Guest Post: Board of Directors
Once again, I am very happy to turn the blog over to Tomáš Vorčák (@vorkywh24 on Twitter), who has been keeping a close eye on developments regarding the KHL’s new strategic plan, unveiled about ten months ago. Mr. Vorčák’s last article was in December, and now he is back to talk about this week’s meeting of the KHL Board of Directors. I gave a very fast update on the meeting on Wednesday, and now Mr. Vorčák has some more in-depth analysis of the situation, and some very interesting notes on how the Board functions. Read on!
The KHL Board of Directors approved the league’s new strategy on March 23, 2018. The Strategy has been changed a bit. The first concept of the Strategy was presented in May 2017 and we wrote about it. The league received some recommendations on the Strategy from the FHR, the KHL clubs, and the Russian Ministry of Sport during the second half of 2017 and perhaps in 2018 as well. And the KHL Board of Directors made a final decision last week. Let’s have a look at the changes to the Strategy.
The most important item is a change of a salary cap mechanism, but I will start with league contraction. Per public information, the league’s aim is still to reduce the number of teams to 24. It was planned that following this season they would have 24 teams, but the decision was made to have 25 sides. Only Lada & Yugra left the KHL. Severstal, as next in line, stayed at least for one season. Dmitry Chernyshenko said that Severstal has made significant progress during the season, with a 13% increase in attendance and 57% increase in demand for the club’s games by broadcasters. And of course, the club made it to the play-offs. It will be very interesting to follow the further development. It was planned that the league will accept two new teams in 2019. Now Chernyshenko is speaking about “one club if there is a serious application.”
Originally it was planned that a “hard” salary cap would be in place for 2019/20 with one “star player” not counting towards the cap. The following two seasons the cap would be reduced to 600 million rubles with exception for two “star players.” CSKA Moscow proposed a change of mechanism and it was approved. Season 2019/20 will stay as a “soft cap” with a 30% luxury tax if a club exceeds the cap. The hard salary cap will start, let us hope, from 2020/21 and will be at the level of 900 million rubles. And there will be no exceptions for star players, plus U21 players are not counted towards the cap. Of course, as planned, individual and collective bonuses (20%) are not counted as well. There are rumors about a salary floor, but no final decision has been made yet. The KHL had a salary floor in Alexander Medvedev’s era, but it was abandoned by Chernyshenko’s leadership. His argument was that players are overpaid, so there is no need to overpay them even more. Advocates of a salary floor say today that SKA and CSKA will not be able to afford so many high paid players, but other teams need to be ready to offer them similar conditions, so their budget for salaries need to be appropriate. Therefore there needs to be a salary floor. We will see.
The KHL is an organisation with various centers of decision-making. As we can see with changes in the Strategy, there are at least four such categories – the KHL leadership, the FHR, the Russian Ministry of Sport and the clubs. And of course the interests of clubs differ from each other. The FHR has two representatives at the KHL Board of Directors, they are Vladislav Tretyak (the FHR President) and Arkady Rotenberg (the Head of the FHR Board). Roman Rotenberg is a complicated figure, because he serves in high positions in all – the FHR, the KHL and SKA. The FHR wanted to keep Yugra and especially Lada in the KHL for next season. According to the IIHF rules only a national hockey federation can organise a national championship/league, but a federation can delegate this right to another organisation, the KHL in this case. And that is a reason why there are discussions about scheduling (how many free days for national teams’ actions during a season) and the limit on foreign players. The KHL and the FHR have to make a compromise on an issue. The KHL had a long break for the Olympics this season, on the other hand we will see shorter breaks for the Euro Hockey Tour tournaments next season than we have this season.
The Russian Ministry of Sport is represented by Alexei Morozov at the KHL Board of Directors. The KHL is represented by four executives – Gennady Timchenko (the KHL Chairman), Dmitry Chernyshenko (the KHL President), Alexei Anisimov (the KHL Chief Referee) and Valery Kamensky (the KHL VP). Chernyshenko was an advocate of an original version of a salary cap, but a camp of clubs, led by CSKA, prevailed. The KHL shareholders & co-founders are the following clubs – Sibir, Severstal, Ak Bars, Metallurg Magnitogorsk, SKA, Torpedo, Dinamo Riga, Dinamo Minsk, Dynamo Moscow. Five of them have their representatives at the KHL Board of Directors – Kirill Fastovsky (Sibir), Gennady Velichkin (Magnitka), Timchenko/R.Rotenberg/Alexander Medvedev (all SKA), Juris Savickis (D.Riga), Igor Shunevich (D.Minsk). Jokerit (Jari Kurri) and CSKA (Igor Esmatovich) have the KHL Board members as well, but are not the KHL shareholders per public sources. Severstal, Torpedo & Dynamo Moscow do not have their representatives. And Ak Bars is represented by Nail Maganov from the Tatneft. The Kazan club is owned by Tatneft and the Tatneft is also a KHL shareholder. Other KHL shareholders are Gazprom-Export (the Board Member Medvedev), Transneft (Boris Korol) and the Magnitogorsk Iron and Steel Works/MMK (Viktor Rashnikov). The MMK is also Metallurg Magnitogorsk´s co-owner. So Magnitka has two Board members de facto. Vyacheslav Fetisov is the last Board member; per rumors he should leave the Board due to a Russian law (he is a Duma member as well). As we can see there are more groups of entities and every group has their own interests. Therefore it is not correct to claim that the KHL is one united entity. Opinions are different and one group prevails on day 1, but other group prevails another day.
There are expected to be two interesting issues in next couple of months. The KHL Board of Directors approved a financial fair play law as proposed by the Strategic Plan & a special committee was approved. The Committee’s role will be to control clubs’ economy and recommend to them how to spend money more effectively, because there are significant differences between teams regarding the administrative and travel costs. Chernyshenko also announced that the league would like to play a few regular season games in Europe next season. No details are available right now. The league plans to reveal the 2018/19 schedule in June; likely we can expect an announcement on European games too if everything is ready by that time.