Wednesday, 1 November 2017

Where Does Racing Stand, on the Scale From Maximum Integrity Through to Frequent Corruption? Part 1 of a Series Examining This Issue

Back in my management consulting career I specialised in procurement and supply chains across major industries on a worldwide basis. In that capacity I advised companies with a total third party spend of well over £3 trillion. I once sat down and worked out how many suppliers in total our clients had, and it was many millions. Hardly surprising that by the end of my career any rose-tinted spectacles about commercial practices were well and truly shattered. I encountered corrupt supply chains every day of the week, usually as the result of cartels or quasi-cartels and overly dominant players, able to stitch up markets.

Indeed, in 1997 I actually co-authored a book entitled Transform Your Supply Chain: Releasing Value in Business. I’m sure you’ll be anxious to track down this “best-seller”. There are still copies sitting in a box in my spare bedroom and who knows you might even stumble upon one as a remainder item in a second-hand bookshop. However I still receive royalties so someone, somewhere out there is still interested in the subject. In 1998 my publisher, Thomson Business Press, told me that I was their “best seller in Belgium”. What an epitaph to put on my gravestone: “Big in Belgium”! I felt so proud until I asked them what that actually meant. Apparently the definition of a best-seller in the rather arcane world of business books is if it sells 1,000 copies in the first year. 90% of all books launched sell fewer than that. 90% of the remaining 10% never get beyond 2,000. That in itself just shows you how easy it is to misrepresent commercial practices in a supply chain – in this case, publishing.

Anyway I went to this “best-seller” ahead of writing the blog, and looked up Chapter 10 entitled Governance, ethics and supply sustainability. On the first page of each chapter I flagged up an overview and then a “bottom line”. There were seven points in the overview that I examined more closely in the chapter: (1) Corporate governance and ethical integrity, (2) Social commitment and ethical auditing, (3) Reducing environmental impact, (4) Responsible supply, (5) Dealing with manipulation in supply chains, (6) Countervailing measures for anti-competitive behaviour and (7) Remedies for supply collusion and monopolies. As you can see, it was hardly a light-hearted breeze through the subject. You only had to read the “bottom line” statement to see where I was coming from: “Everyone in an organisation needs to know the difference between acceptable and unacceptable commercial, social and environmental practice. Without such precision in ethical stance, the risk of a company severely damaging its reputation is unacceptably high. This can wreak havoc on brands, morale and shareholder value. Indeed, it can undermine the very sustainability of the business.”

It's hardly surprising that ever since I’ve been involved in buying and owning horses I’ve looked at the whole operation through the prism of ethical or unethical supply chain practices. Unfortunately I soon came to the conclusion that the racehorse supply chain is unacceptably prone to manipulation at best, and illegal corruption at worst.

Twelve years on from becoming an owner I was pleased to see that the BHA has launched a review into the buying and selling of horses. This is long overdue. There are all sorts of reasons why this is being done, not least the increasing concern that the processes adopted and the sales environment that owners encounter could be deterring existing and potential owners from pursuing or increasing their involvement in our sport. I suspect it isn’t a coincidence but the BHA has also recently done its first ever annual Integrity Survey (which I completed), aiming to measure perceptions and confidence around integrity in British racing and identify areas for improvement. The BHA emphasised that their integrity function is there “to ensure that the public and participants can be confident that British racing is run fairly and in accordance with the rules, that crime and corruption is deterred, prevented or penalised, and that there is a level playing field for competitors.”

Delighted to hear this, and an excellent sentiment. It is going to be extremely interesting to see whether the BHA and British racing has the necessary determination to map out exactly where distortion / corruption take place and then introduce the changes necessary to “deter, prevent or penalise”. Hopefully the review into the buying and selling process will be a good starting point.

Most interestingly though, when the review was launched, was the immediate reaction of agents and auction houses, both of whom collectively stated that they’d never encountered any malpractice at any stage in their lives. No-one had ever complained to them. Clearly everything in racing’s garden is just fine and dandy. Indeed, Goffs’ CEO, Henry Beeby, with mind-bending complacency, stated: “I am adamant British and Irish bloodstock auctions are as fair and transparent as they can possibly be.”

Well, well, well. The auction houses sit astride billion-pound supply chains with thousands of operators. Who would have thought that they’ve never, ever in their lives encountered any malpractice. The ethics and integrity hill, methinks, is going to be a hard one to climb. To be continued in the next blog.

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