The Green Bay Packers are the only NFL franchise that operates without a single “majority” owner. Since the 1930s — long before the NFL adopted its current ownership restrictions — the Packers have been organized as a nonprofit stock corporation. The Packers periodically sell shares to the general public. These sales are not considered a public offering, however, so they’re not subject to federal securities regulations. In 2011, the Packers’ board of directors authorized the sale of up to 280,000 new shares at $25 per share. No person may purchase more than 200 shares under the Packers’ bylaws. Including the current offering, there are about 5 million outstanding shares.
As many commentators have noted, the Packers’ shares are little more than a voluntary donation to the football team. Since the Packers are a nonprofit corporation, no dividends are ever paid. If the Packers ever dissolve, their assets will be transferred to another nonprofit organization. Shares cannot be sold, only transferred to immediate family members. If anyone tries to sell their shares the Packers have the automatic right of repurchase at 2.5 cents per share. The only rights shareholders have are to elect the Packers’ board of directors and approve any future stock sales or amendments to the corporation’s bylaws.
Of course, despite lacking most of the traditional benefits of “ownership,” all shareholders must still consent to Roger Goodell’s universal jurisdiction:
The NFL Rules prohibit conduct by shareholders of NFL member clubs that is detrimental to the NFL, including, among other things, owning a financial interest in any other NFL member club or other professional football organization; loaning money to other NFL member clubs or any player, coach or employee thereof or any football official employed by the NFL; acting as an agent for any NFL player; publicly criticizing any NFL member club or its management, employees or coaches or any football official employed by the NFL; or paying an NFL player or coach. If the Commissioner of the NFL decides that a shareholder of an NFL member club has been guilty of conduct detrimental to the welfare of the NFL then, among other things, the Commissioner has the authority to fine such shareholder in an amount not in excess of $500,000 and/or require such shareholder to sell his or her stock. In addition, if the Commissioner determines that a shareholder has bet on the outcome or score of any game played in the NFL, among other things, then the Commissioner may fine such shareholder in an amount not in excess of $5,000 and/or require such shareholder to sell his or her stock. (Italics added)
So read literally, the Packers shareholders — all of whom are Packers fans, I’d assume — are not allowed to ever publicly criticize the team or the league. That means a negative Tweet or message board post could cost you your shares and up to $500,000.Now, I don’t think Goodell has ever fined a Packers shareholder, and I’d be somewhat surprised if he ever did. Still, it highlights the absurdity of the NFL bylaws, which give the commissioner a broad, non-reviewable power to fine the very owners who employ him.
On the other hand, I wonder if the Packers’ unique ownership structure might not be a working model for organizing a local government along more libertarian lines. Imagine a city where you sold shares to raise revenue for capital projects — building roads, fire stations, et al. — and limited the number of shares any one person could purchase at a time. Shareholders could vote for directors (city councilors) and for or against charter revisions (bylaws), but they could not sell the shares for profit or otherwise enjoy any special privileges. And when you needed to raise money for another capital project, you could just sell more shares. Operating expenses would then be paid through user fees — after all, Packers shareholders still have to buy tickets to actually attend games.
The Packers board of directors has about 40 members elected by approximately 112,000 individual shareholders. That’s far more representative than most city councils. The Packers board elects a CEO and an executive committee to oversee day-to-day operations, which isn’t substantially different than a city manager.
The eternal criticism of any form of voluntary government is, “What if people don’t support it and free-ride off the ones who do?” I think the Packers present a solid response. Everyone knows the Packers shares don’t confer any substantial decision-making power over the team. The shares have no economic value. Yet people still line up to buy them every time there’s an offering. If you build and sustain a good product, be it a football team or local government services, people will support it. Call it civic or team pride, but clearly there’s a market for voluntarily pledging support to a community-based corporation.
I should add here when I speak of “local government services,” I mean only those common services that would otherwise exist in the market. I am not referring to regulatory schemes that cannot exist without the use of force, e.g. zoning. And I’m not suggesting a Packers-style model is the only one that could work. But we should also not be blinded into thinking that the for-profit, publicly traded stock corporation is the only valid method of aggregating capital and administering multiple-ownership property. One of my key criticisms of the NFL has been its strict adherence, the Packers notwithstanding, to an ownership model that promotes poor management and aggression against local taxpayers. Like government services, the NFL would benefit from competition among different governance models.
(This post was first published on February 22, 2012.)