The role of Reward and Punishment as Control mechanisms for promoting Good Governance Compliance in Nonprofit Sport Organisations

Abstract

There has been a global increase in institutional pressure to improve governance standards within national sport federations (NSFs), particularly given their modernisation and
professionalisation. However, due to governance failures, many NSFs across the globe have recently experienced a significant 'legitimacy gap'. This issue is not confined to a specific region or sport but is a widespread concern affecting the credibility and trust in NSFs worldwide. The result has been that several governments have taken steps to ‘codify’ good governance in order to enhance organisational processes and behaviours within the NSFs. To encourage compliance with these good governance codes, some governments have conditioned NSF funding on adopting these codes' principles. In scenarios where adoption of the code is associated with funding, it is only done by penalizing non-compliance; therefore, a 'stick' is used to promote good governance. The current literature on sport governance has not addressed whether a carrot approach, i.e. rewarding
compliance, is also an effective mechanism for achieving compliance. Against this global backdrop, this doctoral study was set to examine whether NSFs are more likely to follow the code principles if rewards and/or punishments are applied. This is further examined in conjunction with the certainty that the funders of these NSFs (who have technically issued the codes) will verify whether these organisations have complied with the code’s principles.

The study adopts a multi-theoretical approach to provide a comprehensive framework for understanding governance dynamics within NSFs. Neo-institutional theory and resource
dependence theory offer macro-explanatory power, while compliance theory and general deterrence theory guide the research design and methodological tools. The study examines the relationships among coercive control, remunerative control, and certainty of control, shedding light on the mechanisms influencing compliance with governance codes in NSFs.

Philosophically grounded in Burell and Mogan’s functionalist paradigm, a quasiexperimental design was employed. The three governance-enhancing factors examined in this
study (punishment, reward, and certainty of control) were administered at two levels, using a 2 x 2 x 2 mixed-design questionnaire for each level. The first factor, punishment, was measured as ‘severe’ and ‘non-severe’. The second factor, reward, was measured as ‘high’ and ‘none’. The third factor, certainty of control, was measured as ‘high (with) control’ and ‘low (without) control’. Based on this design, eight scenarios were developed, four for high (i.e., with) and four for low (i.e., without) certainty of control, to investigate the main impacts and interactions between these three factors. The research was conducted in NSFs in Cyprus, with all 61 active NSFs invited to participate. The board members of these NSFs were asked to respond to an anonymous online questionnaire. A total of 223 responses were received, representing approximately 40% of the number of NSFs' board members in Cyprus.

Five main findings serve as take-away messages. First, compliance intention increases as control certainty increases. Consequently, regardless of whether a reward, punishment, or both are introduced, board members within NSFs are more likely to comply when they feel monitored. However, the impact of control diminishes gradually with the introduction of rewards and/or punishments. Second, in the absence of any control, punishment threats and reward incentives yield a similar level of compliance intention when used separately. This could suggest that in the absence of monitoring, the potential outcomes of NSFs' behaviour drive their compliance intention rather than external influences Third, in the presence of control, the threat of punishment (without reward) leads to a higher compliance intention than the reward incentive (without punishment). This implies that the fear of negative consequences is a more potent motivator for compliance than the promise of positive outcomes. Fourth, no matter the level of control, the intention to comply is
almost the same when both punishment and rewards are introduced. This indicates that both positive and negative consequences can effectively motivate compliance, thus reducing the need for external control. Finally, there is a negative correlation between board membership duration and the willingness of board members to adhere to the provisions of a code. Generally, as board members spend more time on the NSF board, their inclination to comply with the code decreases.

Against all this, the present thesis’ theoretical contribution is threefold. First, building on the theoretical approaches of neo-institutional theory and resource dependency theory, it
introduces and empirically applies compliance and deterrence frameworks to the sport governance domain and to the debate over whether (and how) codifying governance is an effective method of increasing governance standards. Second, this study contributes a theoretical perspective in implementing good governance by emphasizing reward as a plausible strategy for encouraging NSFs to adopt good governance principles. Third, the thesis suggests that implementing severe punishment in conjunction with high levels of reward has a significant joint effect on compliance intention, resulting in a reduction of the need for explicit control strategies.

From a practical perspective, this thesis could have many implications for policymakers and governing bodies, helping them develop comprehensive strategies to promote compliance with good governance principles. First, codes should take the form of non-binding recommendations with clear guidance on the desired outcomes and policy objectives, thereby reducing the scope for discretion in the implementation process. Second, it is crucial to conduct thorough assessments (control checks) to ensure their compliance with the code principles. Self-assessment alone is not sufficient. Third, policymakers should use punitive mechanisms as a primary means of encouraging compliance. If this approach is to be effective, however, it must be implemented early on and must be severe from the outset. Fourth, aside from punitive measures, rewards should also
be employed to encourage compliance. Lastly, in light of the previous two, policymakers can mitigate the need for excessive control by combining punishment with reward.