Francisco Alba II

Corporate Governance

Atty. Teodoro Kalaw

12/14/2016

The Calciopoli Scandal: A Review Using the Stakeholder Theory

Introduction: The Calciopoli Scandal
In May of 2006, one of the highest profile controversies ever rocked the football
world. The Italian authorities uncovered that several teams of the Serie A, the top-tiered
football league in Italy, were involved in a match-fixing scandal. They found transcripts
of phone records which reveal certain team presidents and league officials influencing
the selection of referees for certain matches. This became known as the Calciopoli
Scandal.
The repercussions of this controversy were severe. Juventus, the reigning
champion at the time, was relegated to the Serie B, the second-tiered football league in
Italy. They were also stripped of their two previously-won championships. The other
teams, such as AC Milan, Fiorentina, Lazio and Reggina, received massive point
deduction for the upcoming season. There were also heavy fines meted out. As a result,
several high-profile players and coaches left the involved teams and some even left the
league entirely. The reputation of the Serie A and, as a whole, Italian football, suffered
immensely.
To understand its impact, it is important to know the standing of Italian football at
the time. The Italian national team had just won the 2006 World Cup, the most

prestigious football tournament in the world. AC Milan had also won the UEFA
Champions League, the most prestigious tournament for club teams, for the 2006-2007
season. Italian football had won the top two tournaments in the world. They were also
ranked as the second-best league in the world in 2006 by UEFA, the Union of European
Football Associations, behind only Spain. 1 Simply put, Italian football was at its peak.
Ten years later, however, Italy is now only ranked as the fifth best league in the
world, behind England, Spain, France and Germany. Italian football has also managed
to claim only one other major honor since thenwhen Inter Milan won the UEFA
Champions League in 2010. Needless to say, Italian football has been on a steady
decline since the Calciopoli.
While the Calciopoli is not solely to blame for the decline, it is undeniably one of
main reasons. An article,2 which provides insight on the effects of the Calciopoli,
observed that when high-profile players and coaches began leaving the Serie A as a
result of the scandal, the teams were in a state of frenzy to replace them. They tried to
replace them with similarly if not more reputable players. Oftentimes, however, this
resulted in the teams overpaying for certain players. As a result, several Italian teams
now find themselves financially limited and incapable of meeting the demands of the
modern football market.

1Uefa.com. "Member Associations - UEFA Rankings - Country Coefficients UEFA.com."

UEFA.com. N.p., n.d. Web. 10 Dec. 2016 l
2 Dowley, Conor. "A Decade after Italy's Match-fixing Scandal, Serie A Is Worse than It Was
before." SBNation.com. N.p., 2016. Web. 10 Dec. 2016.

Thus, with the diminished prestige of the Serie A and the financial limitation of its
teams, there is little incentive for top-caliber players to play for the Italian league. This
hinders Italian football from competing effectively with other leagues and recapturing it
previous heights. Italy has never truly recovered from the Calciopoli.
This now begs the questions: how could this scandal been averted and how can
the Serie A move forward? This paper then aims to answer these questions by using
corporate governance principles, particularly that of The Stakeholder Theory, and
applying it to the Serie A teams involved. An analysis will be provided using the said
theory and eventually recommendations will be formulated using the same framework.
Analysis Using the Stakeholder Theory
For whose benefit and at whose expense should the firm be managed?,
Richard Freeman addressed this question in his paper entitled, Stakeholder Theory of
the Modern Corporation.3 In the said paper, he discussed that the traditional answer
would be the stockholders of the company. However, he proposes that managers also
bear a fiduciary duty to stakeholders. He defines stakeholders as benefited from or are
harmed by, and whose rights are violated or respected by corporate actions. He
identified several stakeholders as demonstrated by the figure below:

3 Freeman, R. Edward. "A Stakeholder Theory of the Modern Corporation." The Corporation
and Its Stakeholders (1998): n. pag. Web.

Figure 1.0

Manageme
nt

Local
Community

Owners

The
Corporatio
n

Suppliers

Customers

Employees

As noted, there are different stakeholders to an organization and each interest

must be taken into consideration for effective governance. The same can be said of a
football organization. There are numerous stakeholders to a team; it is not simply limited
to the team itself.
Analyzing the Calciopoli, it is the theory of this paper that non-recognition of the
different stakeholders of a football team gave rise to the scandal. To demonstrate, an
interview from the coach of Italy at the time, Marcelo Lippi, revealed that he thought the
Calciopoli made the team stronger and more united. 4 While indeed the scandal may
4 "TODAY'S FRONT PAGES." Lippi: 'Calciopoli Helped Italy' | Football Italia. N.p., n.d. Web. 10
Dec. 2016.

have motivated the Italian team to strive and fight harder for the pride and reputation of
their country, this exposes the narrow view of traditional football organizations as
long as the team wins, everything should be okay. This very mindset was what gave
rise to the Calciopoli. Teams influenced referee selections in order to increase their
chances of winning games. Simply put, football organizations were too fixated on
winning and the team itself that it failed to consider other pertinent interests.
Unfortunately, the Stakeholder model by Freeman cannot be straightly applied to
football teams. There are numerous differences which prevent a straightforward
application. This is due to a football team not being an enterprise primarily engaged for
profit. As a result, a new model is required for football teams in order to cater to the
unique characteristics thereof. Using the criteria of power, legitimacy and urgency
recommended by Mitchell, Agle and Wood in their work entitled, Toward A Theory of
Stakeholder Identification and Salience: Defining the Principle of Who and What Really
Counts,5 a new model will be established as the figure below shows:

5 Mitchell, R. K., B. R. Agle, and D. J. Wood. "Toward A Theory Of Stakeholder Identification

And Salience: Defining The Principle Of Who And What Really Counts." Academy of
Management Review 22.4 (1997): 853-86. Web.

Figure 2.0

Football
Association

Owners

Suppliers

Management

Footba
ll
Team

Local
Community

Customers/Fa
ns

Employees

Competitors

In this model, there are more identifiable stakeholders. In addition to the retention
of management, local community, customers, owners, suppliers and employees, there
is the addition of competitors and the football association as stakeholders.
The addition of competitors is explained by the unique characteristic of sport teams of
being adversarial in nature. Competitors are vital to the existence of a team. A team
necessarily requires the presence of another to compete against. In fact, its success is
measured by how well they perform in comparison to their competitor. This, however,
creates a precarious relationship between the two. They are vital to each other;
nevertheless, they are built to outperform one another. This is a concern which the team
must consider and balance carefully.

The addition of football association is explained by the power it wields over a

team. The former regulates whatever competition the team is in. They have the power to
discipline the team as well. As a result, they are vital to the existence of a football team
since they organize and regulate the competitions of a football team.
Considering these, evidently, the Italian teams involved in the Serie A were
unable to recognize the different stakeholders of their team. By choosing to focus on
winning at all costs, the teams, in effect, had damaged their stakeholders interest. They
damaged their competitors interest and the latter are no longer as competitive. In fact,
the Serie A is known for being a duopoly of sorts. For the past eleven years, Inter Milan
and Juventus have won five championships each, with AC Milan sneaking one in 2011.
The performance of their competitors negatively affects the team in that it reflects on the
league as a whole. A football leagues reputation is determined by how competitive the
teams in the league are and not how dominant certain teams are. 6 Thus, with the poor
performances of their contemporaries, interest on the league will die down and
consequently, interest on the team will die down as well. The teams involved should
have realized the value of competition in the field they are in and should have protected
such.
They also failed to recognize the football association as a stakeholder. As
mentioned, the leagues reputation in terms of competitiveness suffered as a result of
the Calciopoli; this also negatively affects the interest of the football association, who is
charged with regulating the league. More to that, the bribery of football association
6 Uefa.com. "Member Associations - UEFA Rankings - Country Coefficients UEFA.com."
UEFA.com. N.p., n.d. Web. 13 Dec. 2016

officials involved in the Calciopoli, further undermined the football associations

reputation. The other teams would naturally lose confidence in the association to
regulate the league and more officials would be encouraged to be corrupt. As a result,
the league would not be regulated properly and, as previously established, the leagues
sustainability and competitiveness is vital to the existence and success of a football
team.
Conclusion and Recommendations
Given the foregoing, it is recommended that football teams adopt the Stakeholder Model
provided in Figure 2.0. They should understand the value of their competitors and the
football association where they participate. With this, the teams in the Serie A could
have prevented the Calciopoli and could prevent its reoccurrence in the future.
Admittedly, considering the interests of their rivals is tricky and utmost care must be
taken in evaluating them. It is recommended that teams push for sportsmanship without
necessarily dismantling the opposition. Focusing on their own progression is necessary
but they should bear in mind that it is in their best interest to keep other teams
competitive. This does not necessarily mean that teams would have to adjust to the
weaker ones but they should avoid the use of underhanded tactics such as matchfixing, bribery and the like. They should let the sport run its natural course. With regard
the football association, the teams should always consider their interests. They should
always seek to help keep them trustworthy and help implement their policies in
regulating the league.

With this, it is believed that with the Stakeholder Theory, the Serie A could
reclaim its past glory. Again, provided the teams consider the interests of their
competitors and the football association in mind, the quality of football will improve and
the league will regain its former prestige. Top players and coaches will be more
incentivized to work in Italy and its reputation will rise once again.