment.  North Wales has no pro region. 

The regions were not incentivised to retain the best Welsh players for, until the limited marquee dual central contracts system from 2014, they would be picking up 100% of the wages for Test players absent for large chunks of the season.  Compare with other small country rugby models, where the retention of the Test talent through central contracting is a top priority.   

These six factors, amongst others, remind us that Welsh rugby’s governance reform needs to extend far beyond merely the WRU itself and especially if the pro regions one day hope to have their own representative on the WRU board.