Who Owns the Green Bay Packers? And Why Should Congress Care?

If you ever get tired of your local wingnut’s paeans to corporate capitalism and threats to “Go Galt,” you might try a four-word answer: the Green Bay Packers.  They aren’t owned by some vampire squid.  But who does own them?

At the New Yorker, Dave Zirin thinks he knows about The Pack’s owners:

They have a hundred and twelve thousand of them. The Packers are owned by the fans, making them the only publicly owned, not-for-profit, major professional team in the United States. The Pack have been a fan-owned operation since the primitive pro football days of the nineteen-twenties, when N.F.L. teams could be won in card games and no one foresaw the awesome power this sport would hold over both the American imagination and the American wallet.

Legally, though, this raises more questions than it answers.  The vast majority of “not-for-profits” in the United States do not, strictly speaking, have owners: they are, in California state law parlance, “nonprofit public benefit corporations”, which do not have shareholders. 

In any event, if they have shareholders, then how are they different from any other public company?  A few years ago the evil Boston Celtics became a public company for awhile, and Globe sportswriter Bob Ryan would always end his weekly column with the closing Celtics stock price.  Nobody made a big deal about that.

Looking very briefly through Section 501(c) of the Internal Revenue Code, which classifies more than 20 sorts of tax-exempt nonprofit organizations, it’s not clear whether any of them qualify, because a requirement at least of the most popular forms (I didn’t look at all of them) is that they forbid what we normally think of as shareholders: no one is allowed to get personal financial benefit from the organization’s profits.  Maybe that’s why, as Zirin says, “shareholders get no dividend check and no free tickets to Curly Lambeau Field” — that would be illegal, or at least deprive The Pack of a tax exemption.  In any event, it’s still not clear to me how a firm can be 1) a nonprofit while 2) having shareholders who 3) don’t get any of the benefits of holding shares.

In the end, I agree with Zirin’s conclusion: this is an ownership form that should be replicated.  Fans are tired of being blackmailed by owners who threaten to move: Seattle’s loss of the Sonics was a crime.  As Zirin notes, current NFL rules prohibit more teams operating like the Packers, but given the league’s own tax exemption under 501(c)(6), and the corruption of the current system, this deserves a Congressional response.  I don’t expect the GOP to initiate anything, given its coziness with the super-wealthy, but the Senate Commerce Committee, which has jurisdiction, should begin hearings.  I wonder whether some committee members, such as Minnesota Vikings fan Amy Klobuchar and Seattle Sonics fan Maria Cantwell, both of whom are up for re-election next year, might have some interest in spending some time on the matter.

Comments

  1. Bruce Wilder says

    Non-profit is not necessarily tax-exempt, and I don't think the Packers are tax-exempt. They'd pay a corporate income tax, for example.

    Cooperatives and mutual organization are other forms of corporate organization, which do not have for-profit shareholders providing capital and expecting a return. In the Packers' case, the shareholders do provide capital (there have been share sales, when the team is in financial trouble) and they vote, but the residual beneficiary is a Foundation (which, I presume, is tax-exempt.)

    I'm sure someone could spin out a theory of how differences in the focus of residual control and benefit affect a corporation's strategic behavior, though (I think this obvious) what matters most, currently, in American business culture, is corporate governance and executive looting. In that respect, Packers' shareholders are a force, because they are fans, and they vote, which effect overwhelms matters of mere legal form. Ordinarily, the shareholders in a public company with a marketable capital stock enjoy the apathy born of the separation of control, which marketing the stock in a passably efficient financial market engenders, while the executives are protected by a number of politically convenient obstacles to public scrutiny and the operation of shareholder control. In practice, the executives, in many public corporations, provide no capital, externalize costs to communities, and loot freely.

  2. says

    The benefits that the shareholders get from holding shares is that the team stays in Green Bay and can't be moved on the whim of an owner. They also benefit from (theoretically) lower ticket and concession prices since there's no profit motive driving the ownership.

  3. Jonathan Zasloff says

    All true from everyone, but I'm still a little puzzled about legal form. The issue isn't the tax exemption; the issue how a nonprofit can have shareholders. Steve, this is your bailiwick: what's the corporate form here?

  4. Brad says

    I grew up in Green Bay. My dad had one share in the Packers hung on the wall at his business. There are (apparently) two types of shares – those who vote, and the rest (my dad's $25 share was non-voting).The proceeds from breaking up the Pack would go to some VFW Post (I've forgotten the #). As to governance, the big thing about Lombardi was that he took the reigns of the club and literally kicked the board president (former G.B. mayor) out of any direct involvement in direct management (threatened to go back to New York if the prez – Olejniczak – got on the team plane to the west coast during his first year as coach). Lombardi was a great football coach, and he defined much of the way governance has been handled since then (no one wants a repeat of the 1958 season).

  5. Jack Needleman says

    Jonathan:

    There are many nonprofit forms, and all were designed to solve some problem of contract failure due to coordination, asymmetric information, or other problem of incentives. Some have shareholders, like mutual insurance companies, whose shareholders are the policy holders, or producer cooperatives. A good theoretical economic and legal analysis of different nonprofit forms can be found in Henry Hansmann, The Ownership of Enterprise (Harvard University Press, 1996).

  6. says

    I have long thought that some ambitious mayor is missing a hell of an opportunity for not talking with other mayors in cities blackmailed by the pros into forming a "Municipal League" that would consist of teams owned as the Packers are owned. It would be good for the cities, good for the players – many of them anyway – and good for the mayors.

    It would also be a wonderful opportunity to demonstrate that the Capitalist God Mammon does not have to rule everywhere, and that there are values for which money is not the appropriate arbiter.

    All it takes is a ambitious and wise group of mayors.

    Doesn't seem we have many…

  7. Basilisc says

    I think people are getting hung up on the term "shareholder". Really the term shareholder should only refer to someone who has a legally transferrable share in the profits and in the organization's liquidation value, and it sounds like Packer "shareholders" have neither. It might be clearer if we think of the Packers as a club, and the people who contribute a one-time or recurring fee in exchange for a few benefits, sometimes including voting rights, (but mainly pride) are called "members".

  8. says

    It annoyed me to learn that WalMart calls its wage slaves "associates" – apparently after Sam Walton visited the John Lewis department stores and Waitrose supermarkets in Britain. The 70,000 people who work for this business are called "associates" because they own it: the John Lewis Partnership is a producer cooperative, a rare thing outside farming. But if it works, why isn't it replicated?

  9. John Herbison says

    I wonder: could a municipality exercise the right of eminent domain over an NFL team? (With payment of just compensation to the dispossessed owner)

  10. Robert Waldmann says

    The Wikipedia
    http://en.wikipedia.org/wiki/Green_Bay_Packers#Pu
    says that the Packers are incorporated basically as a joint stock company which happens never to pay a dividend (neither did DEC the Digital Electronic Corporation). The key restriction which makes them unlike your garden variety joints stock corporation is that no one may own more than 200,000 shares. There are other restictions including that all proceeds from any sale go to the Green Bay Charitable foundation, but the shareholders could change those rules.

    Brad the VFW post was deprived of its potential gains (in favor of the foundation) in 1997.

    How did so many people resist the wikitemptation ?

  11. Ebenezer Scrooge says

    John Herbison has an interesting question. Under the US Constitution, they surely could–that's what the Kelo case was about. But many state constitutions and statutes might not permit it. (Municipalities have limited powers.) To me, the legally interesting question is one of jurisdiction. A football franchise is an intangible, albeit an intangible with many tangible contract and property rights. The same goes for the team (which is not the franchise.) Intangibles have no location other than that given to them by a court. Unless the team and the franchise are both deemed to be located in the state in which the municipality is located, eminent domain probably won't work. California cannot exercise eminent domain over New Orleans restaurants, even though eminent domain would further help California become food capital of the world.

  12. Dennis says

    The NFL has passed organizational rules that essentially forbid any city from replicating the Green Bay experiment. Their rules now limit the number of shareholders to 32, and require at least one shareholder with at least a 30% share of the team. The Packer's rules limit any individual to a maximum of 200,000 shares. With more than 4.5 million shares outstanding it's pretty clear that no individual can control the team.

    So, the short answer to the eminent domain question appears to be no. Perhaps the tangible assets could be seized (including the player contracts), but the League would refuse to grant the municipality a franchise to play in the NFL.

  13. NCG says

    I was just reading in the NYT about the egregious health plan NFL players get. Five piddly years of coverage after getting your head knocked around? Excuse me?

    Remind me why any of you put up with these owners?

    Bring on a strike! (Well I guess they'll have to call it something else.)

  14. says

    The Packers are organized as a corporation under Wisconsin's standard business corporation statute (Chapter 180 of the Wisconsin statutes). Green Bay Packers, Inc. v Commissioner, 1942 WL 8993 (B.T.A. 1942). Article VII of the Packers' Articles of Incorporation provides that: "This corporation shall be non-profit sharing and its purposes shall be exclusively for charitable purposes, the profits, if any, to be donated to the Sullivan Post of the American Legion, or other war veterans' organizations, the stockholders not to receive any dividend or pecuniary profit." As the 1942 case confirms, however, the Packers are not exempt from federal corporate taxation. As far as I can tell, Wisconsin law is somewhat unusual in permitting nonprofits to organize under the general business corporation statute. See De La Trinidad v. Capitol Indem. Corp.

    315 Wis.2d 324, 759 N.W.2d 586 (Wis. 2009), which held that "Having established that incorporation under ch. 180 does not preclude Halter from being organized as a nonprofit, we arrive at the question of what makes a nonprofit a nonprofit. A leading treatise says the articles of incorporation are the place to focus, and it bolsters our view that the chapter under which Halter is organized is not dispositive here …."

    While it is true that the NFL has a policy against public ownership, with the Packers being grandfathered in, there is also a pretty good argument that the policy violates the antitrust laws. See Genevieve F.E. Birren, NFL vs. Sherman Act: How the NFL's Ban on Public Ownership Violates Federal Antitrust Laws, 11 Sports Law. J. 121 (2004).

  15. John Herbison says

    Also, the NFL would have a strong incentive to avoid a judicial determination of whether the team owners have violated antitrust laws.

  16. FuzzyFace says

    I was just reading in the NYT about the egregious health plan NFL players get. Five piddly years of coverage after getting your head knocked around? Excuse me?

    Remind me why any of you put up with these owners?

    Because even the lowest-paid player makes over $300,000 / year? And the average salary is about $1.4Million? If you do a halfway decent job of savings, you don't need anybody to pay for your health plan when you retire.

  17. says

    The Green Bay Packers are not the only team with an ownership structure of this nature. They are just the only team in the one of the four major professional sports leagues in the United States. However, we see this, or very similar models, in other countries. Three of the CFL teams, the Edmonton Eskimos, the Saskatchewan Roughriders, and the Winnipeg Blue Bombers, are owned in this fashion and we see this form of ownership in Europe, where many soccer clubs are owned by individual stockholders. There is a also a club-membership model that is popular in the Australian Football League and with some soccer teams in Europe. This method is very similar to the private-stock ownership structure we see with the Packers. I will also note that the Packers are not alone as a the only team in Wisconsin with this ownership structure – the Wisconsin Timber Rattlers minor league baseball team is almost identical. Finally, the Toledo Mud Hens are an example (albeit not the only one) of a government or civic organization taking over the ownership of a franchise.

Trackbacks

  1. [...] Every year, along with season ticket notifications (where the average wait is 30+ years), the Green Bay Packers also issue their financial balance sheet, as all functioning non-profits are required to do. If this sounds like a funny business model for a sports team, it’s because the Green Bay Packers are the only team with this kind of internal structure. [...]