A Principal-ed Sponsor: Reading FIFA's Due-Diligence Problem Through Agency Theory

Who's really vetting whom in football's biggest sponsorship deals?

We tend to assume FIFA screens its sponsors: checking their finances, reputation, and brand fit. But look closer and the relationship runs the other way: it's Adidas, Coca-Cola, Visa, and other major backers who conduct anti-corruption due diligence on FIFA, treating the federation as the riskier party in the deal.

In the latest piece for the AUES Gazette, Hardik Srivastava uses principal-agent theory to unpack this inversion. Sponsors act as the principal, FIFA as the agent, and the classic problems of information asymmetry and moral hazard show up everywhere — from moral clauses built into sponsorship contracts to the joint letter five major sponsors sent FIFA's executive committee in 2015 demanding independent reform oversight.

The framework holds up well... until Qatar 2022. The hosting decision was locked in back in 2010, years before most sponsor due-diligence practices existed, exposing one of the limits of this kind of monitoring: it only works on decisions that are still open, not ones already made.

Read the full piece to see how agency theory maps onto FIFA's sponsorship world, and where it breaks down.

Is FIFA doing someone’s bidding? Questions around FIFA’s inherent prejudices are often raised in conversations about officiating, location-picking, handling of racism, and of course, sponsorships. Sponsors seem to me to be the most natural injectors of prejudice in FIFA's historically corrupt processes: if sponsors’ cumulatively pay around $2.8bn to a relatively black-boxed federation, is it unreasonable for one to assume that they’re bidding for more than what’s on the table? That is a question I’ve had as I’ve went through the World Cup cycle and the conversations around it: and what follows is my understanding, using the principal-agent model, of how FIFA tries to ensure legality in its transactions with sponsors, and where, if at all, cracks of illegality appear. 

The natural assumption about seeking sponsors is that FIFA vets all its sponsors: checking their finances, their reputations, their fit with the tournament's brand, etc. In practice, the more developed and more interesting due-diligence relationship runs the other way: corporate sponsors screen and monitor FIFA, not the reverse. Adidas, Coca-Cola, Visa and others conduct anti-corruption due diligence on FIFA as if FIFA were a risky third-party partner; they negotiate morals clauses that let them exit if FIFA's reputation is damaged; and in 2015, five of FIFA's biggest sponsors jointly wrote to FIFA's executive committee demanding "independent oversight" of FIFA's own reform process after being excluded from the reform committee they'd been promised seats on.

That inversion, where the money-giver monitors the money-receiver's conduct, is a textbook setup for agency theory.

The Principal-Agent Theory

Agency theory (Jensen & Meckling, 1976; Ross, 1973) describes what happens when a principal delegates authority or a task to an agent, and the two don't have identical interests. The principal bears the consequences — profit, loss, reputational damage — while the agent controls the actions that produce those consequences. Two problems follow directly from this structure:

• Information asymmetry: the agent knows more about their own actions, intentions, and internal conduct than the principal does.

• Moral hazard: because the principal can't fully observe or verify the agent's behavior, the agent can act in their own self-interest at the principal's expense, without the principal being able to catch it in time.

The classic response to both problems is monitoring and contractual enforcement, costly mechanisms the principal builds specifically to close the information gap and constrain the agent's freedom to misbehave. Economists call the cost of these mechanisms, plus whatever misalignment survives them, agency costs.

Mapping FIFA Onto the Model

Agency theory concept	FIFA–sponsor equivalent
Principal	Corporate sponsors (Adidas, Coca-Cola, Visa, McDonald's, etc.)
Agent	FIFA
Delegated task	Running a clean, well-governed, reputation-safe global tournament that sponsors' money is publicly attached to, with the highest possible stakes
Information asymmetry	Sponsors have no inside view of FIFA's internal dealings: bribery, vote-buying, or officials' conduct only surfaces well after the fact (as in the 2015 U.S. indictments)
Moral hazard	FIFA officials could extract private benefits (bribes tied to hosting votes, marketing-rights kickbacks) precisely because sponsors couldn't observe or verify that behavior in real time
Monitoring mechanisms	Sponsor-side anti-corruption due diligence, contractual morals clauses, demands for compliance disclosures before signing
Residual loss	Reputational damage sponsors absorbed anyway once the 2015 scandal broke: (Sony, Emirates, Johnson & Johnson, Continental, Castrol) exited rather than continue bearing it

This is a near-perfect fit, with one added wrinkle: it's a multi-principal agency problem. FIFA isn't answering to one sponsor but to a whole portfolio of them simultaneously.

Why Sponsors Monitor Instead of Just Walking Away

A naive prediction from simple agency theory is that principals facing high moral hazard risk should just avoid the relationship, like the peach sellers leaving in a market of lemons. Sponsors don't do that: they pay tens to hundreds of millions of dollars and build monitoring infrastructure around FIFA. Three things explain this:

1. Sunk relational capital makes exit costly. Adidas has held official-ball rights since 1970; Coca-Cola's FIFA relationship runs nearly five decades. All of these are long-duration relational contracts where switching costs (lost brand equity, competitor capturing the exclusive category slot) are enormous. Agency theory predicts that the higher the switching cost, the more a principal will invest in monitoring rather than exit as the response to agent risk. That's exactly the pattern: due diligence and morals clauses, not departure, are the default sponsor response to FIFA governance risk.

2. Morals clauses are a governance substitute for real-time observability. Because sponsors cannot watch FIFA's internal conduct as it happens, they contract for the right to exit later if bad conduct surfaces: a morals clause is, functionally, a deferred and conditional monitoring mechanism. It doesn't prevent moral hazard; it prices the consequence of it and gives the principal an exit option once information asymmetry finally resolves (i.e., once the scandal becomes public).

3. The 2015 sponsor letter is a collective-action solution to a common-agency problem. When multiple principals (Adidas, McDonald's, Coca-Cola, Visa, Anheuser-Busch) share the same agent (FIFA), agency theory's "common agency" variant applies: no single sponsor has enough leverage alone to force governance change, and any one sponsor monitoring alone would be partly free-ridden on by the others. Acting jointly — pooling their five signatures into one letter demanding independent oversight — was a way of internalizing that collective-action problem: it concentrated leverage that no individual sponsor's ~28% share of FIFA's sponsorship-driven revenue could deliver alone.

Where the Model Doesn’t Apply 

Agency theory assumes monitoring can, in principle, close the information gap if the principal invests enough in it. Qatar 2022 is the case where that assumption visibly failed.

FIFA awarded Qatar the tournament in 2010, years before most current sponsor due-diligence practices (built largely in response to the 2015 scandal) even existed. Human Rights Watch is explicit that this happened "with no human rights due diligence and no set conditions about protections for migrant workers." By the time sponsors' modern due-diligence and morals-clause apparatus existed, the highest-stakes decision — which country hosts, under what labor system — had already been locked in a decade earlier. Sponsors were monitoring an agent whose most consequential action (the host decision) predated the monitoring regime entirely.

This exposes the real limit of applying agency theory here: due diligence only works on decisions still open to influence, and to some extent, is limited by the agent’s readiness to accept monitoring. Post-hoc monitoring — reviewing FIFA's conduct after a host is already chosen, stadiums are already under construction, and labor systems (like Qatar's kafala structure) are already embedded in national law — can flag problems but can't undo the delegation that created them. Activist campaigns pressuring McDonald's, Visa, Coca-Cola, Adidas and others during the Qatar buildup were, in effect, asking sponsors to exercise monitoring leverage retroactively, on a decision the agency relationship had already made irreversible.

Sources

• Jensen, M. & Meckling, W. (1976), "Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure" — foundational agency-cost framework

• Ross, S. (1973), "The Economic Theory of Agency: The Principal's Problem"

• Reporting on the 2015 FIFA sponsor letter (AP/Sports Illustrated) demanding independent reform oversight

• Lexology / Crowell & Moring / Compliance Week coverage of sponsor anti-corruption due diligence practices post-2015

• Human Rights Watch reporting on FIFA's absence of human rights due diligence in the 2010 Qatar host decision and subsequent migrant worker outcomes