The New Zealand Herald

Damien Venuto: Team NZ – too hot to handle?

Future support likely to depend on whether funding allegation­s gain more ground

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Questions over the financial management of Emirates Team New Zealand have flung the organisati­on into the media spotlight for all the wrong reasons.

By default, the saga has caught up the collection of big brands that have paid handsomely for the privilege of pasting their names across the sails and hull of the illustriou­s boat.

So far, none of the major sponsors contacted by the Herald were willing to comment on their support for the team.

Spark spokeswoma­n Cassie Arauzo, for example, said the telco would be keeping an eye on proceeding­s.

“We understand MBIE is working with America’s Cup Events (ACE) Ltd, and Emirates Team New Zealand in relation to the claims made, and so we do not feel it is our place to comment at this stage,” she said.

“We will continue to work closely with Emirates Team New Zealand to understand how the situation is progressin­g.”

Other major sponsors Emirates and SkyCity have both declined to comment, and the Herald is awaiting a response from ETNZ itself.

So could the sponsors pull the plug if they wanted to?

Massey University law professor Chris Gallavin says that all depends on what happens next.

“I doubt they will have good grounds at present,” he says.

“It will likely depend on the depth and severity of the allegation­s and whether they gain traction in the media and with investigat­ory bodies.

“The question in their minds will be, no doubt: has Team NZ become publicly too hot to handle?”

That question isn’t unique to this issue or even the sports sponsorshi­p industry. There is always an element of risk when it comes to sponsoring an individual or a sporting body — and that risk has only grown in the online age.

“List any individual sportsman or woman who has ever received negative publicity or said something silly online, or conducted themselves disgracefu­lly, and you will hear about sponsors abandoning them,” Gallavin says. “Same for sports clubs who make wrong moves in the media over all manner of issues — sponsors will say, ‘we don’t want to be associated with this brand any more’ and will rely on their terminatio­n agreement within their contract to end the relationsh­ip.”

Sponsorshi­p and reputation are interwoven concepts, and that’s why sponsorshi­p agreements usually have a terminatio­n clause that allows a sponsor to cut ties in the event of reputation­al damage.

“Sponsors want to be aligned with the reputation of the person, company, sport, etc that they are sponsoring,” Gallavin says.

“If the entity being sponsored no longer has a good reputation, then the entire object of the sponsorshi­p is likely removed.” That will ultimately remove a sponsor’s motivation to provide money and support to an individual, team or sporting body.

Depending on the nature of the agreement, a sponsor could be within their rights to pull any future funding after activating the contract’s terminatio­n clause.

Many questions are still unanswered. What we do know is that Auckland Council and the Ministry of Business, Innovation and Employment have raised a raft of concerns over the handling of public money, while police are now investigat­ing how a hacker convinced ETNZ to send a large payment to a Hungarian bank account.

The council and MBIE say a financial dashboard that was presented in May — showing public spending — was “materially different” from what was presented earlier in the year.

This issue isn’t likely to go away in a hurry. There’s simply far too much money involved for that to happen.

The council and the Government have poured $250 million into hosting the 36th America’s Cup — and the council is planning to spend a further $20m to support the regatta and other events next year.

If anything, this week’s revelation­s have drawn attention to the staggering figures being thrown at this event and will only increase the resolve of critics who question why this even happens in the first place. That level of attention alone might be enough for some backers to consider their continued associatio­n with the event.

In the meantime, every leaked email, investigat­ive inquiry and pointed question from a journalist will only cast a longer shadow over Team New Zealand.

And while the team itself might not be able to escape, the sponsors have an exit strategy should they wish to activate it at any stage.

Team New Zealand will hope it doesn’t come to that, and the event’s future is decided on the water, not in the sponsors’ boardrooms.

If the entity being sponsored no longer has a good reputation, then the entire object of the sponsorshi­p is likely removed.

Massey University law professor Chris Gallavin

 ?? Photo / ETNZ ?? Some very big companies have paid a lot to have their names on New Zealand’s America’s Cup craft.
Photo / ETNZ Some very big companies have paid a lot to have their names on New Zealand’s America’s Cup craft.

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