By Neil Fry
October 25 2012

 The audit of Wenger's management 2004-12 continues below and considers the following topics: Planning: Director Leadership, Relocation / Self-sustainability model, Ownership /Board, Player recruitment policy – transfer spend, Player recruitment policy – wage spend

[Part 2]

Planning:  Director Leadership

Relocation / Self-sustainability model

Historically, the ‘way things are done’ at Arsenal, has been a mixture of gradual improvements to tried and tested arrangements and careful long-term stewardship in order to conserve the vital interests of the club, allied, on occasions, to some specific and quite major revolutionary changes (in a way, therefore, somewhat akin to modern philosophical conservatism).  For example, in 1913 the Club - undergoing a succession of name changes - moved from Woolwich to Highbury and between 1925 and his death in 1934 manager Herbert Chapman enjoyed great success by revolutionising the club with his tactics, training and star signings.  The Club’s Board have repeated the revolution  in recent years and Monsieur Wenger, whilst carrying out a similar footballing revolution, has placed a high premium on patience and loyalty to his players and, in particular,  coaching staff. 

The Board demonstrated a very significant commitment to the club with two very significant state-of-the-art infrastructure projects: a proposed relocation from the Highbury home to a new-build stadium at Ashburton Grove and the development of the training centre at Colney, Hertfordshire.  In the summer of 2006 Arsenal’s “income-generous” Emirates Stadium opened.  The move was designed to help keep the Club at the top of the football ladder and be in a position “to be a leading European club.”[2]  With the relocation came the Club’s clear long term strategy objective:  to keep the club competitive on the pitch and on a sound business footing and financially secure basis off it – the ‘self-sustainability’ model (where the club only spends the revenues it raises).  

Indeed, the Group profit before tax for the financial year ending 31 May 2012 was £36.6m, up from the equivalent 2011 figures of £14.8m.  Ivan Gazidis, Chief Executive commented,

Clubs, fans and other stakeholders in the game are demanding a more rational financial approach and this reinforces our conviction that our Club is strongly placed to succeed over the long term. We have qualified for the Champions League for the 15th season in a row whilst off the pitch we have a business strategy and infrastructure that is helping us to grow our revenues. This revenue growth will provide sustainable funds for future investment in the team whilst keeping within the FFP requirements.[3]

Indeed Mr Gazidis, has hailed the club as a role model for others in terms of financial self-sustainability and well placed for the impending implementation of Uefa’s Financial Fair Play (FFP) rules – which he believes will be enforced.[4]

Ownership /Board

David Dein was a highly influential Vice-Chairman of Arsenal between 1983 and 2007.  Mr Dein believed that English football in general was falling behind other European leagues and needed to embrace new methods and a new style of play based on technique and speed more attuned with the approach adopted by teams from the continent.  This was too radical for other members of the Board and Mr Rioch was appointed instead of Mr Dein’s choice: an unknown Frenchman, Monsieur Wenger, a manager in the relatively obscure Japanese football league.  After his first season, Mr Rioch was dismissed following a dispute with the club's Board over transfer funds.  Mr Dein finally got his way and Monsieur Wenger did become Arsenal’s manager.  Together, they seemed to become close confidants, and spent the next decade transforming the club and helping it join the elite clubs of European football.  Mr Dein, using his extensive network of football contacts, took an active role in the transfer of players and contract negotiations.  He was instrumental in the recruitment of some of the Club’s greatest talents of the era:  Messrs Wright, Bergkamp, Vieira, Petit, Overmars, Henry, Pires, Campbell, Gilberto, Toure, Fabregas and Van Persie.  Mr Dein also helped obtain Arsenal's entry into the G-14 group of major European football clubs in 2002 and, as a keen promoter of women's football, was also President of Arsenal Ladies Football Club, the most successful English women's football team ever.

Unfortunately, the long-term strategy and ‘self-sustainability’ model was quickly undermined by a seemingly unforeseen risk:  the purchase of key rivals by a succession of much higher spending foreign benefactors. – Not least the Russian billionaire Mr Abramovich’s purchase of Chelsea in 2003 and subsequent high spending on player recruitment and wages.  Mr Dein (who had been opposed to the new-build relocation project and wanted Arsenal to share the Football Association’s Wembley Stadium) came to believe a takeover by the American Owner and Governor of Kroenke Sports Enterprises LLC, Colorado, U.S.A, Stanley Kroenke (who had started buying shares in the club) was now necessary to secure the club’s future success.  There were ‘irreconcilable differences’ between Mr Dein and the rest of the Board over this as they totally opposed such a takeover.  Chairman Peter Hill-Wood pronounced Mr Kroenke ‘not one of us’ - and Mr Dein was dismissed from the Board in 2007.  Monsieur Wenger regarded his departure as "a huge disappointment because we worked very closely together, David has contributed highly to the success of the club in the last 10 years and even before that as well. Red and white are the colours of his heart."  He also added, “David Dein is needed in football because this guy has revolutionised this club and also English football. He is top quality."[5]

Many Arsenal supporters believe that with the dismissal of Mr Dein, the Club and Monsieur Wenger, lost an important figure and his expertise and that he should be re-invited to join the Board.[6]  The Club Chairman Mr Hill-Wood does not accept this.

I don’t think David Dein’s departure has impacted on Arsene at all …  Arsene has a very good relationship with Ivan [Gazidis, Chief Executive] and it’s very businesslike. He and Arsene get on very well.[7]

Whilst the self-sustainability model was retained (the terminology somewhat ironically), Arsenal eventually followed key rivals, and others, down the foreign ownership route.  For, Mr Kroenke eventually became a welcome and very much preferred bidder and the takeover by Kroenke Sports Enterprises went ahead in 2011 – now with all the Board’s blessing.  He remains committed to Arsenal’s business model and has not appeared to seek any changes in the direction of the Club.  Mr Kroenke has stressed that he is in it for the long term and doesn’t believe in quick-fix high spending benefactors,

Some people want their private benefactor. I don’t think it is sustainable. Maybe it is, maybe it [football] will always be the one place where there will be guys coming who are willing to pour money in. I don’t know. We have a self-sustaining model. We are committed to that model.[8]

Vastly experienced in sport as a powerful and prolific owner of a portfolio that also includes leading American football, basketball, ice hockey, lacrosse and Major League Soccer teams, Mr Kroenke’s belief is to “put good people in place and trust them to do their jobs.”[9]   

Mr Dein sold his shares to Red & White Holdings, an investment vehicle of Russian billionaire Alisher Usmanov and his business partner and was appointed chairman of Red & White, a position he resigned from one year later.  It has been suggested this was to improve relations between Arsenal and Red & White who are the largest shareholder in the Club outside of members of the Board and own just under 30% of Arsenal.  Many supporters believe Red and White Holdings should be represented on the club’s Board.[10]  However, they remain very much an unwelcome presence with Chief Executive, Ivan Gazidis, stating in the post-season question and answer evening with the Arsenal Supporters Trust that the Board were all aligned to go in the same direction and his presence would be unhealthy and divisive.[11]

The average age of the current Board members is well over 70.  Former Director Lady Nina Bracewell-Smith and now Honorary Vice-President, briefly, suggested a need for a more “dynamic, pro-active, younger board.”[12]

In an “Open Letter to the Board of Directors of Arsenal Holdings Plc”, dated 5th July 2012 from Red and White Securities Ltd[13], Mr Usmanov recently publically expressed his “deep reservations” about the Board’s policies and business model but affirmed his loyal support for the club, and that he “will never do anything that would destabilize or ‘create conflict’ at the club”.  Rather, the club was “seeking to create a false enemy in Red and White” in order to “distract attention from the more fundamental issues facing the club”: the financial model, the lack of investment and the Club’s future strategic direction.” 

Player recruitment policy – transfer spend

The ‘self-sustainability’ model was underpinned by Monsieur Wenger’s new player recruitment policy and is indicative of a wider determination to reign in player recruitment expenditure and avoid the perceived excessive player salary payments of key rivals.  At the Club’s 2011 AGM, Mr Kroenke stressed his support for Monsieur Wenger’s player recruitment, “a wonderful manager on the pitch who makes great decisions in regard to personnel.”[14]  More recently, Mr Kroenke also saluted Monsieur Wenger’s “ability to spend money and extract value. That is what it is all about to be successful in pro sports.”[15]

The first player recruitment policy from the 1996 - 1997 to 2003 - 2004 seasons, which produced The Invincibles, involved a blend of top international offensive skill such as Messrs Bergkamp, Henry, Pires, and Ljungberg buttressed by a battle-hardened defensive core including Messrs Lehmann, Campbell, Viera and Gilberto (see later).   During that season, the final season of the first period, Monsieur Wenger signed: Messrs Reyes, for £13m; Van Persie, £2.75m; Senderous, £2.5m; Lehmann, £2m; Clichy, £250K; Djourou, £0; and Fabregas, free.[16]   

The two distinct periods are separated by funding being completed and construction work beginning at the site of the Emirates in February 2004.[17]

The subsequent, second, player recruitment policy involved a significant change in the overall levels of expenditure and changed the type of players recruited. The two distinct periods of Monsieur Wenger’s long reign are evidenced by both the nature and outcomes of the signings.   In the first season of the second period (2004 - 2005), Monsieur Wenger signed: Messrs Eboue, aged 21, and Flamini, 20, both for £1m; and the older, if hitherto relatively unrecognised,  goalkeeper Manuel Almunia, 27, for £2.5m.  Now Monsieur Wenger sought the purchasing, and the production through the Arsenal Academy, of younger and more inexperienced, but technically proficient, lower cost players.  The expectation was that the young squad could be nurtured and developed into a loyal and committed highly technically proficient squad at least comparable to that of their illustrious predecessors.  The policy was without precedent in Premier League history.  The focus on youth was also accompanied by Monsieur Wenger’s continued reluctance to sign players over thirty years of age.  More recently, however, short-term contracts have been willingly granted to returning Invincibles Messrs Campbell, Lehmann and Henry – when at very much the twilight of their careers.  

There appeared little interest in British born players; rather, they were usually foreign, often continental, players who often spoke the French language.  Having gained a reputation for preferring foreign players, however, very significant transfer fees were paid to recruit the teenage English born future prospects, Messrs Walcott and Oxlade-Chamberlain from Southampton (for £9.1m and £12m respectively).  Indeed, Monsieur Wenger now perceives a big improvement in the general quality of British player that has recently become available.  He now appears convinced that, with the further additions of Messrs Gibbs, Ramsey, Wilshere and Jenkinson, his first team squad offers hope the club can maintain a core of British players who will develop stronger ties with the club and remain more firmly rooted than subsequently proved the case.[18]

Ivan Gazidis, Chief Executive, recently, again, re-affirmed that cash reserves are available for Monsieur Wenger to spend as and when he desires and upon whom he desires.

I want to be clear that the money we generate is available to our manager, Arsene Wenger, and that he quite rightly makes the decisions regarding how to invest those funds based on his extensive football knowledge, experience and judgement.[19]

Despite the club’s disastrous start to the 2011 – 2012 season, the worst start for 58 years, the Chief Executive confirmed that “Our strategy continues to be to focus on young players” and stressed the Board and managers’ unity over this.[20]  Following the 2 – 8 defeat by Manchester United, however, there was evidence of a modest change to the recruitment policy before the closure of the summer deadline one year ago.  Mr Jenkinson, a right-back, was another young English signing, age 19, (from Charlton £1m).  But, clear moves to remedy the longstanding problems of inexperience were evident and signs of a move away from the second player recruitment policy.  Messrs Arteta, 29, from Everton, £10m; and Benayoun, 31, Chelsea, loan; were experienced Premier League offensive players.  Per Mertesacker was a much capped German international centre-back, 26, £9m; and Andre Santos, 28, £6m; a lesser known Brazilian international left-back.  The African forward Gervinho (24, £11m), signed from the French League was a more typical signing, similarly the little known acquisition, the South Korean, Ju Young Park (26, £3m).

Although Mr Song was not replaced before the close of the summer 2012 transfer window (rather the role of Senor Arteta modified in support of Monsieur Diaby or Mr Ramsey) or any goalkeepers signed, Arsenal appeared to have generally learnt from the previous departures of Messrs Fabregas and acted quickly in lining up and signing new players.  Moreover, the focus on young players now seemed completely over and the second recruitment policy consigned to history.  Lukas Podolski, 26, was signed by the close of the season and, despite his relatively young age, has now made 101 appearances for Germany scoring 44 goals (Cologne, £11m).  Before Mr Van Persie’s departure, Olivier Giroud, 25, and a French international, was signed from their top flight champions, having scored 25 goals and finished (joint) highest scorer (Montpellier, £12m).  Soon after Mr Van Persie’s departure, Santi Cazorla, 27, was added (Malaga, £15m).  The versatile attacking midfielder was instrumental in securing that club’s first ever Champions League qualification and has been a regular member of the victorious Spanish international squads for four years.  Both Messrs Podolski and Cazorla have made a particularly encouraging start to the new season, at the time of writing. 

Player recruitment policy – wage spend

The Board has repeatedly denied withholding cash reserves from the Manager both for transfer acquisitions and wage spends.  Mr Kroenke too has affirmed that significant cash reserves remain available to spend on players, “If you look at the total wage spend, we are up there. We have never told anyone not to spend one dime. Not here [with his American clubs] and not in London. They have been free.”[21]

Nevertheless, as another component part of their sound fiscal strategy, the Club has been careful to reign in individual player salaries.  The policy was, famously illustrated by the England international Ashley Cole who came from the academy and was developed by the Club into being one of the world’s best left-backs.  He had been left "trembling with anger" when they were only prepared to offer him wages of £55,000 per week, and he was transferred to Chelsea (who were, under Mr Abramovich, offering him £90,000).  The policy remained in evidence when Mikel Arteta joined Arsenal.  He took a cut in wages of around £10,000 per week from his previous employers, Everton - who are known to be operating under severe financial restrictions – to join on a reported £60,000 per week (In light of his performances in his first season for Arsenal, the Club’s Chief Executive was, apparently, due to meet Senor Arteta's representatives to discuss an improved contract[22]).  More recently, Theo Walcott has been reportedly offered £75,000 per week - a relatively modest sum, in the overall context of the game and his overall, if sometimes mixed, contributions.[23]

However, within a few seasons of Mr Cole’s departure, similar sorts of sums were being routinely paid to a large group of unproven fringe Arsenal squad players.  Young prospects, Messrs Bendtner, Denilson and Vela were all awarded £50,000 per week contracts.  But, the failures are not just restricted to the failures of the young signings policy.  For example, Senor Alumunia earned £60,000 per week last season and made no appearances for the Club; Monsieur Squillaci £50,000 per week for one, poor, substitute appearance in the Premier League and few others; and Young Park £40,000 for a similar return (and has now gone out on season-long loan).  On the other hand, star players such as Messrs Fabregas and Van Persie salaries were not very significantly higher, considering their competences and status. 

The Club’s recent forward signings provide another interesting case study.  Forwards Messrs Gervinho (4 goals from 26 starts, and 11 appearances as substitute), Chamakh (1@1, 12), Park (1@ 4, 2) contributed just 6 goals between them in all competitions.  Their combined acquisition and salary fees, given the inherent offensive balance of the squad may have been better spent one a low risk forward.  Indeed, the experienced Premier League offensive midfield loan signing Mr Benayoun, now departed, scored 6 goals from just 15 starts and 10 sub appearances.  The real economic benefits of multiple high-risk offensive signings, against signing fewer lower-risk forwards with an established Premier League etc. goal-scoring record is highly questionable.  

There have also been question marks over the efficiency in terms of wage spend on the clubs often huge roster of first team squad players on loan.  Arsenal contribute to some players’ wages, whilst on-loan.[24]  Of last season’s loanees, some were young players undergoing genuine development opportunities with lesser clubs by playing regularly - such as had been successful with Messrs Wilshere and Szczesney (at Bolton and Brentford).  Others were players now appear surplus to requirements that the Club seems unable to offload, such as Messrs Denilson and Bendtner.  In fact, there was a remarkable 19 players loaned in the 2011 / 2012 season to 17 clubs all around the globe – to, for example, Crawley, Glasgow Rangers, FC Lorient, Gimnàstic de Tarragona, Zenit St. Petersburg and Sao Paolo. 

References

 [2]  http://www. arsenal.com/history/the-wenger-years/club-moves-to-emirates-stadium

[3]  http://www.arsenal.com/assets/_files/documents/oct_12/gun__1349166617_ ARSENAL_HOLDINGS_plc_ANNUAL_RE.pdf

[4] http://www.bbc.co.uk/news /business-14987610   

[5]  http://en.wikipedia.org/wiki/David_Dein

[6]  http://www.arsenaltrust.org/resources/documents/1341846103ast-questionaire-2012-results-v5.pdf

[7]  http://www.standard.co.uk/sport/ football/peter-hillwood-of-course-arsenal-can-win-the-league-this-season----and-spurs-wont-trouble-us-8104267.html

[8]  http://www.telegraph.co.uk/sport/ football/teams/ arsenal/8797931/Arsenal-owner-Stan-Kroenke-Arsene-Wenger-is-one-of-the-greats-he-will-be-in-charge-for-as-long-as-he-wants.html

[9]  cited by swissramble@blogspot.co.uk/2011/10arsenals-finances-21-questions.html

[10]  http://www.arsenaltrust.org/resources/documents/1341846103ast-questionaire-2012-results-v5.pdf

[11]  http://www.arsenaltrust.org/news/2012/ivan-gazidis-qa-report

[12]  cited by swissramble@blogspot.co.uk/2011/10arsenals-finances-21-questions.html

[13]  http://www.bbc.co.uk/sport/0/football/18725835

[14]  http://www.telegraph.co.uk/sport/football/ teams/arsenal/8852790/ Arsenals-majority-shareholder-Stan-Kroenke-tells-supporters-I-am-here-for-the-long-term-at-AGM.html

[15]  http://www.telegraph.co.uk/sport/football/teams /arsenal/8797931/Arsenal-owner-Stan-Kroenke-Arsene-Wenger-is-one-of-the-greats-he-will-be-in-charge-for-as-long-as-he-wants.html

[16]  When undisclosed by Club transfer fees are estimates, sources: http://arsenaltrust.org/news/2012/ast-analysis-of-financial-position-of-arsenal-football-club, http://www.bbc.co.uk/sport/0/football, http://www.transferleague.co.uk/ premiership-transfers/arsenal-transfers.html

[17]  http://www.arsenal.com/ history/the-wenger-years/club-moves-to-emirates-stadium

[18]  http://www. telegraph.co.uk/sport/football/ teams/ arsenal/9499532/Arsenal-manager-Arsene-Wenger-says-instability-at-Emirates-Stadium-can-be-ended-by-British-core.html

[19]  http://www.arsenal.com/assets/_files/documents/oct_12/ gun__1349166617 _ARSENAL_HOLDINGS_plc_ANNUAL_RE.pdf

[20]  http://www. bbc.co.uk/news/ business-14987610

[21]  http://www.telegraph.co.uk/ sport /football/ teams/ arsenal/8797931/Arsenal-owner-Stan-Kroenke-Arsene-Wenger-is-one-of-the-greats-he-will-be-in-charge-for-as-long-as-he-wants.html

[22]  http://www.bbc.co.uk/sport/0/football/18324116

[23]  http://www.bbc.co.uk/sport/0/football/19707348

[24]  http://arsenaltrust.org/news/latest-news/ast-analysis-of-financial-position-of-arsenal-football-club