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Mason and Misener are with the Faculty of Education and Recreation, University of Alberta, Edmonton, Alberta, T6G 2H9; Thibault is with the Department of Sport Management, Brock University, St. Catharines, Ontario, L2S 3A1.

An Agency-Theory Perspectiveon Corruption in Sport: The Case ofthe International Olympic Committee

Daniel S. MasonUniversity of Alberta

Lucie ThibaultBrock University

Laura MisenerUniversity of Alberta

This article discusses agency problems in sport organizations in which the same individuals are involved in both the management and control of decision making. We focus our analysis on the case of the International Olympic Committee (IOC) by reviewing the behavior of selected IOC members with regard to the bidding process for the Olympic Games and the resulting reform attempts made by the IOC in an effort to address issues of corruption. After a review of examples of corrupt behavior on the part of IOC members, agency theory is introduced to discuss IOC reforms and provide some suggestions for future reform. We propose incorporating other stakeholders (in addition to the IOC members), such as corporate partners, media conglomerates, and other members of the Olympic movement (e.g., athletes, coaches, officials), into management and control functions. The rationale here is that, because these individuals have a stake in the ideals of the Olympic move-ment and the Olympic Games, they have the incentive to protect the image of the IOC and the Olympic movement. More specifically, it is suggested that these stakeholders comprise a board that oversees the operations of the IOC (similar to the IOCʼs current executive committee) and be given the ability to remove and/or sanction IOC members who act self-interestedly to the detriment of the Olympic movement. Thus, by delegating the control function of decision making to a board and the management function to internal agents, greater accountability for all organizational members can be achieved.

Agency problems arise in virtually all types of settings. They can be exacerbated by organizational characteristics of that allow for the presence (or continuation) of

Journal of Sport Management, 2006, 20, 52-73© 2006 Human Kinetics, Inc

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opportunism on the part of agents who are acting on behalf of their parent orga-nizations. A prominent example of a sport organization that has been criticized because of the behavior of certain agents is the International Olympic Committee (IOC). The IOC is the nonprofit organization responsible for the Olympic move-ment; its primary responsibilities are oversee the Olympic Games and to preserve and promote Olympic ideals. The IOC is currently comprised of 116 members (including numerous sport dignitaries, presidents of national Olympic committees and international sport federations, and former athletes) and could be considered the most prominent “amateur” sport organization in the world (IOC, 2005a). The organization has enjoyed a high profile internationally and, up until recently, a relatively positive image that has allowed the IOCʼs premier event, the Olympic Games, to attract considerable support and resources from the public, a variety of governments, and the corporate sector. Although agency problems have historically been associated with the membership of the IOC, it has recently come under much more intense public and internal scrutiny.

In the last 25 years, rumors of questionable practices by members of the IOC have been surfacing, particularly related to the bidding process to host the Olympic Games (cf. Jennings, 1996, 1997; Jennings & Sambrook, 2000; Johnson & Ver-schoth, 1986; Lenskyj, 2000, 2002; Simson & Jennings, 1992). These rumors were largely ignored until late 1998, when a respected IOC member from Switzerland, Marc Hodler, publicly discussed IOC members ̓involvement in bribery and vote “selling” and “buying” as long-standing practices involving individuals from cities bidding to host the Games (cf. Christie, 1998, 1999; Lenskyj, 2000). Initially linked to individuals in bid cities, and particularly to leaders of the Salt Lake Organizing Committee1 (SLOC), the allegations were especially damaging for the IOC when it was publicized that several IOC members had received lavish gifts and favors in exchange for votes (cf. Associated Press, 1999; Bai & Murr, 1999; Christie, 1998; Deacon, 1999; Swift, 1999).

These allegations appeared on the front pages of major newspapers around the world, and they have continued to be a focus of media attention. In fact, a search of the newspaper database Lexis-Nexis in 2002 using the search terms Olympics and corruption yielded over 600 newspaper articles published in the previous year alone. The 2000 Sydney Olympic Games were seen as an opportunity for the IOC to redeem its tarnished reputation, and “restore some purity of spirit to the Olympic movement after the most ignominious period of its 108-year modern history” (Marks, 2000, p. 6) after what one commentator described as “a run of spectacular financial successes and colossal moral failures” (Fisher, 2000, p. O10).

Subsequent attempts at reform, from both within and outside of the IOC, have been met with varying degrees of success. A U.S. investigation concluded that the core problem was that the IOC lacked the ability to control the behavior of its members, instead trusting them to behave honorably when representing the IOC (Abrahamson, 2000). IOC President, Jacques Rogge, recognized this problem at the IOCʼs 113th session when he proclaimed that “inappropriate structures and human weaknesses on both sides [the IOC members and individuals from cities bidding to host the Games] were the root of all evil that would come to light here” (Abrahamson, 2002, pp. 4–1). Along the same lines, Richard Pound (2004), a high profile member of the IOC, argued that:

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The IOC had failed to practice what it preached and showed that its stan-dards had fallen well short of acceptable for an organization that purported to head an ethically based sport movement. The reforms were put in place remarkably quickly, but they are structural only and must now be lived. (p. 273)

As this article will show, the problems associated with the behavior of certain IOC members are symptomatic of agency problems that exist in many nonprofit organizations.

The issues faced by the IOC are not unique; there have been several reports of agency problems in nonprofit sport organizations. For example, incidences of opportunism were evident in a number of international sport federations (Jennings, 1996; Pound, 2004; Simson & Jennings, 1992). The much-publicized judging scandals in the Olympic Games involving the International Skating Union and the Fédération Internationale de Natation [International Swimming Federation]2 are examples of agency problems (cf. Pound, 2004). Other examples include USA Boxing. The organization was the object of an investigation involv-ing the misallocation of US$3 million3 (Lloyd, 1997). More recently, the chief executive officer of the USOC, Lloyd Ward, was involved in conflict of interest allegations (Hyman & Weiner, 2003; Starr, 2003). There have also been opportunism cases in Russian sport in which leaders of sport organizations were involved in organized crime and in the import of alco-hol and tobacco products through illegal channels (MacDonald, 1997). In one of the most mediatized cases of corruption in sport in Canada, Hockey Canadaʼs top leader from 1975 until 1993, Alan Eagleson, misappropriated organizational funds (over CA$2 million) for his personal gain (cf. Barnes, 1996; Conway, 1995; Houston & Shoalts, 1993).

Although there is evidence of several nonprofit sport organizations involved in problems of opportunism and agency, we have chosen to focus on the IOC because of the prominence of this organization in international sport and the attention this case has received in the media. In addition, the IOCʼs much pub-licized agency issues have been followed up with investigations and reform to remedy these issues.

Thus, this article uses agency theory as a lens to assess the behavior of selected IOC members, with regards to the bidding process for the Olympic Games and the resulting attempts of the IOC at reform, in order to illustrate how agency theory can shed new light on the issues of corruption within the IOC. In doing so we hope to better explain and understand the behavior of IOC members and the attempts to reform the IOC, as well as to evaluate the likelihood of the reforms reducing similar behaviors in the future. After a discussion of examples of corrupt behavior on the part of IOC members, we introduce agency theory to explain how they were able to act opportunistically. We then discuss attempts at reform on the part of the IOC and critique them on the basis of their ability to address inherent agency problems, providing some suggestions for future reform. Thus, we hope that agency theory will help to explain opportunism in this context and contribute to identifying agency problems and understanding how they can be addressed within other nonprofit sport organization environments.

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The IOC and Member Opportunism

The Olympic movement generates approximately $1.5 billion annually in mar-keting revenues with 7 of the IOCʼs 10 leading corporate sponsors based in the U.S. (IOC, 2004a). The Olympic Partner (TOP) program alone generated $633 million toward IOC revenues for the 2001–2004 quadrennial and is anticipated to generate $866 million for the 2005–2008 quadrennial. In addition, the U.S.-based National Broadcasting Company (NBC) will pay $3.5 billion to the IOC for the rights to televise the Olympic Games through the 2008 Games in Beijing (Abrahamson, 2001a) and $2.2 billion for the rights to televise the 2010 and 2012 Games (Byers, 2003; IOC, 2004a) in Vancouver and London respectively. The Olympic Games remain an international institution, and the Games could be argued to “represent a great deal more than mere game or contest” (Chalip, 1992, p. 96). The history and ideals put forth by the Olympic movement are considered to be a “sociocultural phenomenon” (He, 2001, p. 11) that advocates for the rights of women in sport, underprivileged countries ̓access to sporting experiences, and human rights more generally. The reach of the Olympic movement has been significant; for example, 3.9 billion people watched the 2004 broadcast of the Athens Olympic Games (IOC, 2004a). According to He (2001), the IOC has a duty to perpetuate the dream that sport is universal and promotes unity, understanding, and mutual respect among all those aligned with the Olympic movement.

Despite its lofty goals of worldwide unity and understanding, the IOC has been a very exclusionary group, with only 12 women among its 116 current active members; the IOC had no women members between its inception in 1894 and 1981 (Abrahamson, 2001b; IOC, 2004b). In the past, members have been self-recruited and, according to Roche (2002), should not be considered representatives of their respective countries; rather, they are ambassadors of the IOC to their nations (IOC, 2002). Observers have often criticized the IOC as being an organization that serves only the self-gratification of individuals. For example, Senn (1999) wrote of mem-bers such as Lord Killanin, who was concerned over how liberal members could tolerate such an institution that outwardly defied democratic principles. Although members are supposed to serve the interests of the IOC and not pursue their own agenda, Olympic scholars have recognized the implicit tension that exists because IOC members are often designates of their own federal governments, serving also as national Olympic committee representatives (cf. IOC, 2004a; Jennings & Sam-brook, 2000; Senn, 1999).

The full membership of the IOC generally meets once per year. An executive board made up of 15 elite IOC members meets three to four times per year and is ultimately responsible for overseeing the administration of the IOC, approving the IOCʼs internal organization and internal regulations relating to its organization, and the management of the IOCʼs finances and general administrative structure. In addition to the executive board, the administration, under the Director General, oversees to the daily affairs of the Olympic movement. This includes assisting host cities, circulating Olympic information, and providing general communication with national Olympic committees and international sport federations. The Director General reports directly to the President, and the President has the right to remove any individual who does not adhere to the structure and policies of the IOC. For

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example, according to Barney, Wenn, and Martyn (2002), Monique Berlioux, IOC Director General from 1969 until 1988, brought some much needed efficiency to the organization, administration, and fiscal responsibility of the IOC. When she became too powerful, however, and did not share IOC President Juan Antonio Samaranchʼs vision for the IOCʼs financial development, he had her removed from her position.

Another area in which the IOC has been scrutinized is the process whereby cities are awarded the rights to host Olympic Games. The bidding process became particularly competitive after the 1984 Los Angeles Summer Olympic Games. The Los Angeles Games generated an unprecedented $232.5 million in profit, and as a result it became apparent that in addition to a given city or country appearing at the center of the world stage (Wamsley, 1997), hosting the games in and of itself could be a lucrative venture (Abrahamson, 2002). In the follow-ing section, we review the recent behavior of members of the IOC in relation to the scandal that has unfolded surrounding the bidding process for hosting the Olympic Games.

In 1998 a document detailing IOC members ̓alleged improprieties during the Salt Lake City Olympic bid was sent by a former SLOC member to a local Salt Lake City television station. Not long after, the document was sent to Canadian IOC member Richard Pound (Barney et al., 2002). The aforementioned document revealed how the Salt Lake Olympic Bid Committee (SLOBC) members autho-rized the payment of tuition and living expenses for the daughter of the late René Essomba, Cameroon IOC member, in return for his vote (Barney et al., 2002; Lenskyj, 2000). Soon after, a respected Swiss IOC member, Marc Hodler, revealed corrupt practices of certain IOC members during the bid process to determine which city would host the Olympic Games (cf. Christie, 1998, 1999; Lenskyj, 2000). The revelation garnered media attention worldwide because improprieties were initially linked to members of bid cities wishing to host the Games and, par-ticularly, to members of the SLOBC. The allegations became especially damaging for the IOC when it was made public that numerous IOC members had initiated the bribery and, as a result, had acquired lavish gifts4 and favors in exchange for votes (cf. Associated Press, 1999; Bai & Murr, 1999; Christie, 1998; Deacon, 1999; Swift, 1999). It was reported that accepting bribes, including redeeming first class airline tickets for cash and accepting gifts such as jewelry, video equipment, and expensive artwork was common practice among many IOC members (cf. Jennings & Sambrook, 2000; Lenskyj, 2000, 2002; OʼHara, 1999).

By 1999, the names of 12 IOC members were circulating in the international press as being investigated for selling votes not only for the Games that were held in Salt Lake City but also for previous Games (Jennings & Sambrook, 2000; Len-skyj, 2000). Soon after, rumors surfaced about the extravagant gifts offered to the then-IOC President, Juan Antonio Samaranch. It was reported that Samaranch had accepted an ancient samurai sword valued at $28,000 from the Nagano Olympic Bid Committee and a set of guns valued at $1,600 from SLOBC. The IOC was quick to respond to these allegations by pointing out that the President did not have a vote and therefore did not directly affect the bid-selection process, and that the gifts would be housed in the Olympic museum. Thus, the IOC argued that the gifts should not be considered improprieties (Abrahamson, 2000). Ss President of

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the IOC, however, Samaranch could exert considerable pressure on other members of the IOC, many of whom he had personally selected to serve the organization (Lenskyj, 2000).

Critics had long argued that Samaranch was integral in fostering an elitist culture in which he could increase his personal power in the international com-munity. Samaranch was often criticized for his sympathy toward General Francoʼs fascist regime in Spain, his commercial exploitation of the Games, his indifference toward the use of performance-enhancing drugs, and his lust for power (Barney et al., 2002). Because “the president presides over all activities of the IOC, acting as its permanent representative” (IOC, 2003, p. 3), he exerted significant influence over the activities of members (Guttman, 2002; Jennings & Sambrook, 2000). Thus, Samaranchʼs practice of hand picking IOC members to conform to ideals he espoused made it particularly problematic when it came to opportunism because his own behavior might imply a tacit endorsement of these types of actions on behalf of IOC members. For example, consider his own ambitions to remain head of IOC beyond the term specified by the IOC. In 1985, he personally lobbied to have the age of retirement changed from 75 to 80 so that he could stand for re-election. Critics have also pointed to his biases in securing the host city of his choice. There is no doubt that Samaranch had a strong influence in bringing the 1992 Summer Games to his home city of Barcelona. These practices were highly criticized in the media, and many called for his resignation. During the investigations, however, Samaranch deflected attention away from himself and toward select members of the IOC, thus redirecting the focus away from his own improprieties (Guttman, 2002). On the power held by the IOC president, Richard Pound, a high-profile IOC member since 1978, wrote:

The organization [IOC] is quite unique in structure and mandate. It consists of volunteers who meet very seldom and the personality of the president is imposed on it almost as a matter of course, given both the statutory powers vested in the president and the fact that he is the only member continuously involved in the business of the IOC. More than almost any international orga-nization, the IOC will rise, fall, or drift along in direct relation to the strengths, abilities, and convictions of its presidents. (2004, p. xiv)

As the allegations of corruption among IOC members grew, and as the media focused more attention on this story, Olympic sponsors became concerned about how the issue might affect the image of the IOC and, by association, their own organizations. This crisis prompted the IOC to take action by creating three inter-nal commissions: a) the IOC Ad Hoc Commission to Investigate the Conduct of Certain IOC Members and to Consider Possible Changes in the Procedures for the Allocation of the Games of the Olympiad and Olympic Winter Games (IOC Ad Hoc, 1999); b) the IOC 2000 Commission, which was to examine the “com-position, structure, and organization of the IOC” (IOC 2000, 1999a, p. 1,); and c) the Ethics Commission, the purpose of which was to develop and regulate a new code of ethics for IOC members.5 These commissions were deemed necessary to investigate and help eradicate the unethical practices of IOC members. As noted in the IOC 2000 Commission preliminary report:

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It was decided that the IOC must adopt a three-pronged approach to resolving the crisis: An internal “house cleaning” based on the recommendations of the Ad Hoc Commission, followed by the establishment of two other commissions to address, respectively, ethical standards and practises (Ethics Commission), and structural reform (IOC 2000 Commission). (IOC 2000, 1999a, p. 1)

The Ad Hoc Commission continued its investigation of 25 IOC members for most of 1999, during which time it demanded explanations from 15 IOC mem-bers regarding their practices of receiving gifts (Barney et al., 2002). Over the course of the inquiry, four IOC members under investigation resigned from their positions. Among these was Bashir Mohamed Attarabulsi of Libya, who accepted tuition and living expenses for his son in Utah from the SLOBC in the amount of $62,696. Zein El Abdin Ahmed Abdel Gadir of Sudan was also purported to have had tuition and living expenses paid for his son at the University of Southern Mississippi. In addition, he also convinced SLOBC to send $1,000 a month to his nonexistent daughter in London (Abrahamson, 2000; IOC Ad Hoc, 1999). The Ad Hoc Commission determined in its investigation that this practice of bid cities providing “Olympic scholarships” to family members of IOC members was one of the more common improprieties (Christie, 1999; Lenskyj, 2000). Perhaps the most notorious improprieties were those committed by Jean-Claude Ganga, IOC member from the Republic of Congo, who received an estimated $250,000 in gifts and an additional $70,000 in cash from SLOBC in return for his vote (Abrahamson, 2002; Lee, 2001).

In addition to IOC members being implicated, United States Olympic Com-mittee (USOC) representatives came under fire for their role in the corruption allegations. The USOC formed an investigative commission that condemned the IOC for being closed, unaccountable, and unethical. The commission became one of the biggest drivers of the reform process because the U.S. Congress summoned Samaranch to appear before a subcommittee for questioning. Samaranch attempted to avoid appearing before the tribunal, but finally came to the U.S. in December 1999, after the IOC had presented their reforms, to defend the IOC to the USOC commission (Barney et al., 2002). The USOC immediately denounced the IOC reforms as “window dressing” and attacked Samaranch for whitewashing the cor-ruption. At the end of the questioning, the commission vowed to closely monitor the reforms of the IOC, and “to implement legislation that would ban American companies from financially supporting the Olympics” (Congressman Waxman, 1999, as cited in Barney et al., 2002, p. 270) if they failed to follow through.

When the final report of the IOC Ad Hoc Commission was submitted to the IOC and the investigations were closed, a total of 13 members had been implicated and numerous others had been investigation. It is estimated that SLOBC paid out more than $1 million to IOC members in gifts and cash to secure votes for its bid for the 2002 Olympic Winter Games. The report demonstrated patterns of lavish accom-modations, entertainment, gifts, and services for IOC members and their families. Among the more excessive misconduct were contracts with professional lobbyists employed to cater to the “needs” of IOC members, scholarships for athletes from developing countries, general financial assistance, and higher education and/or employment in the bid city or region for relatives of IOC members (cf. Christie, 1999; IOC Ad Hoc, 1999; Jennings, 1996; Jennings & Sambrook, 2000; Lenskyj,

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2000). Lenskyj (2000) noted that “there was unequivocal evidence that rules guiding gifts, hospitality, and services had been ignored by all parties” (p. 39). In addition to the four resignations submitted during the investigation, the report of the IOC Ad Hoc Commission resulted in the expulsion of 6 IOC members and warnings to 10 others.6 The report also outlined the need for rule changes and reform in the IOC in order to control some of the unethical practices and opportunistic behavior of IOC members.

Agency Theory and the IOC Bid Process

As evidenced by the behavior of IOC members described above, the mani-festation of individuals ̓values, beliefs, and interests might not always be in the interest of the organization. The IOCʼs reputation was damaged significantly by these improprieties. Although the degree to which certain IOC members have acted in their own self-interest might be shocking, their actions are consistent with agent opportunism that can occur in any situation in which an individual acts on behalf of another or group of others to perform a duty or service, and in which information asymmetry allows self-interested activity to go undetected.

In the past few decades a significant body of academic work in organizational economics has emerged examining the actions of individuals within organizations, their influence on firm operations, and potential solutions to the opportunism prob-lem (cf. Alchian & Demsetz, 1972; Eisenhardt, 1988, 1989; Fama, 1980; Fama & Jensen, 1983a, 1983b; Jensen & Meckling, 1976). The relationship typically examined in this context, called the principal–agent relationship, has been between the manager of an organization (the agent) who has been hired by a group of diverse stockholders (collectively, the principal) to manage and operate an organization (Olson, 2000). In the context of sports, agency theory has been employed to examine principal–agent relationships between professional sport leagues and their member clubs (Atkinson, Stanley, & Tschirhart, 1988; Mason, 1997) and professional ath-letes and their player agents (Mason & Slack, 2001a, 2001b, 2003).

We now turn to the principal–agent relationship between the IOC (the princi-pal) and the individual IOC members (the agent). Specifically, we are reviewing IOC members (as agents) and the duties they perform in selecting bid cities to host future Olympic Games. In this context, the IOC is comprised of the entire group of individual IOC members, who collectively act as principal. This arrangement is similar to other single-principal, multiple-agent relationships in sport, such as those in professional sports leagues. For example, the National Football League (NFL), as principal, is in fact comprised of the total of all of the leagueʼs clubs, who individually act as agents to the NFL (Atkinson et al., 1988; Mason, 1997).

In any agency relationship in which an individual or group acting as principal acquires the services of an agent, there emerges a problem of information asymme-try. Generally, it is difficult for the principal to be completely aware of the activities that the agent undertakes while acting on behalf of the principal. For this reason the principal encounters problems of monitoring the behavior of the agent, and there is the potential for the agent to act opportunistically without being detected. Using the IOC as an example, certain IOC members were able to extract gifts and payments from leaders of organizations bidding to host the Olympic Games while they were

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performing a service on behalf of the IOC—evaluating bids from prospective host cities and voting on the merits of those cities as sites for future Olympic Games. In addition, it is possible that agents might have been neglectful by not investing the necessary effort and time in performing their duties on behalf of the principal. This problem is called shirking, and it results in a decrease in the welfare of the principal (Eisenhardt, 1989).

Another concern in the principal–agent relationship is agency costs. Agency costs are created by any discrepancy between the interests of the principal and the agent (Jensen & Meckling, 1976). There are three basic types of agency costs. The first is monitoring costs incurred by the principal in order to reduce agent opportunism and to rectify the information asymmetry that exists between the two parties (Eisenhardt, 1989). An example of monitoring costs would be the expense of creating committees or commissions to investigate certain agents within the orga-nization. Thus, organizations incur costs by diverting firm resources (e.g., financial resources, time, effort) to monitor agent behavior. The second type of agency cost is called bonding costs and is incurred by the agent. This is a cost absorbed by the agent in order to present him- or herself to the principal as suitable and qualified for the duties to be performed. The final agency cost is called residual loss. It con-sists of the loss to the principal, created when the agent does not act completely in the principalʼs best interest (Jensen & Meckling). In a typical organization, the owners or group of owners (i.e., the principal or principals) receive the benefits of the organizationʼs operations, which are called residual claims (Olson, 2000). The principal is then a residual claimant and typically receives residual claims in the form of profits. When an agent acts opportunistically, the resulting residual loss reduces the residual claims available to the principal.

In the case of the IOC, however, the issue of residual claims is more ambiguous. In nonprofit organizations there are no residual claimants per se (Fama & Jensen, 1983a), although there are individuals who obviously benefit from organizational outcomes, specifically, the IOC members who collectively comprise the IOC as a whole. Thus, in the context of nonprofit sport organizations, the principal is viewed as the party (or parties) who receives the benefits of the organizationʼs achievements; this could be the organization itself and all of its contributors and stakeholders, and might also include members, clients, governments, volunteers, and corporate sponsors. In effect, these individuals all receive some sort of benefit, monetary or otherwise. Given the scope of the Olympic movement worldwide, there are many groups who might consider themselves as having a stake or claim in the IOCʼs affairs. In addition, other parties might also benefit indirectly from the activities of nonprofit organizations (cf. Freeman, 1984). In the case of the IOC, these individuals might indirectly contribute to the sport organizations (through government funding, for example) and receive an indirect benefit from the success of athletes in sport competitions.

As suggested by some researchers, however, having no easily identified group of residual claimants might actually increase the likelihood of agency problems. Because no one individual or group has claims to residual earnings in nonprofit organizations, there is less incentive for inefficiencies to be identified and corrected (Alchian & Demsetz, 1972; Steinberg, 1987). In other words, there is no one group that has the incentive to act directly as a watchdog to monitor and police agent behaviors. In the case of the IOC, the problem has been exacerbated by the fact

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that each IOC member, as agent, was in fact acting on behalf of the IOC, which is overseen by the IOC membership as a group. One can see how the opportunistic behavior of IOC members continued unchecked for so long. What incentive would opportunistic IOC members have to catch themselves acting inappropriately?

In a typical nonprofit organization, the organization and its members perform a public service, and individuals associated with the organization (especially vol-unteers) are usually motivated by alternatives to monetary compensation. Ineffi-ciencies are mitigated because agents will work to ensure that the service is being adequately provided. In turn, these individuals experience personal satisfaction from their contributions to the organizations, which can be in the form of labor, goods, or money (Douglas, 1987). Thus, in some ways, the goal of the nonprofit organization is to generate a “social profit” (Bouckaert & Vandenhove, 1998, p. 1075). This has not appeared to be the case with some members of the IOC, how-ever, and as a result of the organizational make-up of the IOC, an environment was created in which the monitoring of agent behavior was not adequate. This problem is critical for the IOC because monitoring is paramount in organizations in which there are no clearly identifiable residual claimants: “In a profit-making institution, the principal is the general meeting of shareholders and in a non-profit-making institution it is the organizational authority” (Bouckaert & Vandenhove, p. 1,074). Thus, the onus is on the IOC members as a group to ensure that individual IOC members are not behaving opportunistically. Unfortunately, in this case the IOC has been unable to do so adequately.

Once the interests of the IOC members as a group (as principal) became threatened by the negative media coverage, the incentive to monitor and police individual members ̓(agent) behaviors emerged. Given the abilities and interests of the IOC, however, the degree to which the IOC would address this issue remained uncertain. The following section reviews the efforts made by the IOC at reform in response to the outcry for changes to the bidding process whereby IOC members visit and select cities to host future Olympic Games.

IOC Reform

As previously mentioned, the IOC set up three commissions to attempt to address the abuses of power that had become apparent. Initially, the IOC was reluc-tant to address the issues and bring about reform, but Samaranch urged members of the IOC to adopt the reforms. At least one observer argued that Samaranch coerced members into accepting the reforms as a ploy to retain his position as president (Jennings & Sambrook, 2000). The preliminary strategy to eradicate the unethical behavior resulted in more questions than answers. After the investigations by the IOC and the subsequent member resignations and expulsions, the IOC set out to restructure its organization. The Olympic sponsors were anxious for the IOC to move quickly and decisively because they had invested millions of dollars and were intricately tied to the image of the Olympic movement (Payne, 2002). The IOC 2000 Commission met for the first time on June 1, 1999, to establish recom-mendations for IOC reform. Six months later the Commission presented 50 reform recommendations to the rules and governance committee of the IOC. At the 110th IOC Session in Lausanne, the IOC membership voted to approve all 50 reforms. The reforms ranged from changes in the structure and governance of the IOC to

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significant changes in the manner in which bidding cities are selected. The primary structure and governance reforms included changes to the age of retirement (from 80 years of age to 70 years of age); limiting terms of IOC members to 8 years subject to re-election; and changes in the composition of the IOC membership to include active (i.e., current) athletes, 15 international sport federation presidents, 15 national Olympic committee presidents, and 70 other members for a total of 115 members (IOC 2000, 1999b). In addition, the IOC has sought more transparency in fund allocation and distribution, as well as “encouraging National Olympic Com-mittees, International Federations, and Olympic Partners to disclose their sources and use of funds” (IOC 2000, 1999b, p. 18).

Changes to the process by which cities bid for the Olympic Games were con-sidered key to deterring some of the problems inherent in the IOC structure. In order to ensure that cities were truly prepared to host the Games, the IOC introduced a new bid acceptance policy:

A city put forward by its NOC as a bid applicant would not be considered as an official candidate city until such time as its application had been examined and approved by the IOC. This would ensure that only cities adequately prepared and in conformity with IOC policy would be authorized to go forward into the full bid process thus avoiding unnecessary expenditure for those cities not sufficiently prepared at that time. (IOC 2000, 1999b, p. 29)

This process was designed to ensure that cities were adequately prepared to host the Games and would not be tempted into questionable dealings to acquire the Games. In addition, there have been changes in the manner in which site visits and general site selections by IOC members take place. The entire membership still votes on the bid cities, but the bid committees of the cities make their initial presentations to the general membership at the IOC headquarters in Lausanne; the final presentations take place in the city where the annual session is to be held. As well, rather than have the entire IOC membership visiting bid cities, only the 15-member bid evaluation committee travels to bid cities during an officially scheduled visit organized by the cities ̓bid committee. IOC members who are not on the bid evaluation committee are not permitted to visit bid cities, nor are members of the cities ̓bid committees permitted to visit IOC members. The new IOC bid policy states that bid cities are not to give gifts of any sort to members of the IOC or selec-tion committee, and the ethics policy further states that IOC members are only to accept gifts of nominal value from members of the bid cities organizing commit-tees. Although there are still some discrepancies in whatʼs considered acceptable conduct, these efforts were undertaken to eradicate some of the vote-selling and -buying behavior.

The changes in the governance of the IOC and the bid selection process are an attempt by the IOC to deter some of the opportunistic behaviors that have been a long-standing occurrence among IOC members. The changes to the rules are considered fundamental to ensuring that the reputation of the IOC returns to what it once was. The IOC Ethics Commission, which includes several non-IOC members, established a Code of Ethics based on the founding principles of Olymp-ism in an attempt to standardize the activities and behaviors of the IOC members (IOC 2000, 1999b). The Commission has also been charged with the responsibility

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of “investigating complaints raised in relation to the non-respect of such ethical principles, including breaches of the Code of Ethics, and if necessary proposes sanctions to the Executive Board” (IOC, 2002, p. 43). The effectiveness of this program, however, is questionable. Since the Ethics Commission was established, only one IOC member has been sanctioned.

Although this might suggest that IOC members are complying with the Code of Ethics, consider that Norwayʼs Gerhard Heiberg, head of the IOC panel that evaluated the three 2010 bid cities ̓committee, had direct business and economic interests in a Norwegian petroleum company that had business dealings in British Columbia (Associated Press, 2003; Radio-Canada, 2001). The Ethics Commission found that there was no conflict of interest despite the fact that the company would directly profit from Vancouver hosting the Olympic Games. Most recently, the full force of the IOC Ethics Commission was put to the test when it investigated the behavior of Un Yong Kim, IOC member from South Korea. Un Yong Kim had been investigated previously during the Salt Lake City scandal but was exonerated of any wrongdoing. In January 2004, the Ethics Commission took action to fur-ther investigate him; at the same time, the Ministry of Justice of South Korea also launched a criminal investigation against Mr. Un Yong Kim on charges of corruption and embezzlement. The Ethics Commission decided in January 2005 “that Mr. Un Yong Kim has violated the ethical principles set out in the Olympic Charter and the Code of Ethics, and thereby seriously tarnished the reputation of the Olympic Movement” (IOC, 2005b). The Commission suspended his membership rights and functions and recommended expulsion from the IOC. What is interesting is that despite the Ethics Commissionʼs recommendations, it still requires a two-thirds majority vote by the full IOC membership in order to expel an IOC member. On May 20, 2005, Mr. Un Yong Kim resigned from the IOC while serving a 2-year prison sentence in South Korea for bribery and embezzlement that occurred during his tenure as head of the World Taekwondo Federation and other sport organiza-tions (Court Upholds, 2005). Some have argued that his own resignation saved the IOC a potentially embarrassing vote because Kim still had many supporters among the IOC membership, and it was believed that the vote to expel him from the IOC would be very close (Kinser, 2005; IOC, 2005b).

Discussion

Despite efforts at reform, the IOC still has some issues related to reducing member opportunism that persist. Although a number of new rules and regula-tions have been created to help prevent problems, IOC members have violated the rules relating to activities such as receiving gifts in the past. This begs the question: although it now appears that IOC members have additional restrictions on the manner through which they interact with members of bidding cities, what guarantees are there that IOC members will adhere to these rules? The following discussion draws on agency theory to assess the new IOC reforms and to suggest alternatives for reducing IOC member opportunism in the future.

Although the IOCʼs creation of three commissions to address the problems within its membership is a step in the right direction, there are still fundamental problems associated with an organization that reports to no one except its own

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executive members. According to agency theorists, problems will likely surface again because there are no external control and policing mechanisms for the orga-nization. The selection of IOC executives as members of the Ethics Commission or the IOC Ad Hoc Commission is interesting since these members are the same individuals who were in leadership and management roles within the organization when the unethical behaviors occurred. As one Canadian athlete noted, “there should be a whole new investigation by an outside party. It canʼt be done with the IOC investigating itself” (OʼHara, 1999).

The IOC Ad Hoc Commission report pointed out the lack of control mecha-nisms for IOC members ̓behaviors and, in the process, made clear some of the inherent problems within the organization: “IOC members are completely inde-pendent; they are not bound by any contract, carry out their duties in a voluntary capacity and enjoy complete freedom in their actions. They receive no instructions or orders, least of all regarding the exercise of their right to vote” (IOC Ad Hoc, 1999, p. 14). Thus, it would appear that the reforms in their current form will likely not be successful in removing opportunism from the bid process for the Olympic Games. As explained by Roche (2002, p. 178):

It is reasonable to assume that [IOC reform] has a good chance of squeezing many, even most, of the opportunities and temptations for bribery and corrup-tion out of the process. However, this conclusion only holds true on the condi-tion that the new system is implemented and policed rigorously. Unfortunately, in the case of an organization with the dubious track record on self regulation of the IOC, this condition may prove difficult to achieve.

The problem here is that there is little incentive for members of the IOC collective to police themselves as individuals.

There is likely another reason that has underscored the inaction taken by the IOC in adequately reforming its process of selecting host cities that has to do with the carefully crafted image of the IOC as a worldly, ethical, and human-rights-oriented organization. Although allegations of improprieties on the part of IOC members have circulated for decades (Jennings, 1996, 1997; Senn, 1999; Simson & Jennings, 1992), the IOC initially chose to downplay or even ignore such reports rather than investigate them (Barney et al., 2002; Jennings & Sambrook, 2000; Lenskyj, 2000, 2002). In many respects this is similar to problems that have been occurring in organized religion. In a study of churches, Duncan, Flesher, and Stocks (1999) explored accounting and management problems. They found that “implying that staff members or volunteers might be deficient in one of these areas may result in disharmony and division and ultimately damage the ministry of the church” (p. 146). Similarly, to recognize that certain IOC members lacked the expertise or morals to fairly determine future sites of Olympic Games could also undermine the reputation of the Olympic movement, so, rather than bring attention to the problem when it first appeared, the IOC chose to dismiss the allegations.

Another issue for the IOC relates to accountability on the part of IOC mem-bers. As Duncan et al. (1999) reported, agents in nonprofit organizations might not consider themselves as accountable to donors (who can comprise the residual claimants in nonprofit organizations) as they might be to owners (who would have a strong incentive to protect their residual claims in an organization). This is exac-erbated by the fact that the IOC members themselves act collectively for the IOC.

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Therefore, any individual IOC member, being part of the group that comprises the principal (the IOC) would have little incentive to police agent activities b because this would negatively affect his or her welfare (i.e., remove the “perks” of accept-ing bribes). Thus, there is less incentive for the IOC membership, as principal, to protect the residual claims of the IOC. Conversely, there is also less incentive for individual IOC members (as agents) to be accountable to the IOC as a whole when their own personal needs might be better met by enjoying the fruits of opportunism as IOC members. This scenario might also encourage collusive behavior among IOC member agents because they could benefit from acting together to conceal the benefits they receive through opportunistic behavior.

Similarly, there has been little incentive for IOC members to act to control opportunism among IOC members because of the possibility of an erosion of power and control within the organization. As explained by Boatright (1996), agents might sometimes avoid activities that benefit the organization as a whole if it means that their own personal power is reduced or if it places them at risk within the organi-zation. As mentioned earlier, this occurred in the IOC when Samaranch removed former Director General of the IOC, Monique Berlioux, from her position despite her positive contribution to the organization because she became a threat (Barney et al., 2002). Other IOC members would then be fearful of suffering the same fate.

In addition, as a result of the autonomy and prestige associated with visiting prospective host cities and enjoying the benefits of being an IOC member, one can understand how reform would reduce the ability of IOC members to enjoy the “perks” associated with being a part of selecting the sites of future Games.

What Can Be Done?

Given the fundamental problems with the nature of the principal–agent relation-ship between the IOC and IOC members described above, there is little doubt why corruption in the bidding process to host the Olympic Games occurred. According to some agency theorists, however, some alternative options might be available that could help reduce the likelihood of agent opportunism. Fama and Jensen (1983a, p. 303) explained that the decision process within a firm has four distinct steps:

1. Initiation—generation of proposals for resource utilization and structuring of contracts;

2. Ratification—decision regarding which initiatives will be implemented; 3. Implementation—execution of ratified decisions; and 4. Monitoring—measurement of the performance of decision agents and

implementation of rewards.

The initiation and implementation of decisions are commonly performed by the same agents and are called decision management. Similarly, the ratification and monitoring of decisions are part of decision control. When these two processes/steps are combined, agents are able to perform both and have a greater opportunity to access the residual claims within an organization. When we consider the bid selection process for the Olympic Games, it is evident that the same individuals control all four steps of the decision process. This is what creates the environment for opportunism to occur.

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By separating management (initiation and implementation) and control (ratifi-cation and monitoring) of decision making within the organization, the likelihood of any one agent manipulating the process for personal gain is dramatically reduced (Fama & Jensen, 1983a). In most cases, a fundamental problem that arises in non-profit sport organizations concerns the point at which the separation of management and control is more efficient than combining both decision mechanisms with the same agents; typically these functions are performed by single agents because there is no one else who is willing or able to do so (such as the volunteer of a local sports association). According to Fama and Jensen (1983a), the most efficient means is often determined by the complexity of a firm; in a small, noncomplex firm, it would be too costly to hire or assign more than one agent to perform these functions. This is not the case for the IOC, an organization that has the resources available to ensure that the management and control of its organization are separated. At this point, however, the activities of management and control within the IOC are integrated; that is, the IOC members are responsible for the operations of the organization, as well as in control of the decision making.

Initially, one might suggest that the responsibilities of the IOC members be delegated such that the management and control functions are divided among the existing IOC membership. The following, however, suggests an alternative that will be more likely to reduce opportunism in the IOC. A key to solving this problem lies in revisiting who comprises the residual claimants of the IOC and incorporating those who have claims to the organization (in addition to the IOC members) into management and control functions of the IOC. As mentioned earlier, in a for-profit organization, the shareholders or owners of the organization are the residual risk bearers who provide capital to an organization. In return they receive the residual claims associated with the organizationʼs operations (Boatright, 1996). In contrast, in a nonprofit setting, there are no residual claimants per se (Fama & Jensen, 1983a). The collective group of IOC members, however, comprises the principal (the IOC itself) and therefore is responsible for ensuring that agents of the IOC act in the best interest of their organization. As this article has shown, however, the IOC has not adequately achieved this. Nonetheless, an issue remains that is related to other parties that potentially have residual claims to the operations of the IOC. Given the apparent mission of the IOC and the widespread influence of the Olympic Games, it could be argued that there are other stakeholders who benefit from the operations of the IOC and its goal of “universal citizenship” (Roche, 2002, p. 168)—those who have been a part of the Olympic movement, who share the ideals that the IOC has carefully crafted over the past century, and who share in the variety of meanings and values associated with the Olympic Games (Chalip, 1992).

Through sport, education, culture, and arts programming, the Olympic move-ment claims to bring together the world in a way that has not been achieved by other organizations. According to the IOC, sport and human rights programs in many countries are supported through the ideals of the Olympic movement (IOC, 2003). In addition, the opportunistic behaviors of IOC members might have an impact on consumers who buy into the Olympic movement through their consumption of the Olympic Games via the media and advertising because the image of the Games might be tainted by the behavior of certain members. This might include corporate partners who associate themselves with the Olympic movement and consumers who purchase products and services and follow the Olympic Games. Certainly, these

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individuals share in the benefits accrued through the operations of the IOC and, thus, could be considered “secondary” residual claimants. In other words, if the Olympic movement reaches and has an impact on as many groups (e.g., national Olympic committees, international sport federations, organizing committees of the Olympic Games, special interest sport organizations) and individuals (e.g., athletes, coaches, officials, and administrators) as the IOC alleges, then surely representative members of these groups can become more involved in the organization, operations, and decision-making process of the IOC.

It is proposed here that secondary residual claimants be included in the man-agement and control functions of the IOC. Because these groups and individuals have a stake in the ideals of the Olympic movement and the Olympic Games, they have the incentive to protect the image of the IOC and the Olympic movement, which has been jeopardized by the actions of another group of residual claimants, the IOC membership. As part of the reform, the IOC has already introduced changes to the composition of its membership by including more members from various stakeholder groups (cf. IOC 2000, 1999a, 1999b). For example, the IOC called for greater representation and decision-making involvement from athletes, leaders of national Olympic committees, and leaders of international sport federations (IOC 2000, 1999a, 1999b). Other stakeholders who are not identified in the reform, however, are also involved: for example, the worldwide corporate partners of the IOC that have invested tens of millions of dollars in sponsorship in order to align their products and services with the Olympic Games and the Olympic movement. These corporations are very motivated to ensure that the integrity and image of the IOC is maintained. As explained by Olson (2000, p. 283), in nonprofit organiza-tions, much-needed capital is provided by donors who

contribute to the organization with the expectation that something good will result such as lives being saved, the environment cleaned up, or people edu-cated. Although it is not financial, they anticipate a return from their investment and will invest elsewhere if their expectations are not met.

Corporate sponsors of the IOC are not donors per se; they do, however, contribute considerably to the IOC with the expectation that they will receive something in return. When corporate sponsors are not satisfied with the return on their investment, they often end their partnership with the IOC. For example, American pharmaceutical company Johnson & Johnson withdrew its interest in a sponsorship arrangement at the height of media coverage of the IOCʼs corruption allegations.7 During the crisis, David DʼAlessandro, CEO and president of John Hancock Financial Services, Inc., threatened to withdraw the companyʼs $40–50 million sponsorship deal unless immediate changes were made and an ethics clause was added to the sponsorship contract (Wilson, 2000).

In addition to corporate sponsors, media conglomerates have an important stake in the activities of the IOC. They invest considerable resources for the rights to broadcast the Olympic Games (cf. Jennings, 1996; Lenskyj, 2000). An unfavorable IOC image might translate into lower numbers of television view-ers and consequently lower revenues for the media from advertisers. This would invariably affect the value of broadcasting rights for future Olympic Games and thus impact an important revenue source for the IOC. As a result, corporations

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(including media conglomerates) are considered high-demand stakeholders. As explained by Abzug and Webb (1999), “high-demand stakeholders (who have the greatest interest in the organizationʼs products, and who have the time, expertise, and so on to engage in controlling them) control nonprofit organizations in this context” (p. 421). Involving them in the management and control functions of the IOC will reduce the likelihood of opportunism and perhaps contribute positively to the IOC by strengthening ties with a corporate base that provides the IOC with significant operating capital.

Conclusions and a Modest Proposal

Our discussion suggests that one solution to corruption on the part of IOC members is to introduce additional stakeholders—whom we have identified as also having residual claims to the IOC—into the management and control functions of the operations of the IOC. Fama and Jensen (1983a) proposed three decision control systems that reduce the potential for opportunism in nonprofits of all sizes. The first, decision hierarchies, reduces the likelihood of any one agent acting opportu-nistically and is supported by accounting and budgeting systems. This is what the IOC has attempted to do by appointing a 15-member bid evaluation committee and then having the total membership select the host. This will be ineffective, however, as long as the same individuals are involved in both functions (i.e., management and control). The second is mutual monitoring systems, which provide informal information on the control process. This allows “whistle blowing” to occur if any one agent is acting in their self-interest or is being rewarded improperly, and it is particularly effective in nonprofit organizations that provide a public service because agents will police one another to ensure that organizational goals are reached. As the earlier discussion has shown, this has not been the case amongst IOC members in the past, nor have dramatic changes occurred as a result of the fact that all moni-toring systems, including the IOC 2000 Commission, the commission responsible for ethics, are comprised primarily of the same people.

The final decision control system that is commonly used in nonprofit sport organizations is a board of directors. In for-profit organizations, the bifurcation of management and control functions is ensured because boards of directors are authorized to hire, fire, and compensate top-level decision makers, and they are authorized to ratify and monitor important organizational decisions. Although the delegation of decision management to one or a few agents might be generally efficient in nonprofit organizations (Fama & Jensen, 1983a), the important deci-sion makers within the organization must be chosen, evaluated, and monitored by members of the boards to reduce agent opportunism. This could be a costly and arduous process, particularly for smaller, noncomplex organizations. The IOC, however, certainly has the resources to undertake this restructuring if its members are willing to give up the authority.

It is proposed here that other stakeholders, including the other secondary residual claimants discussed earlier, be introduced to a board that oversees the operations of the IOC and has the ability to remove and/or sanction IOC members who act self-interestedly to the detriment of the Olympic movement. Although cre-ating boards or extending their responsibility might increase monitoring costs, the IOC must weigh this increased cost with the risk of having resources expropriated

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by internal agents. The disenchantment of athletes, sport leaders, media, spon-sors, and the public ultimately harms the IOC financially. By giving up control (ratification and monitoring) to boards, and management functions (initiation and implementation) to agents within the organization, the IOC should have its needs for agent oversight met effectively.

As suggested previously, collusive arrangements are a possibility among agents within the IOC. According to Zimmerman (2001), long-term relationships create an environment for collusion to arise because it allows for such arrangements to be established and to thrive. As a result, it is recommended that the tenure of IOC members be reduced significantly. Generally, in nonprofit organizations, board members ̓tenure ranges from 1 to three 3 (Drucker, 1992). In recognizing the unique nature of the IOC and the Olympic Games, a term of 4 years would be more closely in accord with term limits of other nonprofit organizations and it would correspond to the 4-year Olympic Games cycle. As mentioned earlier, the IOC 2000 reform has reduced the tenure of IOC members to 8 years. This time period, however, might still be too long. In contrast, research on board composition in nonprofit organizations suggested that “boards tended to improve performances as they grew larger and longer tenured, and gained members with business executive background” (Olson, 2000, p. 294). As a result, one could recommend that board membership tenure not be subjected to the same term limits as the IOC membership, and that “secondary” residual claimants (identified above) with business savvy be encouraged to become involved on the board. In other words, we propose a more stable, longer tenure for board members and a shorter tenure for regular IOC membership.

In sum, by delegating the control function of the decision-making process to boards and the management function to internal decision agents, the IOC could increase accountability of all organization members. Increased accountability for members of the boards and for IOC members, combined with improved monitoring within the organization, should reduce the need for external groups, such as federal governments, athletes ̓groups, sport organizations, and corporations, to needlessly incur monitoring costs by performing external audits or other similar activities.

Unfortunately, it is unlikely that IOC members will be willing to give up the degree of autonomy and power that they have enjoyed in order to reduce oppor-tunism. A review of agency theory, however, has helped to explain how and why corruption has occurred in the IOC, particularly during the bidding process for the Olympic Games, and led to suggestions for reducing opportunism in the future. Ultimately, the future of the IOC and the Olympic movement rests on its mem-bership; if the IOC fails to adequately address the concerns of all of its residual claimants, the future of the Olympic movement might be irreparably harmed by the opportunistic behavior of its own members.

As a final comment, it is important to note that another agency problem that faces the IOC is the background of many of the IOC members. Members often have prominent positions in national-level sports committees and organizations; this situation raises issues of conflicts of interest for IOC members when decisions are being made that could impact members ̓ home organizations. Although we have suggested a proposal that will reduce agency problems associated with the management and control of the IOC, future studies of nonprofit sport organizations could explore the potentially conflicting roles that agents such as IOC members face while acting on behalf of their parent organizations.

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Notes1When the story broke in the media, it focused on allegations of improprieties by members of

the Salt Lake Organizing Committee to secure the 2002 Olympic Winter Games. Soon after it was revealed that many of the bribes “paid” were actually solicited by a number of IOC members.

2We are referring to the controversial judging of two events: the figure skating pairs ̓event at the 2002 Salt Lake City Olympic Winter Games involving French judge Marie-Reine Le Gougne and the synchronized swimming solo event at the 1992 Barcelona Olympic Games involving chief referee Judith McGowan (cf. Pound, 2004).

3All figures will be reported in U.S. dollars unless otherwise noted.4IOC policy at the time was that gifts valued at no more than $150 were acceptable.5It is important to note that there were also several external commissions that examined the

corruption in the IOC; the IOC, however, chose to focus on the findings of its internal commis-sions (Booth, 1999).

6One IOC member under investigation passed away before a ruling was made on his membership.

7According to the IOC, Johnson & Johnson decided against becoming a sponsor “for various unrelated reasons” (IOC, 1999, p. 3)■.

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