Category Archives: Deep Dive

The Financial Fallout Of The European Super League.

Nearing midnight on the 18th of April, a statement was released, announcing that twelve giants of European football had come together to become founding members of a “European Super League”. This breakaway league would be independent of both European and the world’s football governing bodies (UEFA and FIFA). Although the league is essentially dead in the water now, it remains important not only to understand why such a league would wreak havoc upon the most important aspect of football, the supporters and their clubs, but also to understand what financial implications would come to the fore very quickly.

A Game of Greed

Of the league’s inaugural board (and perhaps last), it’s important to note how two members Joel Glazier and Stan Kroenke, are both American business owners with significant stakes in Manchester United and Arsenal F.C., respectively. Both men are despised by their teams supports groups, most notably due to Glazier’s tactic of leveraging United’s free cash flow to fund his takeover, effectively transferring his debt to the club’s balance sheet. Fans feel their owners are distanced from their clubs, with their interests more focused on raising profits rather than keeping the fans as the focus. This perception of the footballing world as a source of cash crops rather than sporting clubs is further reinforced through the financial rewards associated the European League. The league is set to be funded by J.P. Morgan, who will provide over €4.9 billion to get the league up and running. Much of this funding will go to each of the inaugural members in the form of an ‘infrastructure grant’ worth $430 million. This sum of money highlights the importance the boards of these clubs have put on financial gain. For comparison, the winner of the current European championship (The Champions league) receives only $19 million euro for their achievement itself, which when added to previous rewards throughout the competition, can rise to around €80 million euro. This sum is not even a quarter of the potential investment available to clubs for just becoming members of this rogue league.

Ridding Clubs of their fighting Chance

One could be forgiven for appreciating these breakaway teams’ decision, given the huge gains which can be reaped by entering this league. However, by lining their own pockets, these founding members are condemning their domestic competitors to their financial doom. Much of the funds that football clubs are allocated comes from broadcasting coverage revenue. The broadcaster B.T. has already payed £1.5 billion to broadcast the Champions League between 2021 and 2024, with this revenue being shared among the various teams within the competition; the further a team progresses, the more financial support they earn. This gives lifelines to smaller teams who can secure the vital funding needed for their continued existence.  Even just with qualification to the group stages, a team can secure upwards of 16 million euro, along with teams who fall short in the preliminary rounds still being able to avail of investments worth in the hundreds of thousands. Through the formation of an exclusive European Super League, the broadcasting rights will be shared among a much smaller group of cubs, allowing for much higher individual gains and a much lower collective benefit. Dundalk FC, who are only valued at 3 million euro were awarded €280,000 for advancing to the second qualifying round of the competition. For a team as small as this, this allows the club to continue to be a sanctuary where supports can come together to love and support their team, regardless of if they win, lose or draw. Through the introduction of a super league where some members are exempt from relegation, making it essentially impossible for smaller clubs to progress and earn the possibility to secure their future. Not only is this a tragedy, but with the world’s footballing bodies insisting that participants in this league will be unable to compete domestically, these smaller clubs will lose out on the broadcasting rights revenues and footfall stemming from cup draws and league ties against huge clubs. With the possibility of Dundalk F.C. not being able to contest Arsenal F.C. in London during the Europa League (a secondary Europe-wide competition), or Tottenham F.C.’s stare down with Marine F.C. (worth €300,000) in an F.A. Cup tie becoming a distant memory, these giants of European football have forgone their passion for the sport in light of financial gain.

Mistaking a Football Decision for a Business One

What makes this scenario all the more pitiful is the fact that players and managers have been left in the dark completely on the issue, with many players who would theoretically play in this league voicing their disapproval of the proposal. This decision has been taking with the view that football is to be seen as a business rather than a sport, with the very people instrumental to its success being left in the dark. Some large clubs within Europe have rejected the invitation to join this select group, most notably Borussia Dortmund and Bayern München. In the German league there has been a ’50 + 1 rule’ in place since the late 90’s, stating that in order for a club to compete in the German domestic league, the club must hold a majority of its own voting rights. This for the most part has prevented the trend of takeovers of football clubs my millionaires, who in place of a connection or passion for the club, bring their financial muscle.

Let He Who is Free of Sin cast the First Stone

Any hope of this league coming to fruition seems slight at most, with all English clubs and some continental members already turning back on their decision. Florentino Perez, the league’s inaugural chairman has however brushed aside this change of heart, citing the binding implications of membership to the league and the financial reparations which would have to be paid in regard to a departure.  Even with this victory, UEFA’s 2024 plans to revitalize the Champions league has raised a few eyebrows, with teams which would usually not qualify for the league now having the opportunity to sneak in due to their pedigree in the championship from previous campaigns. The new format to be introduced also increases the number of games to be held by over one hundred matches, raising profits from broadcasting on a large scale. While this certainly seems good for supporters, much is to be said of player welfare due to an increase in travel and game time, further raising the issue as to which truly takes priority: the clubs themselves or their coffers?

How COVID-19 is Impacting Gender Inequality

BY Gaia Aviloff

COVID-19 has exacerbated gender inequality in the job market. Recent studies have shown that the global pandemic is disproportionately affecting women in two main ways. Firstly, women work in the hardest-hit sectors. Secondly, the closure of schools and the shift to online learning have impacted women’s ability to work from home. 

The study The Labour Market Impacts of the COVID‑19: A Global Perspective shows how 40% of all employed women work in the sectors that have been most affected by COVID-19.  The UN WOMEN has released data revealing how female unemployment fell by 50% in Asia and the Pacific compared to 35% in male unemployment. To help evaluate which sectors have been most affected, the study The Impact of COVID-19 on Gender Inequality has distinguished two criteria:

  1. Whether or not current regulations have limited the sector’s output
  2. Whether or not the sector allows for telecommuting

The sectors considered ‘essential’ are Transportation and Material Moving; Healthcare Support; Farming, Fishing, and Forestry; Installation, Maintenance, and Repair; Protective services; Healthcare Practitioners and Technicians. Women work in 4 out of these six sectors, and men work in 6 out of the six sectors. Moreover, 70% of women who work in healthcare services, social work, or who are frontline workers are paid less than their male counterparts.

On average, in the United States, 28% of men work in sectors that allow for telecommute compared to 22% of women. Thus, women will be more likely to face unemployment as they work in industries that cannot adapt to the new remote working format. The graph below shows which sectors are considered essential and which allow for telecommuting in the United States.

 In households where both married members can telecommute for work, the wife will most likely quit her job to provide childcare and housework. In Europe, the pandemic has exacerbated these gendered patterns, with women reducing their work hours 4 to 5 times more than men.

The closure of schools, childcare services, and day centres coupled with older relatives’ unavailability has further splintered gender inequality. There has been an increase in childcare needs with children staying at home and having classes online. The distribution of childcare needs varies on the work arrangements of the members within a household. In the United States, 25% of married couples have a traditional labour division in which men are employed full time and women stay at home. However, in only 5% of married couples, the arrangement is the opposite. In marriages with traditional work distribution, the increase in childcare needs will fall on women. The European Institute for Gender Inequality shows how, before COVID-19, married women provided 39 hours of childcare and married men provided 21 hours. The rise in childcare needs has further amplified the gendered patterns in the unequal distribution of childcare. The graph below illustrates the division of childcare and housework in households across 22 countries.

                                   Source: UN WOMEN

The division of childcare within a family reflects the existing disparities between men and women.

Single mothers are the most vulnerable to these changes. They must juggle home-schooling, the rise of childcare needs, and work. Single mothers must also rely on a single income; however, studies have shown that they are more likely to work in sectors that have been most affected by current restrictions. According to the Central Statistics Office, there are 44.5% single mother households in Ireland compared to only 18.6% single fathers. Single mother households are more at risk of living in poverty since most governments worldwide do not supply social coverage.

Nonetheless, the study The Impact of COVID-19 on Gender Inequality proposes that the flexible working format may produce greater gender equality. The conversion to remote working, adopted during the pandemic, is likely to persist in a hybrid form. More fathers will be able to participate in childcare needs and housework actively. Which can lead to an equal distribution of household tasks as both members may balance their careers with childcare needs and housework. Studies have shown that boys with a working mother will be more likely to marry a working woman contributing to changing gendered norms.

The European Institute for Gender Inequality suggests that the EU promotes education free from gendered stereotypes. Women may access less impacted sectors which allow for telecommuting. The study also states how: “Addressing women’s under-representation in STEM occupations could create up to 1.2 million jobs and increase GDP by up to EUR 820 billion by 2050.” By implementing policies that aim to reduce gender inequality in the labour market, EU member states will see higher economic growth and greater financial stability.

Cooking Up A Storm: The Importance Of Migrants and Street Food

Upon my arrival in Bavaria as part of my Erasmus programme, I was met with many nuances which were wholly expected. Namely, würst, brezel and plenty of beer from the many breweries dotting Germany’s largest Bundesland. One thing I didn’t expect were the many cultural cuisines scattered across nearly every city in Germany and the rich variety of dishes offered at great prices. Döner and Falafel have become cornerstones of youth culture within Germany and further afield too. In Dublin one is prone to find themselves enjoying a burrito or spicebag among many other dishes, which certainly do not have their routes in traditional Irish cooking. Immigrant workers have long established take outs and restaurants as a means to plant their roots in their new homeland. In appreciating the wealth of food and culture stemming from this practice, it does raise the question as to why immigrants so often turn to this practice, and how important are such businesses to a country’s economy?

A brief history lesson

Street food vending was first legalized in renaissance-era Turkey, with the selling of kebab meat being a long-established practice in the country. With Istanbul acting as a gateway between Europe and Asia, many cultures had the opportunity to try new dishes and furthermore bring tales of these tastes back home. Street food had been long been a central pillar of society within China, the Middle East and African communities. Through the emergence of mass migration across the globe by many populaces, the recipes and pallets brought along with these migrants added further depth to the cultural melting pots beginning to brew.

The backbone of the fast-food industry

Work within the catering industry has long been a source of income for migrants. With work opportunities often limited through a combination of lack of qualifications, language and sadly discrimination, many newcomers find work in the fields picking crops, cleaning dishes in a kitchen, or working as chefs also. In the United States alone, 10% of the catering industry’s workforce consists of foreign-born workers. Often this work is unappealing and lowly paid, but with few chances many migrant workers seize upon the opportunity to establish a foothold on the work ladder. This is best represented with the United States’ agricultural workforce, which consists of over 50% of undocumented immigrants.

Rising above poverty

After gaining experience within the sector, it’s easy to see why migrants would build upon their knowledge and endeavour to establish their own chains and restaurants, specializing in dishes from their homelands. These ventures present a fantastic opportunity through the combination of skills and specific culinary knowledge passed from generation to generation, along with the ability to appeal to niche markets of consumers who can’t often access such tastes within their domestic market. For many people, street food is not only a tasty treat, but also a healthy cheap source of nutrition, helping to reduce poverty in cities such as Bangkok and in turn raise ‘cultural capital’, enabling for easier mobility of people through social classes, allowing for many to escape the clutches of poverty and secure a future for their children.

Creating a springboard

All of these factors combined with the convergence effects of globalization have allowed for many of these once street vendors to establish themselves as restaurateurs and even go as far as to establish food chains. In Berlin alone there are over four thousand Döner sellers. This large density of competitors is a result of a labour agreement with the Turkish republic in 1961, allowing workers into West Germany. These numbers rose in 1974-1978, with worker’s families allowed to follow their breadwinners to the DDR (West Germany). The proximity of California to its southern neighbour, Mexico, allowed for a large influx of immigrants. The introduction of the residents of Los Angeles to foods such as Tacos as early as the 1890’s highlights how foreign food can become synonymous with a new city, with Mexican food being a core element of Los Angeles’ food culture. The introduction of the hibachi restaurant concept to New York in 1964 by Hiroaki Aoki sparked a thirst for Japanese cuisine within the United States. The restaurant grew in popularity before expanding due to increased demand. This has culminated in the Benihana franchise, with over one hundred franchised restaurants around the world.

Breaking bread with strangers

While many of these operations are still small family owned operations, operating on street corners or out of kiosks in busy train stations, they play a massive role collectively. Over 20,000 people are employed within German Döner shops, helping to support thousands of families and livelihoods. Their success also stands as a testament to the integration of the Turkish people into German culture, with the love for great street-food being a unifying factor. As globalization continues to induce effects around the world, different cuisine can often act as a bridge in allowing for a start in a new country, so too can it help to create a wider and more diverse society in the world we live in.

The Murky Business Of Territorial Waters

The thought of international waters conjures images of shady dealings, pirate radio and lawless seas, but the claimed areas of water bordering these oceans have questionable origins, too. Territorial waters appear straight-forward on the surface, but peering into their depths often leads to a sea of murkiness surrounding politics, natural resources and importantly, trade. In a world where natural resources are becoming ever-more depleted and in conjunction with the departure of Britain from the European Union, these waters will become even more important.

Defining Territorial Waters

In international law, territorial waters are defined as the areas of water directly adjacent to a state, and are subsequently subject to the jurisdiction of that state. This means that the adjacent state has sovereignty to the water, the seabed below, and the airspace above. Other states may only enter this body of water for “innocent passage”, with foreign aircraft or submarines not permitted to pass through. Due to this, fishing rights are not extended to the trawlers and fishermen of foreign nations, although the Common Fisheries Policy of the E.U. is an exception to this.

While this is perfectly reasonable regarding a nation’s immediate borders, the laws can and have been bent to meet a nation’s needs in a variety of ways. For example, Chile and Peru claim their territorial waters reach as far as their continental shelf: an area of submerged land still connected to the continent with relatively shallow waters, which lies directly before the much deeper ocean floor- much like the steps leading to a deeper swimming pool. This gives these nations an additional 370 kilometers of offshore territory, and more importantly, access and ownership to natural resources such as oil and gas.

Similarly, Russia has made claims that an ocean ridge on its northern coast stretches into the Arctic circle, allowing them to lay claim to the huge reserves of oil and gas estimated at $2 billion, which for millennia had been protected from mankind due to the difficulty in its extraction due to harsh weather conditions in the Arctic. With global warming melting these obstacles to harvesting, Russia has staked its claim to the Arctic seafloor, in the form of a Russian flag being planted by a miniature submarine on the North Pole seabed. This region of the world is very susceptible to ecological harm and any type of oil extraction poses as a serious threat to the climate and wildlife of the region. The indigenous Saami tribe of the area are threatened from the potential claim, with their culture and livelihoods at stake.

Colonial Claims

France’s territorial waters are the largest of any nation with nearly 10,760,500 km2 under the 5th republic’s governance. This initially seems odd, given the size of France (643,801 km2), but taking a look at the country’s colonial history gives an explanation. The embers of a once great French Empire lay scattered across the globe in the form of small inhabited islands, archipelagos and atolls stretching from la France métropolitaine to Réunion Island in the Indian Ocean, further still to Antarctica and across to the Caribbean islands of the French West Indies.  While many of these once subjugated islands were granted independence, many still belong to France, leading to a situation where France’s longest land border lies not with Belgium or Germany, but rather between French Guiana and Brazil, 7,216 kilometers from Paris. These satellite dominions give France a global presence in terms of military activity and natural resource exploitation. The huge swathes of ocean associated with these areas also gives great opportunity to the French fishing industry.

Chinese Island Construction

China has come under fire recently due to its decision to engage in “island-building” in the south China sea in order to bolster its territorial claims. China has built on sandbanks and small uninhabited islands in the region, transforming them from scraps of land into military installations, strengthening its presence in the area. While China isn’t the first to engage in such practices in the region, the rate at which it is aggressively pursuing this course is a cause of concern for many parties. A third of the word’s trade flows through the South China Sea. With China having the potential to effectively control this trade route, many states fear that sanctions may be imposed, and restricted movements enforced by the Chinese government. The actions would cripple industry and business within their respective economies.

How A Small Island Can Play A Huge Role

While the points above highlight the role these island outcrops can play, one could still be forgiven for questioning how important a small island may be on a world-wide scale. One can look toward the small island chain of French Polynesia. The micro-state only possesses a population of 270,000. With the main industries consisting of agriculture and handicrafts, it’s clear that it is far from an industrial powerhouse. However, the importance of French Polynesia is best highlighted in terms of its waters, whose combined area exceeds 4.7 million kilometers2. For context, this is comparable to the entire landmass of the European union.

This ability for small plots of land to hold huge strategic importance can be highlighted a lot closer to home. The basalt outcrop of Rockall has long been a source of contention between the Republic of Ireland and the United Kingdom. The uninhabited rock lies 370 kilometers north of the Donegal coast and 300 kilometers west of the Scottish island of St. Kilda. Officially incorporated into the United Kingdom through an act of Westminster in 1972, following its annexation by the British navy in 1955, Britain’s claim to the island is still yet to be recognized by the Irish government. Presently the fishing rights around Rockall belong to Scotland, and with Britain’s departure from the European Union, the tension surrounding the Rock is bound to escalate further. This is best highlighted in the Scottish Secretary for Economy’s threat to deploy naval vessels to the area to enforce Scotland’s exclusive fishing rights to the waters surrounding Rockall. The fishing industry is vital to County Donegal and many of its fishermen risk being wiped out if they are denied access to fishing in Rockall’s waters, highlighting how large an influence a now-extinct volcanic island can possess.

The Greatest Governance Failings of the 21st Century

Corporate governance has catapulted from the fringes to the fore since the turn of the millennium, with numerous scandals dominating headlines in recent years. Essentially, corporate governance is the system by which companies are directed and controlled. When governed well, companies can achieve an optimal balance of all their stakeholder’s interests. However, when corporate governance goes wrong, even the most large-scale businesses can suffer its destructive consequences. Outlined below are three of the most momentous governance scandals since the beginning of the 21st century.

Enron – 2001

It is impossible to list the most notorious governance scandals of recent years without beginning with the grandfather of corporate failings. Enron, a former giant of the energy sector and darling of Wall Street, suffered a collapse that shook the business world to its core in 2001. In August 2000, Enron had a market capitalization of $70 billion and was outperforming the S&P by more than 200%. By November 2001, the company was bankrupt.

The situation began in early 2001 when institutional analysts monitoring Enron questioned irregular accounting practices employed in the company’s latest Annual Report. The U.S. Securities and Exchange Commission (SEC) subsequently began an investigation which uncovered that Enron was concealing liabilities and toxic assets to the value of billions of dollars through mark-to-market accounting and special purpose vehicles.

The company’s senior executives basically measured the value of their securities based on its current market value instead of its book value. This allowed the company to build an asset and instantly claim its forecasted profits on their books even if the company had not yet generated any revenue from the project. If it transpired that actual revenues were inferior to those forecast, Enron simply transferred the asset to an off-books entity where the loss wouldn’t be reported, thereby having no negative consequences on Enron’s accounts. Furthermore, Enron were able to impose significant pressure on their auditor, Arthur Andersen, to overlook the irregularities. This allowed Enron to appear very profitable when in fact it was bleeding cash.

The fallout from the scandal was immense. Enron’s share price plummeted from $90.75 at its apex to $0.26 in a matter of months, leading to the filing of a $40 billion lawsuit from the company shareholders. The scandal is also believed to have been the prime motivation behind the introduction of the Sarbanese Oxley Act in 2002, which helps to protect investors from fraudulent financial reporting. Enron ultimately filed for bankruptcy on December 1st 2001 with $63.4 billion in assets, the single largest corporate bankruptcy in U.S. history at the time.

Lehman Brothers – 2008

On September 15, 2008, Lehman Brothers filed for bankruptcy having fallen victim to the subprime mortgage crisis. Images showing hundreds of smartly dressed workers, exiting the bank’s offices with their belongings in small cardboard boxes is the quintessential portrayal of the subprime mortgage crisis’ climax.

As the housing bubble began to accelerate in the early 2000’s, Lehman Brothers directed their attentions firmly on mortgage-backed securities and collateral debt obligations in order to provide those seeking to purchase real estate with loans. By 2007, Lehman Brothers had underwritten more mortgage-backed securities than any other firm, garnering a portfolio to the value of $85 billion, four times the firms shareholder value.

Being so highly geared meant that the firm was extremely sensitive to the housing market, leaving it at significant risk of collapse in the occurrence of a housing downturn. In order to disguise this fact, Lehman Brothers made repurchase agreements with banks in the Cayman Islands, effectively agreeing to sell them the firms liabilities with an agreement to repurchase them at a later date. Lehman Brothers then manipulated accounting standards to record these repurchase agreements as sales, allowing the firm to acquire cash in the short run without recording any liabilities.

However, when real estate values began to fall and the credit market began to tighten, Lehman Brothers found themselves in the fatal position of being unable to repay their repurchase agreements, as their own clients were defaulting on their loans. Despite ‘Hail Mary’ attempts at the final minute to agree a takeover with Barclays PLC and Bank of America, in September 2008 Lehman Brothers filed for bankruptcy with $639 billion in assets and $619 billion in debt.

The Lehman Brothers bankruptcy was a seminal governance failure that sent financial markets reeling in its wake and effectively marked the beginning of the Global Financial Crisis. It acts as a stark reminder that no company nor market is too big to fail.

Volkswagen – 2015

‘Dieselgate’ rocked the automotive world in in September 2015 when the U.S. Environmental Protection Agency (EPA) announced its belief that Volkswagen had installed software devices in diesel cars to defeat emissions testing. The announcement triggered a staggering fall from grace for the German firm famed for its precision engineering and drive to become the world’s best-selling car manufacturer.

Volkswagen allowed their lofty ambitions to blind them from their responsibilities towards their customers, shareholders, the environment, and society in general.

The EPA discovered that the company had installed illegal software, dubbed ‘defeat devices’, in polluting vehicles that could recognise when it was undergoing an emissions test and subsequently change its performance in order to pass. Volkswagen had intentionally set emissions controls in their diesel engines to turn on during laboratory emissions testing only. This allowed vehicles’ outputs of Nitric oxide output to conform with U.S. standards during testing, but actually emit up to 40 times more Nitric oxide when driving on the road.

In total, Volkswagen installed defeat devices in 11 million cars across the globe between 2009 and 2015, 500,000 of which were in the U.S. Volkswagen were forced to pay a heavy price for their governance failures in the aftermath of the scandal, most notably a mammoth $18 billion fine from the EPA. Volkswagen’s share value plunged 30% in the immediate aftermath of the scandal, constituting a loss of over $26 billion in shareholder value. As of writing, the fallout from the controversy has cost Volkswagen over $33 billion, taking into account fines, financial settlements and recall/ repurchase costs, a substantial figure when you consider that the GDP of many small nations is less.

The greatest price of Volkswagen’s actions, however, are the 59 estimated premature deaths that will occur as a direct result from excess pollution of illegal Volkswagen cars in the United States alone.

Lessons to be Learned

Enron, Lehman Brothers, and Volkswagen teach us that the absence of a sound corporate governance structure can hold disastrous consequences for any company, regardless of their size and revenues. Corruption, lost profits, reputational damages, and in extreme cases bankruptcy, are just some of the potential consequences for a company chooses to ignore its governance responsibilities. On a grander scale too, governance neglect can have large-scale ramifications. Lives can be lost and economies unbalanced through neglect of even a single company. Therefore, it is clear that businesses must remember their corporate governance duties if they, and society, are to thrive and succeed into the future. If not, they may just be the next name to join this list.

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