I learned something on Twitter the other day. Once the shock of having engaged in a meaningful interaction on that social media platform wore off, the substance of what I’d learned began to sink in: the Green Bay Packers are a publicly-owned nonprofit corporation.
This was of immediate interest to me. Anybody unfortunate enough to have followed me on this site and on Twitter (@thisthreetime: come join the pointlessness) will know that my particular bugaboo is the NHL’s reliance on whacky billionaires to own and manage their franchises. While it’s true that most of these billionaires are just fine, and that the NHL is hardly unique in this reliance, the business model does have a tendency to occasionally blow up in the league’s face. Tying a team’s fortunes to an individual’s wealth is how you get Charles Wang meddling in hockey operations, Oren Koules running the Lightning into the ground after the real estate market collapsed, and Eugene Melnyk challenging old-school whack-a-doos like Harold Ballard and Bill Wirtz to rule their Mr. Monopoly fiefdom with the most iron-y of fists.
My uneducated speculation in this area has led me to valorize the idea of the consortia of local business interests, like those that exist in Winnipeg and Nashville. In these arrangements, the risk is spread out among more investors so if, say, your pharmaceutical magnate runs into liquidity trouble as a result of a worldwide contraction in the pharmaceutical market, it doesn’t affect your nice little hockey club.
But then a nice person on Twitter told me about the Green Bay Packers. Here, from the esteemed Wikipedia.org:
The Packers are the only publicly owned franchise in the NFL. Rather than being the property of an individual, partnership, or corporate entity, they are held as of 2016 by 360,760 stockholders. No one is allowed to hold more than 200,000 shares, which represents approximately four percent of the 5,011,558 shares currently outstanding. It is this broad-based community support and non-profit structure which has kept the team in Green Bay for nearly a century in spite of being the smallest market in all of North American professional sports.
Green Bay is the only team with this public form of ownership structure in the NFL, grandfathered when the NFL’s current ownership policy stipulating a maximum of 32 owners per team, with one holding a minimum 30% stake, was established in the 1980s. As a publicly-held nonprofit, the Packers are also the only American major-league sports franchise to release its financial balance sheet every year.
What obviously interests me about this structure is that it takes the idea of making risk more diffuse among a few local interests and turns it up to eleven. The risk would be spread out between everyone and anyone who owns shares, with the consolidation of shares limited by the shareholder agreement. Locals would be incentivized to support the team by buying tickets because they, or people they know, would feel a literal degree of ownership of the team. If the team runs into liquidity problems, it could also issue more shares and spread the risk out even further.
What would this look like, in practice? Would we have hundreds of thousands of people debating the merits of trading for Gary Roberts? Not really.
Again, from Wikipedia:
Even though it is referred to as “common stock” in corporate offering documents, a share of Packers stock does not share the same rights traditionally associated with common or preferred stock. It does not include an equity interest, does not pay dividends, cannot be traded, and has no protection under securities law. It also confers no season-ticket purchasing privileges. Shareholders receive nothing more than voting rights, an invitation to the corporation’s annual meeting, and an opportunity to purchase exclusive shareholder-only merchandise.
Shares cannot be resold, except back to the team for a fraction of the original price. While new shares can be given as gifts, transfers are technically allowed only between immediate family members once ownership has been established.
In other words, being a shareholder first and foremost empowers one to contribute to the sustainability of one’s team and mitigates risk. It essentially takes the concept of season ticket holders and makes it more affordable and guarantees some voice. There’s nothing requiring Melnyk to hold season ticket town hall meetings. Shareholders are entitled to certain rights, however.
This goes to the immediate benefit of such an arrangement: it immediately makes possible a level of transparency and accountability that currently does not exist among the more dictatorial ownership groups. The fact that the team most not only release a balance sheet every year but that shareholders can attend an annual general meeting at which general governance is voted upon reduces the likelihood of, say, the general manager announcing one day that he’ll make a decision on the coach at the end of the season and then firing the coach the next day. It’s not that he’ll need to bring that sort of decision to a vote, but if he acts in that manner he must answer to the shareholders during the AGM as opposed to only answering to his whacky billionaire boss (who may or may not have ordered the firing in the first place). Shareholders would not be involved in the day-to-day of the draft, trades, or getting a hockey team on the road, but could ask for justification of strategy and, should there be enough votes, vote to approve broad changes in management.
Secondly, this structure would act to reinvest the profits into the community. While shareholders would not receive dividends (which could incentivize shareholders to reduce costs as much as possible to maximize returns), as a nonprofit the corporation must carry a limited surplus. Any excess profits could be reinvested in the teams’ infrastructure or in the community via the corporation’s foundation after, say, adhering to an agreement to spend within a certain percentage of the cap or privileging re-signing one’s drafted players.
Finally, the idea of a publicly-held entity may incentivize government to help with the construction of an arena. As opposed to the ephemeral notion of economic growth as the spillover result of arena construction (something that’s been pretty thoroughly debunked at this point), the city, province or feds may be more amenable to contributing revenue knowing that the economic benefits of team ownership will not be conferred first to a whacky billionaire who winters (and probably does his taxes in) the Bahamas but instead to constituents. I don’t know if the math works out, and it’s probably always a safer bet to invest in public transportation, schools, and housing, but at least the ephemeral promise of growth is guaranteed to confer more directly than it would if it traveled first through the bank account of a pharmaceutical magnate.
How likely would any of this be? Oh lord, not at all:
Any new purchase of an NHL team must be approved by the league’s Board of Governors, which is comprised of some of the more established owners in the league. The board not only establishes the rules of membership in the NHL ownership fraternity, but decides what, if any, help the league may offer franchisees in negotiating arena leases or other related legal matters. Balsillie’s bid to buy the Phoenix Coyotes out of bankruptcy in 2007 was essentially sunk when members of the board, such as Minnesota Wild owner Craig Leipold, painted Balsillie as deceitful and uncooperative.
The NHL’s current ownership rules exist to make possible the long-term economic benefit of an elite group of whacky billionaires. It seems unlikely that the same group would vote to allow an innovative ownership structure that cuts them out of the equation rather than, say, simply identifying another whacky billionaire to invite to their club. The only reason Green Bay’s arrangement exists is that it was grandfathered in from a time when unions and collective ownership were considered essential components of our economy as opposed to the tools of despicable socialists.
But in Melnyk, we’re seeing the tragic trade-offs of the league’s current reliance on cartoon villains with formerly deep pockets. We may romanticize whoever comes along and saves Ottawa from this endless cycle of misery – as we once did with Melnyk – but by then the damage will have been done to the brand, to the community, and to the sustainability of hockey in Ottawa. I can’t imagine anybody at NHL head office is arguing that what’s happening at the moment is ideal.