NYT on Sunil Gulati

It is encouraging to see the mainstream media paying attention to FIFA governance and the role of Sunil Gulati in it. A few days ago the NYT did an analytical piece on Gulati's new role. Here is an excerpt:

Gulati, the president of the United States Soccer Federation, was elected to the 25-member executive committee of FIFA, soccer’s governing body, in an 18-17 vote by members of Concacaf, the regional organization consisting of countries from North America, Central America and the Caribbean.

On the surface, this is positive: the United States now has a seat at the table, as Gulati said, in the group that makes most of the important decisions in global soccer, including selecting the dates and sites for major tournaments. That presence is no small development for a country that has problems related to its own professional league. Major League Soccer does not have a promotion-and-relegation system, unlike most of the rest of the world, and it does not play its season in the traditional international window; having FIFA’s approval for these idiosyncrasies, Gulati noted, is important.

So from that perspective, Gulati’s election is encouraging. But it also feels a bit as if a child has put on a crisp white suit just before going out to play beside a giant mud puddle.

Global soccer is, at present, a quagmire of corruption. Bribery, blackmail and cronyism are rampant, and in recent years as many as 10 members of the executive committee have been linked to venalities of varying degrees.

Read the whole piece here.

Grant Wahl Interviews Sunil Gulati: Welcome to the Real World

Sports Illustrated has posted an valuable interview with Sunil Gulati, president of US Soccer and newly elected representative of CONCACAF to the FIFA Executive Committee. In the interview Grant Wahl asked lots of questions about FIFA governance.  Here are some excerpts and my commentary.

It is interesting to learn the amount of information that Gulati did not have. For instance, here are some examples excerpted from the interview:

Wahl: [Which] FIFA committees are you on right now?
Gulati: I don't know yet. That's to be determined

Wahl: You're unpaid in your position as U.S. Soccer president. You will be paid as a member of the FIFA Executive Committee. How much?
Gulati: Formally, I haven't been told that yet. I'm sure I'll find out in the weeks to come and I'll find out the rules and regulations about disclosure.

Wahl: Is there a specific FIFA policy that prohibits disclosure?
Gulati: I've asked that question and I don't know the answer to that.

Wahl: Do you know how much Blatter receives in compensation?
Gulati: No.

Wahl: Should members of the FIFA ExCo know such a thing?
Gulati: I'm sure some members of the FIFA ExCo do. I don't.

Gulati explained what it means to be on the ExCo:

Gulati: What does [the FIFA ExCo spot] mean? It's a seat at the table of essentially the board of directors of the body that governs soccer throughout the world. So whether it's discussions about the long-term growth of the game or changes to the laws of the game, which eventually go to the IFAB, or the use of funds from the World Cup and how those are divvied up, development funds, all those things. It's a normal board of directors, so having a voice there is certainly positive.

A member of a board of directors ought to know many of the things that Gulati does not, so hopefully Wahl or other reporters will follow up with many of these same questions in the fall.

Wahl asked Gulati about the recent CONCACAF Integrity report, and the limited answer provided by Gulati suggests that he was without much information at all about CONCACAF governance in recent years as a member of its Executive Committee:<

Wahl: The CONCACAF Integrity Report came out and there were some staggering examples of improper behavior by former leaders Chuck Blazer and Jack Warner in the report. You served on the CONCACAF Executive Committee during their time in power. Were you aware of their activities in that report?
Gulati: The answer is no.

Wahl: There was good journalism done — admittedly not enough by me, but by others — revealing improper behavior that ended up in that Integrity Report. Do you feel like you should have done more?
Gulati: There are two things. One can always say one should do more in certain situations. But secondly, and more importantly, in the midst of various legal proceedings, I'm not going to talk about this. I'm not involved in any legal proceedings, but I think it would be inappropriate to say very much about that given FIFA proceedings and other potential proceedings.

Wahl: Are we looking at FBI and IRS investigations into Blazer and Warner, as has been reported?
Gulati: Given various proceedings, I'm not going to comment on anything else here.

It is of course fair enough and to be expected that Gulati does not want to discuss the issues associated with corruption in CONCACAF. However, it is remarkable that as a member of the CONCACAF Executive Committee (that organization's "board of directors") Gulati was completely unaware of the finances of the organization -- which as we have learned were often co-mingled with the personal finances of Jack Warner an Chuck Blazer. 

Recall that Blazer and Warner appropriated approximately $88 million of football funds for personal use. How does that go unnoticed by the CONCACAF Board? Should a member of the CONCACAF ExCo have known more? I would expect that Gulati will face -- appropriately so -- further questions about what he did and did not know, from the media and various investigators.

Wahl asked Gulati about his views on the FIFA reform process and the criticisms that former FIFA IGC member Alexandra Wrage made about the process (she ultimately resigned from the committee in April):

Wahl: You just got back from the FIFA congress in Mauritius. How would you grade the FIFA reform process and what it's accomplished so far?

Gulati: Well, since what I do for a living is grade students, I'd say incomplete. What's been done up to now, I think, is a long way toward addressing some of the issues, but I think more needs to be done. So setting up independent chambers on the ethics panel for adjudicating and investigating, that's a big plus. Setting up the external audit and compliance group under Domenico Scala is a great advance. And the people that are in charge of those three groups, from everything I've seen, read and witnessed and talked with them about, are highly qualified and highly professional. That's a big plus.

The rewriting of the ethics code is a big plus. It's pretty clear what's happened the last few years with seven, eight, nine people who've left the ExCo either by their own decision or by formal investigation or some combination of both. That doesn't happen if people are just saying let's forget about the past and move on. Some of those things happened a long time ago. Under the new code of ethics they can be investigated and disciplined for that. Those are all pluses.

There are any number of other things, in terms of the funding of programs, the audit and compliance area, the transparency of funding development projects, external bids within the general area of finance the whole bidding process has changed. I'm not talking about the World Cup bidding process, but the bidding process for contracts with FIFA for business.

The changes are incomplete in my view on the World Cup [host] decision-making. The only formal decision to be made so far is the final decision will be made by 209 countries.

Wahl: Alexandra Wrage resigned from the IGC and had a very public critique of the IGC's work. Do you think her criticism was off the mark?
Gulati: I don't agree with Alexandra's comments. I think much was accomplished in the process and much still needs to be done. To the extent she believes other things still need to be done, that's fine. To the extent she believes the 18 months didn't accomplish anything, I think that's off the mark. Frankly, I think [her criticism] was unfair to the three people that are now in charge of the adjudication, investigation and audit/compliance [bodies], all of whom to me are highly qualified, highly independent and have done from what I've seen so far a commendable job on the issues.

Gulati's optimistic view of the reform process jibes with FIFA's own view, but is hard to square with an objective evaluation.

Finally, one of Gulati's comments was revealing for what it says about how those who govern football view the world. When Wahl asked Gulati about US support for Blatter in the 2011 FIFA election, noting that he was the only one on the ballot. Gulati replied:

Gulati: [F]rankly I'm not sure what world you live in. I live in the real world.

At some point Sunil Gulati will have to choose between the red pill and the blue pill. He is not quite there yet. As Morpheus tells Neo in The Matrix, "Welcome to the real world."

Analysis: A Report Card on FIFA Reform

Over at Play the Game I have a new analysis up focused on a (somewhat) objective evaluation of the FIFA reform process. Here is how it begins:

Last month at the FIFA Congress in Mauritius FIFA President Sepp Blatter declared that the governance reform process that he had initiated two years earlier had come to a close, "We have been through a difficult time. It has been a test for football and those who lead it. As your captain, I can say we have weathered the storm." 

Mark Pieth, a professor at the Basel Institute of Governance and the man hand-picked by Blatter to lead the FIFA Independent Governance Committee to advise the reform process, said of the two-year effort, “In a relatively short space of time, it's quite spectacular so far what has been achieved.” FIFA announced that the process had been a resounding success: “the majority of the reform recommendations by the IGC were implemented.”

Such comments are difficult to reconcile with the perspectives of other close observers. One member of the FIFA IGC, Alexandra Wrage, a governance expert and president of TRACE International, resigned from the committee just over a month before the Congress in Mauritius, explaining, “It’s been the least productive project I’ve ever been involved in. There’s no doubt about that.”

Following the Congress, Guido Tognoni, former FIFA Secretary General, told a Swiss television station that, “Mark Pieth has good intentions but to me he’s like Sepp Blatter’s poodle. He must bark loud but he’s not allowed to bite. He had a promising approach but, of course, he’s banging his head against a block of granite.”

With such claims and counter-claims flying about, colored by interests and personalities, it can be very difficult to get a sense of what was actually accomplished in the FIFA reform process. In order to provide a somewhat more objective basis for evaluating the process, I have undertaken a formal evaluation, with a first look at the results presented here.

To see how the evaluation comes out, both for FIFA and for its IGC, head over here. Comments welcomed here or by email, as this is a work in progress.

5 Things I Wish I was taught "How To Be" when I was a Teenager (to be Financially Better Off)!

Do you, or someone you know, have things you wish someone taught you "how to be" when you were a teenager, to be financially better off?  I do!
  

“If I knew then what I know now.” This has got to be the theme song for most adults, especially when it comes to finances.  There are hundreds of things that I wish I was told, taught or nagged about when I was a teenager.  But, here are my top 5 Things I wish I was taught “how to be” when I was a teenager, to be financially better off.
 

I wish I was taught how to be …

  

A Boss!

No, not Bossy, but A Boss of my own business. Instead of being encouraged to go to school so I can get a good job, I wish I was told and taught to go to school to learn how to make jobs. Or to go get a job to learn what it takes to run a business. Seriously, we are told what to do and what not to do when we are children, only to go to school to get a job for other adults to tell us what to do and what not to do when we become adults.  Seems like a set up to me now.  
  

So teens … go to school and get a job, NOT to just be an employee, but to learn how to become an entrepreneur. Besides, there are not that many jobs out there right now anyway. Create your own business and Be A Boss!

  

A Giver

The first principle of Prosperity is Giving! In order to reap a harvest, a seed must be sown.  Always remember, there is no room to receive in a closed fist.  Whether your giving is spiritually, morally or emotionally based, give gladly and on good ground. Giving is not always about money. Sometimes your old clothes, knowledge, or time may be just as, if not more, valuable.
  

So teens … learn the power and pleasure of giving early to a church, non-profit or worthy organization or individual. You’ll be surprised of the blessings you will receive because of your openness to give.

  

A Saver

Who knew that if I had saved only $100 per month when I got my first job at the age of 14 in a savings account with an interest rate of 0.50% until now (25 years), I would have saved over $32,000? And if I had saved $200 per month, it would be almost $65,000.  The point is, if I really understood the power of saving at a younger age when I could afford it, I would be able to afford almost anything I wanted when I got older.
  

So teens … Start Saving Sooner!!! The younger you are when you start saving, the more you will have when you really need it when you get older. Trust me on this one.

  

Financially Proactive

Enjoy today but Live for Tomorrow!  Tomorrow is your future. Live like you are going to be alive for a long time and you want to be financially comfortable for the rest of your life. True story … If I had planned for the things that I wanted “tomorrow” (in the future); I would nothave borrowed money to get what I wanted “today” that I would have to be paid back “tomorrow” (in the future). Well, it’s tomorrow for me now and I’m still paying for what I borrowed “yesterday” (in the past).  My point is that using credit to get what you want right now will limit what you can afford tomorrow, when you really need it. It’s no fun not being able to afford to buy a home because you owe too much in credit card debt.  Credit is designed to be a leverage to help you acquire real “assets” (read Robert Kiyosaki’s book, Rich Dad Poor Dad) or to be an anchor and drown you deep in debt.
  

So teens … use credit wisely and do not use it until you are mature enough to handle its consequences (read my book, Financial Fornication).

 

Wealthy!

Not rich, but Wealthy! Rich is predicated on how much money you have, but Wealth is determined by how much you are able to do with the money you have. I’ve met hundreds of broke “rich” people, but I’ve never met a broke “wealthy” person.  Also, don’t believe the bling you see on TV! Nine times out of 10, the bling is borrowed! #IJS
 

So teens … follow my Financial Freedom Formula early and be wealthy for the rest of your life!

 

      

Those are my top 5 things I wish I was taught, but believe me there are more. Come to think of it, I was probably told to be a few of them, but I just didn't listen. Typical teenager.  ;-)

   

Best wishes on your journey to Financial Freedom!

   

Financially True,

   

Tarra Jackson, Making Money Sexy!

Further Thoughts on Sepp Blatter's FIFA Salary

A few months ago I offered a guesstimate at Sepp Blatter's FIFA salary of $6 million. I have just read through the 2012 FIFA Financial Report which was released a few weeks ago in Mauritius (here in PDF) and have a few additional thoughts.

In 2012 FIFA had total personnel expenses of $90,649,000 covering 412 employees, for an average of about $220,000 per employee (from p. 73). However, the report also notes that "key personnel" received $33,500,000 in compensation in 2012 (from p. 94). These "key personnel" include members of the FIFA Executive Committee, Finance Committee and management.

If we subtract the compensation of the "key personnel" from the total and also the 38 personnel who fall in that category, we find that the average salary of a non-key FIFA employee is about $153,000.

There are 25 members listed on FIFA's Executive Committee (let's set aside those who are suspended or otherwise outcast) including FIFA President Sepp Blatter. The Finance Committee is comprised of member of the ExCo, but for salary purposes, let's treat them as separate salaries. We do not know how much compensation these 25 receive, we just have a snippet of information from Mohammed bin Hammam in 2011 who revealed the ExCo compensation in 2010 to be 200,000 Euros, or about $280,000.

Since 2010 was a World Cup year FIFA's revenues were high and the pay to the ExCo was apparently high as well:

"We don't get any salaries," Bin Hammam said. "We are only getting bonuses [and FIFA expense reimbursements]." One FIFA source told SI.com that personal bonuses for the executive committee are larger in years when FIFA's profits are higher, as was the case in 2010.

For simplicity sake and to likely err on the over, let's go with $250,000 as the average compensation of the 24 members of the Executive Committee (minus Blatter) including whatever bonuses are received by those 6 ExCo members who put in additional duties on the Finance Committee. That totals $6 million.

If we subtract that total from the $33.5 million that leaves $27.5 million to be allocated across FIFA management, shown in the organization chart below from the FIFA website showing its administration:

That means 13 individuals average annual compensation of $2.12 million each. I see perhaps 5 or 6 organizational levels in the organization chart. Assuming a simple rule that salaries double from one level to the next, and that the lowest "key personnel" makes $400,000 per year implies that Blatter makes >$12 million per year. That seems high. You can play around with the allocation of the $27.5 million in any number of hypothetical ways, of course, and unless FIFA has a somewhat flat salary structure, it is hard to come up with an allocation to Blatter of $6 million or less, which would be 2-3 times the average of the "key personnel." The alternative of course is that the "key personnel" are very handsomely paid.
 
So right now, I'm taking the over on my April guesstimate as a slightly better than 50-50 proposition. I am pretty confident that (let's say 95%) that Blatter's 2012 salary falls into the range of $2.12 million ("key personnel" average) and $12 million (~6 times the "key personnel" average). That's my guesstimate for today.

5 Ways to Avoid Financial STDs (Substantially Tremendous Debt)

Have you or someone you know been infected with Financial STDs? I have…
   

In my book Financial Fornication, I talk about Financial STDs (Substantially Tremendous Debt).  This financial dis-ease is not only financially and emotional painful, but families and cosigners can get infected as well because it can be contagious.

   
Here are 5 ways to avoid Financial STDS.
   
Use Financial Contraception.
Financial Contraception is better known as a budget or spending plan. Create a budget or spending plan that works with your lifestyle. Using a budget is the best protection against acquiring Financial STDs.
    
Avoid being financially promiscuous with multiple credit cards.
Pick a credit card that has the lowest rate and provides bonus points if you must or choose to use a credit card for purchases. Using multiple credit cards may result in excessive spending, which result in Financial STDs.
    
Limit or Avoid Financial One Night Stands.
A financial one night stand is a financial transaction, usually less than $50-$100, that should be paid in cash or paid in full if purchased with credit. If you choose to use credit for these types of transactions, avoid turning those financial one night stands into a long term financial relationship by revolving the balance and not paying it off in full. Vernacularly speaking, “Hit it & Quit it!”
   
Become Financial Abstinent.
When your finances feel like they’re getting out of control, sometimes it’s best to just STOP using credit to get a handle on your finances. Being financially abstinent stops the leaks in finances so a budget can be created to build up immunity against Financial STDs.

 

Get out of Financially AbusiveRelationships.

If you are getting your butt kicked with ridiculously high loan rates, low deposit rates, lots of fees and poor customer service, they’re probably really not that into you, which means that it’s time to plan your exit strategy from that financially abusive relationship.  You don’t have to stay. Date financial institutions to find the best one for you.

 

For more tips, check out my book “Financial Fornication.”

 

Financially True,

 

Tarra Jackson, Making Money Sexy

Analytics Advice for Phil: Putt for Show, Drive for Dough

If you have another look at the title of this post you'll see that it flips on its head conventional wisdom about golf scoring, where it is almost an article of faith that matches and tournaments are won via the short game. Mark Broadie, a professor at Columbia Business School, published a paper in 2011 (here in PDF) which took a look at 8 years of data (2003-2010) on the PGA Tour to rigorously evaluate where the pros gained the most shots.

What he found was surprising:

Many people claim that the short game and putting are the most important determinants of golf scores. For example, Pelz (1999, p.1) writes, “60% to 65% of all golf shots occur inside 100 yards of the hole. More important, about 80% of the shots golfers lose to par occur inside 100 yards.” Several academic studies have reached similar conclusions. In contrast, strokes gained analysis of PGA TOUR data shows that the long game is the most important factor explaining the variability in professional golf scores. . .

The availability of detailed golf shot data makes it possible to create golf measures that allow consistent comparisons between different parts of the game. Using the starting and ending locations of each shot, strokes gained gives the number of strokes a golfer gains or loses relative to an average PGA TOUR tournament field. Analysis of over eight million shots on the PGA TOUR in 2003-2010 shows that the long game (defined as shots starting over 100 yards from the hole) accounts for more than two-thirds of the scoring differences between PGA TOUR golfers.

Of the three components to the game -- long (>100 yards), short, and putting -- the contribution of the long game to shots gained (over the average player) is huge:

Using data from 2003-2010 for golfers with at least 120 rounds, the contributions to total strokes gained are 72%, 11% and 17% for the long game, short game and putting, respectively. By this measure, the long game explains more than two-thirds of the variation in total strokes gained.

So when Justin Rose won the US Open yesterday, what you saw was the consequence driving in the fairway and long irons to the green, just as Broadie's research indicates is most important. Mickelson falling short resulted not from his short game -- though missed putts and a thin sand wedge from the green made for good TV -- but his inability to hit the fairway and the poor position that placed him in for his long approaches.

Based on the data that Broadie provides for individual players we can look at this another way. If Mickelson improves his putting and short game by another 20% (from his 2003-2010 average) he would gain an additional 0.12 strokes per round over his competition. In contrast, were he to improve his long game by 20%, he would gain 0.24 strokes per round - or a stroke per tournament.

The data show that Mickelson was 12th overall in both the long and short game and 95th in putting.  This would suggest that he has the most to gain in improving his putting. However, when looked at in terms of strokes gained, Mickelson was almost a full stroke behind the Tour leader in the long game, 0.22 in the short game and 0.57 in putting.

If these findings hold today (would need updated data to determine) then this suggests that Phil has a lot more room for relative improvement in the long game than in putting and the short game combined.