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View Full Version : Why is it against NFL rules to have a publicly owned team?


Donovan
11-19-2002, 09:10 PM
Now before anyone points this out, I am quite aware that the Green Bay Packers are a publicly owned team; this is only because they were grandfathered in as the only publicly owned team when the owners voted to make this a rule; is there any good reason why this is so, or is this just some evil plot to keep control of the league in the hands of the millionaires that own the other teams?

BobT
11-19-2002, 09:15 PM
Presumably, the NFL as a cartel that controls professional football can set whatever rules it sees fit for ownership of a team. The owners have to vote on any franchise sale and if they don't like the ownership, they can vote not to let that team in to the cartel.

CarnalK
11-19-2002, 10:27 PM
From the NFLs constitution:

"(b) Charitable organizations and/or corporations not organized for profit and not now a member of the league may not hold membership in the National Football League."

from: http://www.pbs.org/livelyhood/ourtowns/nflrules.html

So it's Capitalists only! :) I would think this is because a non-profit organization would have drastically different business plan. The NFL, AFAIK, is a profit sharing league so the business practices of one team would directly affect all the others. My WAG anyway.

starfish
11-19-2002, 11:11 PM
Easy. A publicly owned team could never leave town. Without being able to leave, the team could never force the town to build a new stadium. It's all about money.

Walloon
11-19-2002, 11:46 PM
What CarnalK quoted from the NFL constitution does not appear to prohibit a publicly owned team.

Kalt
11-20-2002, 12:31 AM
it probably has more to do with not wanting shareholders causing trouble whenever the team loses. Derivative suits to oust the board every losing season.

Also, if it were a publicly traded company, it would take "stock market gambling" to a whole new level. Team wins, stock goes up; team loses, stock goes down. Actually, it would be better for the economy to have people gambling in the stock market than gambling with bookies (plus more tax revenue for the gov't).

I don't know much about it though; is it only the NFL? Can public corporations own NBA or pro baseball teams? CarnalK's cite only says no non-profit corporations can hold membership (which I assume means own a team).

Starfish: no reason why a publicly owned team wouldn't/couldn't leave town. Don't think for a minute all the shareholders would be locals. Frankly, if leaving town would inrease the stock price 0.0001%, the team would be gone.

BobT
11-20-2002, 01:54 AM
I believe that the Boston Celtics and Cleveland Indians are publicly traded companies.

cstamets
11-20-2002, 04:33 AM
Originally posted by BobT
I believe that the Boston Celtics and Cleveland Indians are publicly traded companies.

The Indians are no longer publicly traded. When Larry Dolan bought the team from Richard Jacobs, he also bought up the outstanding publicly-held shares.

TwistofFate
11-20-2002, 05:02 AM
There are several Soccer teams that are publicly owned. F.C. Barcelona is Spain being the most famous. And many of the clubs are listed on the stock market. The shares aren't as volatile as you might think. They generally rely on financial information more than team performance, just like most companies.

aahala
11-20-2002, 06:44 AM
The original purpose of the NFL ownership rule is unknown to me.

Several effects are clear, it prohibits local fans from buying a portion of the team which would make moving the franchise more difficult and prevents the fans from direct management influence.

Unlike other pro sports, NFL has TV revenue sharing, effective salary caps and such, making it operate more like a single company with local managers than separate entities.

plnnr
11-20-2002, 06:50 AM
The Green Bay Packers are a publically owned team. Shares cost $200, but are not traded and do not increase in value or pay a dividend.

Billdo
11-20-2002, 07:00 AM
I know that a number of MLB, NHL and NBA teams are owned by large publicly traded corporations. Are there NFL teams similarly held?

smiling bandit
11-20-2002, 07:09 AM
How can they do this, legally? I never understood the legal ideas around sports, which seem to break all the normal rules of business.

Telemark
11-20-2002, 08:23 AM
While some of the Celtic's stock is publicly traded, the controlling interest of the team is still held by the owners of record.

Mycroft Holmes
11-20-2002, 09:07 AM
Originally posted by TwistofFate
There are several Soccer teams that are publicly owned. F.C. Barcelona is Spain being the most famous.

Actually, the first and most famous soccer team to go public is of course Manchester United, which was floated in 1991.

Cite. (http://ir.manutd.com/manutd/about/)

In fact, I can't find any proof at all that FC Barcelona has actually been floated on the stock market. If you look here (http://www.hoovers.com/co/capsule/8/0,2163,103348,00.html) you see no mention of a stock price, while the corresponding page for ManU, here (http://www.hoovers.com/co/capsule/8/0,2163,93798,00.html) actually links to the stock price on the London Exchange.


Then again, this whole discussion is moot, because almost no European Soccer team is privately owned!!! They are all clubs (in Germany: Verein), where you have to pay dues if you are a member. In fact looking here (http://www.fcbarcelona.com/eng/socios/socios/sersoci_1.shtml), I see that you can become a member of FC Barcelona for the paltry sum of: a registration fee of 373.23 Euros, and an annual fee of 124.41 Euros. (Please note I am in no way associated with FC Barcelona, and I will not be getting a commision if you do decide to join.) :D The board, president, etc. are elected by the club members. Once a year the board must present the profits or losses for the entire club for the last year, and they are then either re-elected, or a new board and president are elected.

Most of these clubs also have teams active in other sports, and the profits (or losses) of the professional teams go into the bookkeeping of the clubs as such. Note that these are not non-profit organizations. If they make a profit, this money is invested (in new players, in stadiums, in other sports, in youth teams, etc...), if they make too many losses they go bankrupt and lose the licenses to play in professional leagues. In fact, every year, all the teams that wish to play in professional leagues must present a business plan with predicted gains and losses for the next year. The governing body (for example the DFB or Deutscher Fussballbund in Germany) then may give the club the license to field a professional team. It has happened before that teams have been degregated to amateur leagues or clubs have been completely disbanded due to bankruptcy.

CookingWithGas
11-20-2002, 09:46 AM
starfish sez: Easy. A publicly owned team could never leave town. Without being able to leave, the team could never force the town to build a new stadium. It's all about money. I think you may be misinterpreting what "publicy owned" means. It means that shares of ownership are freely traded as stock available to the public (to the extent that owners want to sell it), like Microsoft. It is not public in the sense that it is owned by the public at large or a government.
Originally posted by plnnr
The Green Bay Packers are a publically owned team. Shares cost $200, but are not traded and do not increase in value or pay a dividend. How can shares that don't trade be considered publicly traded? This sounds like a closely held private company to me.
aahala sez: Several effects are clear, it prohibits local fans from buying a portion of the team which would make moving the franchise more difficult and prevents the fans from direct management influence. Imagine that, allowing the fans to have influence on the team. We can't have any of that, now, can we? :smack:

critter42
11-20-2002, 09:49 AM
The Memphis Redbirds foundation profess to be the only not-for-profit organization that both owns a professional team and the facility they play in. It is a foundation and not a business per se, so I'm not sure if it could be considered a public company or not (you're able to "join the team" by making donations) - I'm a computer geek, not a business administrator :).

Cite (http://www.memphisredbirds.com/not-for-profit/index.html)

The Memphis Redbirds Baseball Foundation is the only entity in the country that owns and operates both a sports team and the facility. All operating profits are put back into The Memphis Redbirds Baseball Foundation that funds two youth programs, RBI (Returning Baseball to the Inner City) and STRIPES (Sports Teams Returning In the Public Education System). These programs foster amateur sports, enhance education and teach life skills for the future.

Would this be considered a "public" company?

Also, can their claim be substantiated? (the Redbirds are the AAA Minor League team for the St. Louis Cardinals)

critter42

Nametag
11-20-2002, 10:14 AM
I think y'all badly misunderstand the term "public," as well as the NFL constitution. The NFL prohibits "Charitable organizations and/or corporations not organized for profit" from joining the NFL. There is NO prohibition against publicly TRADED corporations.

I suspect that the true reason for this prohibition lies in the tax implications. Attempting a fair revenue-sharing scheme (which the NFL is allowed to do) between taxable entities and non-taxable entities would be a friggin' nightmare.

rombuu
11-20-2002, 10:35 AM
We actually discussed this rule at some point when I was in grad school. The reason was supposedly that the NFL did not want to have owners who were only interested in having a profitable team but who were not worried about fielding a competitive club. (See: The Chicago Cubs under the Tribune's ownership).

The thought process was that if you have an individual owners, you are usually getting a highly competitive person who also probably has quite an ego, and is going to want to win more than some large corporation.

Freddy the Pig
11-20-2002, 03:03 PM
If you read the rule on franchise ownership in its totality:

(a) New members must pledge that their organization is primarily for the purpose of operating a football team.

(b) Charitable organizations and/or corporations not organized for profit and not now a member of the league may not hold membership in the National Football League.

(c) All stockholders in a corporation or persons owning any interest in a franchise in the National Football League must be approved by a ten-twelfths (10/12) vote and any transfer of stock or of any interest in a franchise must also be approved by a ten-twelfths (10/12) vote of the membership.

. . . it effectively prohibits any large, publicly-traded corporation from owning an NFL team--not just non-profits.

Why did the NFL do this? I'm not sure, but I think there was just a prejudicial feeling that a "gentleman sportsman" operating a team as a stand-alone entity was a more "pure" ownership model than a large corporation, in which the team (a la the Cubs, Angels, or Braves) would be a small cog in a huge unit. The NFL owners were taking a huge risk along about this time (early 1960's) by giving up their local TV revenue in favor of a national contract, and it was important to them to maintain strict control over who joined their club.

Frank #2
11-20-2002, 03:15 PM
I think the regulations on corporations (jklann's point c) is to eliminate a conflict of interests. Imagine a clothing manufacturer, food vendor, or other related company owning a NFL team. Suddenly that team is getting favors, price breaks, and amenities while other teams are getting late shipments, extra fees, wrong products, etc. It could also be possible for a large company to funnel revenue into it's team without the league's consent (accountants can be very creative).

Non-profit organizations get numerous tax breaks so that could schewer the revenue sharing in their favor, as Nametag mentioned.

nth
11-20-2002, 03:18 PM
Green Bay does not issue dividends?
What do they do with their profits?

nth
11-20-2002, 03:20 PM
i answered my own questions.

http://www.packers.com/shareholders/

duh! they are a non-profit team.