The challenges of hosting major events owned by International Federations The 2014 Chess Olympiad - Chess Governance
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The challenges of hosting major events
owned by International Federations
A case study of the 2014 Chess Olympics
-
The 2014 Chess Olympiad
Harry Arne Solberg and Lin Olderøien,
Centre of Sport and Culture Management Research
Norwegian University of Science and Technology
Norwegian University of Science and TechnologySome examples:
• Financial results in red-figures
– 2017 UCI World Cycling Championship, Bergen, Norway
– 2015 UCI World Cycling Championship, Richmond, US
– 1995 IAAF World Athletics Championship, Gothenburg, Sweden
• White elephants / Cost overruns on venues
– FIFA World Cup 2002, 2010, 2014
– 2004 UEFA Championship, Portugal
– 2011 FIS World Skiing Championship, Oslo, Norway
• Tourism impacts lower than expected
– 2017 UCI World Cycling Championship
– 2012 London Olympics
– 2010 and 2002 FIFA World Cup
Norwegian University of Science and Technology 2Research issue:
• Why are these problems so common?
The Chess Olympiad an opportunity to investigate:
• An event of medium size
• The dynamic forces in work - from the early start till the
closing down of the office
• The relationship between the local organizer and the
owner (FIDE)
Norwegian University of Science and Technology 3The 2014 Chess Olympiad
• Hosted in Tromsø, Norway 1-14 August, 2014
• Celebration of The Norwegian Chess Federation centennial jubilee
• Initially planned as preparation for the 2018 IOC Olympics
• Attracted 3250 visitors to the city of 72,000
– 1518 players from 167 nations
– 430 attendances at the FIDE congress
• 53,100 bed nights / 102,500 meals
• Occupied 100% of Tromsø’s accommodation capacity.
Norwegian University of Science and Technology 4Major stakeholders involved:
• FIDE as owner
• Local organiser (COT2014)
– Tromsø city council (90%),
– Norwegian Chess Federation (10%)
• Norwegian government (funding 64% of the costs)
• Local hotel industry
Norwegian University of Science and Technology 5Methods:
• Seven semi structured in-depth interviews with informants
from:
– COT2014: Administrative staff, board members
– Tromsø city council
– Norwegian Chess Federation
– FIDE
• Documents:
– COT 2014 documents
– Consultancy report (finances)
– FIDE regulations on the Olympiad
– Juridical documents
– Articles in newspapers / magazines
Norwegian University of Science and Technology 6Financial result COT 2014:
Revenues: NOK133,5 mill. (€15,9mill.)
Costs: NOK137,6 mill. (€16,4 mill.)
Deficit: NOK 4,1 mill. (€500,000) (2,9%)
• One creditor submitted bankruptcy petition, which
later was withdrawn
• Creditors received 90% of the debt
Norwegian University of Science and Technology 73 periods:
1. From the idea appeared until the application submitted
2. Candidacy period
3. After the awarding
Norwegian University of Science and Technology 81: Before submitting the application
• Winning the event being prioritised (almost at whatever price)
• 2014 the only alternative due to the jubilee
• Offensive strategy: Show potential rivals that we mean serious
business
• Increased the fee with NOK 5 mill. Earmarked subsidising of travel
costs for players from low income nations
• Hiring key supporters to promote Tromsø’s candidacy, but also an
informant (mole) to seek information
• FIDE informing applicants that host city would also have to host the
2013 World Cup
– A heavy financial burden NOK13,5 mill. (€1,5 mill.)
– COT2014 unprepared - had already submitted the application
for governmental funding
Norwegian University of Science and Technology 92. The candidacy period
• Two applicants: Tromsø and Albena from Bulgaria
• Tromsø informed by their «mole» that Albena had been offered to
buy the event – other sources later confirmed the information - but
Albena rejected
• FIDE also tried to create a bidding war the day before the awarding
– but without success
Norwegian University of Science and Technology 103. After the awarding
• COT2014 applied for additional funding – first rejected, but later
granted NOK12,5 million
• Russia (RCF) enrolled female team after the deadline => enrolment
rejected
• Russia protested and was supported by FIDE => FIDE threatened to
move the Olympiad to Sochi => COT2014 gave in and accepted the
late Russian enrolment
=> COT2014 also had to accept late enrolments from 14 other teams
=> additional costs of €120,000
=> Juridical dispute, where RCF required a compensation of
€150,000, from COT2014, but RCF lost in the court.
Norwegian University of Science and Technology 11How to analyse these incidents?
Three theoretical perspectives
a) Auction theory
b) Principal-agent theory
c) Ethical theory
Norwegian University of Science and Technology 12a) Auction theory
Period 1:
• Secret auction
• Regulations requires a fixed fee, but possible (and common) to bid
more, which Tromsø did
• FIDE more powerful the more bidders there are
• Bidding cities unaware of each other at this stage - therefore unable
to collaborate
• Applicants already having spent costs at this stage
• COT2014 extra vulnerable because of the jubilee factor
• FIDE successful: Candidate accepted also hosting the World Cup
Norwegian University of Science and Technology 13Period 2:
• Two candidates: Tromsø and Albena from Bulgaria
• FIDE tried to orchestrate auction before the awarding
• Tromsø and Albena unwilling and collaborated – Trust
had been established
• FIDE unsuccessful
Norwegian University of Science and Technology 14Period 3:
• Hypothetical auction with Sochi as a «possible» rival
• => collaboration impossible
• FIDE already shown they were not to be trusted
• COT already signed contracts with suppliers (hotels)
• FIDE successful
Norwegian University of Science and Technology 15Factors deciding the outcome of auctions
• Distribution of power between supply and demand side
• Degree of urgency
• Collaboration
Norwegian University of Science and Technology 16b) Principal-agent theory
• Principal = The owner of the event (FIDE)
• Agent = Tromsø, the agent hired to host
• Distribution of power a key word
– Principal deciding the rules
– Situations where rules are not being followed
• Situations of asymmetric information:
– One part taking advantage of being better informed
– Usually, the agent is better informed, but in this case the
opposite was present
Norwegian University of Science and Technology 17c) Ethical theory:
• What are the rules and regulations?
• Will they be followed by those involved?
• How to react if not – withdrawing or adopting the same
behaviour?
Norwegian University of Science and Technology 18Quotes / reflections from interviews/newspapers:
• This was a world where power, positions, strong
relations, and incentives are important….
• ….and where you get the impression that corruption and
bribes are common…
• …it is not driven according to Norwegian morals and
values…
Norwegian University of Science and Technology 19• We understood that we had to play the game according
to the rules that were “out there”
• If it is extremely important to win the bid, let others do
the dirty work…
• …involving instruments that in some context would be
considered in the ethical grey area…
• «Hiring a mole to seek information and influence key
stakeholders…and indication of mistrust
Norwegian University of Science and Technology 20• Ethics and moral practice was contextual»
• An environment where procedures contradicting the
rules are common => a context that makes rules relative,
changeable and adjustable
• An environment where cultural differences create
different definitions and practices of trust»
Norwegian University of Science and Technology 21Conclusions
• A local organiser not fully prepared for what will come.
• Had overoptimistic expectations, which is common.
• The meeting of stakeholders from different ethical
cultures.
• How (un)usual is this story?
– Conflicting interests between owner and organiser are common
– Owner the most experienced of the two, and often the one who
decides the premises
– Distribution of power important
Norwegian University of Science and Technology 22Thanks for your attention!!! Norwegian University of Science and Technology 23
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