Why would anybody want to be an independent director at the Tigers?

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Wests Tigers Rugby League Football Club Pty Ltd is a voting member of the ARLC and a licensee of the NRL, giving it the right to participate in the NRL competition. Wests Tigers first joined under this license in 2000.

Before then there were the Balmain Tigers and the Western Suburbs Magpies; Creatures that are not widely known to live in harmony in the wild. Each is a core rugby league club with a long history.

Wests Tigers’ membership of the ARLC and the license agreement binding it to the NRL are interdependent; If the license agreement is terminated, ARLC membership will also be terminated and vice versa.

Wests Tigers is a company with two shareholders: Balmain Tigers Rugby League Football Club Limited and Wests Magpies Pty Limited. But this is where things unravel.

Wests Tigers’ home rule is not democracy or anything close to it. Balmain owns 1,000,020 Class A ordinary shares in Wests Tigers; Wests Magpies hold four times that number.

Wests Magpies own 80 per cent of the total shares and voting rights of Wests Tigers. But look through the history books (and ASIC records) and you’ll see that this wasn’t always the case.

In the simpler times of 1999, when the Magpies/Tigers arranged marriage was taking shape (with the specter of extinction lurking around), the union was at least equal.

No more. The constant financial disasters that have occurred with terrifying regularity over the past quarter-century have manifested themselves in the renegotiation of regulations and the destruction of any balance in what has now become the shell of a “joint” enterprise.

Even more intriguing is the control of Balmain and Wests Magpies shareholders. Balmain’s management is unremarkable for the sports club; is under the control of company members.

Wests Magpies are fundamentally different. It has two shareholders: Western Suburbs Leagues Club Limited and Western Suburbs District Rugby League Football Club Limited. There are three shares outstanding in Wests Magpies: Class A shares, Class B shares and Class C shares.

The Western Leagues own Class A and Class B shares, Western Football owns Class C, but the Western Leagues have control over Western Football regardless. Is it too complicated?

Wests Tigers are required to be run by a nine-man board of “independent” directors. Being a member of a football club means having a democratic say in all matters.

On the contrary, the Wests Tigers structure doesn’t actually work that way. And it seems like no one there really values ​​independent thinkers and doers.

In line with unequal shareholdings, Wests Magpies have the power to appoint many more directors to Wests Tigers than Balmain. But there is a different problem in terms of the way the Wests Magpies themselves make decisions.

West Magpies are a registered club subject to both the Corporations Act and the Registered Clubs Act. The latter legislation sets out the classes of members a registered club can have and other rules of internal governance. Like most registered clubs, there are thousands of members.

But a strange quirk of the Wests Magpies structure is that the majority of power is held by a group of 20 “bond” holders who loan the club $100 at (apparently) a six per cent interest rate in return for enjoying access to the internal faction that effectively controls the Wests Magpies in terms of managerial appointments.

These 20 credit unions control four-fifths of the voting power of the Wests Tigers and the NRL franchise itself. Democratic? Tough. But there are other problems here.

Article 47.1 of the Wests Tigers constitution says the company will have a maximum of nine directors.

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The appointment, dismissal and replacement of directors will occur in accordance with the company’s shareholders’ agreement and other documents.

The word “independent” is used at least 55 times in Wests Tigers’ constitution and shareholders’ agreement. There’s even a whole program defining what the term means.

Clause 4.11(g)(ii) of the shareholders agreement, which governs the relationship between Wests Tigers’ shareholders, casts material doubt on whether shareholders (not just Wests Magpies) can effectively give notice of the removal of an “independent director” as classified in the documents.

Clause 4.11(g)(i) allows a shareholder who appoints a non-independent director to remove that director. Clause 4.11(g)(ii) requires both shareholders and National Rugby League Limited to give notice of the removal of an independent director.

Which leads us to the question: Which of Charlie Viola, Michelle McDowell, Annabelle Williams, and Barry O’Farrell are “independent directors” for West’s purposes?
Tigers governing documents? These documents occasionally state that there are two independent directors.

If by proper definition only two of the four directors are “independent directors”, there are legal questions about the proper basis for Wests Magpies’ belief that it could act alone as the majority shareholder.

These questions need to be answered before the Western Tigers go any further. Whether O’Farrell or anyone else would go to the trouble of burning money to get an injunction from the Supreme Court on this issue is hypothetical; Who would want to risk further damage to their reputation by trying to stay in the tent?

But assuming Wests Magpies can issue a notice to remove an independent director if that notice has the appropriate legal effect, it goes back to the fundamental question of why anyone would want to be an independent director.

The appointment of independent and expert directors to the boards of directors of sports clubs and franchises serves a variety of governance, risk management and performance improvement purposes. In modern sports management, especially in professional leagues, the role of the board of directors has expanded far beyond ceremonial oversight.

Independence and expertise help ensure that the organization is managed in a commercially sound, ethically sound and strategically forward-looking manner.

If the majority shareholder of Wests Tigers intends to set up such a scheme, why would anyone with the necessary expertise and knowledge want to waste their time participating in the pantomime?