To improve FIFA’s governance, make soccer more American

In the wake of the most recent scandal news affecting international soccer, Richard Epstein of the Hoover Institution writes that FIFA could address its problems by making soccer more American.

(T)he list of particular derelictions, however long it may be, takes the worm’s eye view of the subject. This cascade of errors does not happen by accident. It takes place in large measure because of the faulty governance structure inside of FIFA. …  It would be wrong, however, to assume that the difficulties with FIFA stop at the institutional level. In the United States, the basketball and hockey playoffs have taken center stage. Anyone who watches all three sports will quickly realize that the defects in FIFA’s governance structure are not only felt in the boardroom, but also on the playing fields. As a game, I leave it to others to decide which sport they prefer. But as a set of game rules, as I have long argued, soccer is so sadly deficient that much has to be done to fix the sport. 

While it makes good sense to us that FIFA’s governance structure could be improved, we’re not so sure that would be enough.  “Good governance” reforms, implemented in the wake of a crisis or scandal, inevitably fail to prevent the next crisis or scandal because even the best procedures won’t stop a determined bad actor.  This is especially true when the institution’s culture is complacent and/or complicit – as is the case with FIFA.

As we’ve written elsewhere, in the context of a start-up company’s board, what makes great boards great are the ‘robust social systems’ in which board members’ informal modus operandi animate the formal procedures.  Transparency and a virtuous combination of tension and mutual esteem will facilitate healthy and constructive debate and improve decision making.

Epstein goes on to address what he calls soccer’s “atrocious penalty structure” with penalties “either too severe or too lax.”  He compares the situation unfavorably to hockey, in which each infraction is treated as a discrete event and the structure of the penalties create “strategic possibilities” more in proportion to the eventual outcome of the match.

Not having penalties proportionate to the offense creates perverse incentive effects on players and officials alike. The definitions of all infractions, especially those that turn on intent, are often subject to disputation. Players will try to inch closer to the line, daring the referee to respond with the nuclear option. Lower the stakes, and referees will be less reluctant to impose a penalty that now fits the offense. Players will respond by avoiding silly plays that can subject them to penalties.

This too parallels something else we’ve written, on the subject of complex financial regulations:  if regulators create the incentive to just “manage to the rules,” even a good actor may tiptoe right up to the hot red line where a crisis can be triggered by a little bad luck.  Regardless of the activity, the rules, or who’s officiating, there is always a need for good judgment.