On the road to World Sailing elections

The World Sailing (WS) election of the President and seven Vice-Presidents will soon be conducted via an electronic ballot and an overriding issue for the candidates is the stability of the organization.

To track back the happenings from 2014 is complicated, due on one hand to the long-term chronic unprofitability of WS, and on the other, to the breakdown of the sponsorship contract with Gazprom, which led to a large budget deficit for the organization in the 2017 – 2020 quad.

And it is now around finding out the reasons: “Who is to blame for this?” In an exclusive interview, Yacht Russia magazine sent questions regarding finances and organization structure to WS Communications & Digital Manager Daniel Smith who coordinated the response by current president Kim Andersen and vice presidents Scott Perry and Gary Jobson:

How did the WS board enter in a 5-year sponsorship agreement with Gazprom in 2014 worth one million Euro annually without any obligations from WS in the written contract? What did the WS promise to the sponsor in exchange?

World Sailing’s sponsorship by major sponsors, including Gazprom, offers numerous rights and benefits from World Sailing in exchange for the sponsor’s financial commitment. World Sailing granted rights to Gazprom that were covered in the Sponsorship Rights of the Sponsorship Contract and is commercially confidential.

Gazprom requested their sponsorship be used for an Emerging Nations Programme. In addition, they wanted their sponsorship to be used to publish a book on the Emerging Nations Programme called “Closing the Gap.” Both of which were phenomenally successful.

Why did the WS negotiate and sign the contract for sponsorship with only the CEO of a daughter company of Gazprom, without securing if the CEO was authorized to sign such a contract?

World Sailing contracted with the European subsidiary of Gazprom, domiciled in the Netherlands because that was the preferred corporate entity stated by Gazprom at the time. World Sailing was unaware of any allegations that the sponsorship was not authorized.

Why did the WS board set up a World Sailing Foundation in Switzerland in May 2016 with no representative of the sponsor? Was the WS informed that the Gazprom CEO left the company already in November 2015? Was Andersen informed as he visited Russia in December 2016 that this person is not more responsible for any monetary expenses of the mentioned Gazprom company?

In 2015-16, World Sailing explored the establishment of a charitable foundation which would be able to raise charitable funds for the wider benefit of sailing worldwide. A meeting of the proposed Board of the World Sailing Foundation was held in May 2016.

Any foundation in Switzerland must be published in the Swiss Commercial Registry before it is a fully registered and functioning foundation. After the current Board was elected in November 2016, the application was cancelled, and the foundation was never established.

Carlo Croce was World Sailing President in November 2015 and we cannot comment on his knowledge regarding the CEO.

President Kim Andersen attended the Russian Sailor of the Year event in December 2016. President Andersen was due to meet the CEO but he did not arrive. At this time, President Andersen was informed he was not working for Gazprom directly.

What was the exact purpose of the Foundation and why was it set up separate to WS? What happened to the Foundation and what is the latest status?

The charitable foundation would be able to raise charitable funds for the wider benefit of sailing worldwide. The foundation was discontinued.

Who from the WS board was the main contact person to the sponsor?

The then World Sailing President Carlo Croce

Why did the WS board in 2016 calculated the value of sponsor money for four years (2017-2020) budget, although the contract was signed only for two years and with a cancellation option after one year?

The Board presented the budget for the 2017 – 2020 quadrennial to Council (November 2016) with the full funding from Gazprom. The contract called for five annual payments (2014 – 2018). Gazprom International cancelled the final payment as allowed by the sponsorship contract.

For your information, the statutory audited accounts of World Sailing are publicly available and prepared in accordance with the international Generally Accepted Accounting Principles (GAAP) accounting principles.

World Sailing’s accounts are externally and independently audited. All sponsorship contracts are reviewed by our management, Directors, and external auditors to ensure they receive the correct accounting treatment in the accounts. World Sailing’s audited accounts are available on the website here – https://www.sailing.org/about/governance/finance.php.
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NOTE: In 2013 the WS board changed the structure of WS organization from a General Secretary (GS) structure where each board member had a special area of responsibility to the CEO structure which foresees that the CEO has the function to be in charge of all competences and resources.
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Was it not eminently important to be sure that the hired CEO must be competent in all areas of sports management and in sailing particularly to fulfill his role? What was the reason to change the structure from GS one to CEO one?

In common with a number of other International Federations, the Board of World Sailing wished to move away from the traditional model of a Secretary General and a Secretariat only looking after the administrative affairs of the Federation, to a Chief Executive Officer and Executive Office responsible for leading all operations, commercial activity and administration of the Federation under the supervision of the Board. This change was approved by World Sailing’s Member National Authorities.

Who from WS board was contacting the HR agencies?

No executive search agency was used when Andy Hunt was hired. Vice-President Scott Perry and our HR consultant were responsible for negotiating Andy Hunt’s employment contract.

Why the board members took time from 2014 through 2015 and hired a person which was not aware of sports management or sailing in general?

Peter Sowrey had extensive general management experience but did not have specific experience in managing sailing. After an extensive search, and an extensive interview process with members of the World Sailing Board, he was hired.

Why did the WS board decide just after six months to release the candidate in 2015?

Peter Sowrey had a six-month trial period. His departure was announced on 2 December 2015

In January 2016, a new CEO was hired. Who personally from the board was responsible for this recruitment?

President Carlo Croce led the recruitment process.

What was the reference for these recruitments as it seems the new top management in WS was unexperienced with sailing and had only experience within sports management?

The CEO, Andy Hunt, had extensive knowledge in all areas of sports management having been the CEO of British Olympic Association and Chef de Mission for TeamGB at the London 2012 Olympic Games. Andy Hunt was also a Board member of a prominent English rugby club. As President Carlo Croce led the recruitment, he must be consulted.
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MORE: After this interview, Yacht Russia contacted many WS members (and several sources close to WS) and some of them gave their own interpretation of the answers above. However, they chose to remain anonymous, so what follows is a summary by Yacht Russia of these conversations:

The key issue, of course, concerns finance. World Sailing financials statutory audited accounts are publicly available and prepared in accordance with the international Generally Accepted Accounting Principles. There is also a report to Council presented at the Midyear and Annual meeting, but to find the inside of the assumptions being correct, wrong, misleading, or politically motivated is impossible.

However, one must clearly understand for what reasons such an unpleasant situation has developed with the budget of the WS. In our opinion, one of the main reasons was the sponsorship contract with Gazprom, many of the circumstances of the conclusion of which look more than strange.

And we must point out that the answers to the questions we asked World Sailing look rather general and lacking in specifics. The questions where linked to the previous board, so it is a “long time ago”, but the consequences were what the new board after the election in 2016, had to deal with.

However, all the available information clearly shows the very weak management skills of the previous management, which led to the conclusion of the sponsorship contract with great miscalculations. The consequence was an unsecured four-year budget: 2017 – 2020.

And the whole story with the signing of a sponsorship contract with Gazprom looks very strange: it was a contract that provided for WS payments without any obligations from the latter. And there was no advertising for Gazprom (or its subsidiaries) by WS. A quite reasonable question arises – where did the money paid by the “sponsor” go?

According to information from people close to World Sailing, there was no written agreement on any obligations, and still the World Sailing board by Carlo Croce and Scott Perry signed the contract.

The contract meant financing five programs for Emerging Countries at once, publishing a book and shooting a film, for which 3 million euros should have been allocated (2014, 2015, 2016). This amount seems too large, especially considering the long-standing difficulties with funding in previous stages.

For people close to Gazprom, it was clear that the new board of Gazprom International, which took over the management of the company in 2015, did not know about any of its obligations under the sponsorship contract with WS from 2014. This was the reason for Gazprom’s refusal to pay and renew the contract planned for 2016 (and, accordingly, caused the absence of expected payments in 2017 and 2018 FY).

And this is where the real question arises: why did the WS board of directors plan to renew the contract with the former CEO of Gazprom International in May 2016, although it was known that he left the company back in November 2015???

According to our information, it was Scott Perry who was the central person in the creation and organization of the joint fund with Gazprom, since it was he who at that moment was responsible for finances in World Sailing due to the “absence” of the CEO.

Additionally, we learned that it was Scott Perry and Gary Jobson who were the main driving forces behind the Emerging Nation project and had visited the Gazprom office in Moscow.

Following up on the answers received from World Sailing regarding the process recruiting the CEO for World Sailing, we are told that the search for a candidate (after the liquidation of the General Secretary position) was carried out by an international recruiting company.

The candidates were interviewed by Scott Perry, and after more than 12 months (!), Peter Sowrey was recruited, who was fired just six (!) months later. Thus, the cost of hiring and salary for six months plus “golden parachute” disappears.

With no CEO in place from 2014, the financials were under the leadership of Scott Perry, and when Andy Hunt started as CEO in January 2016, World Sailing’s financial management had been in dire straits.

According to people close to World Sailing in that period, total spending in fiscal 2015 rose 40% from 2014 to around £ 4.35 million (up from £ 2.73 million in fiscal 2014). As a result, in 2015 the deficit will amount to 2.7 million pounds. Costs were clearly out of control, and Hunt had to clean up and make tough decisions.

We wish World Sailing and its members healthy elections!