Morals Clauses: Tiger Woods and The Death of His Sponsorships
September seemed like a good month for Tiger Woods. Forbes magazine declared that Woods was “the first billion-dollar athlete.”1 The magazine calculated that with the $10 million bonus he received from the FedEx Cup,2 Woods reached the billionaire status that is usually reserved for the Waltons and hedge fund CEOs. What made Woods’ impressive earnings even more remarkable was that his skills as a golf prodigy, gaining him trophies left and right, only made up 10% of his lifetime earnings.3 The rest came from his lucrative endorsement deals,4 most remarkably Nike which paid him $30 million annually.5
However, the first billion-dollar athlete saw his endorsement empire crash and burn in December, the aftermath of a scandalous car crash coupled with exposure of his (many) extramarital affairs. Accenture, the global consulting giant, and AT&T have already dropped Woods. Although not officially parting ways with Woods, Gilette has said it will start phasing out Woods from promotions for its Gillette razors and shaving foams.6 The reason? Following the flood of information regarding Wood’s infidelities,7 Woods no longer represents the athletic, clean-cut family-man such brands wish to be associated with.8 Or as in Accenture’s case, Woods “just wasn’t a metaphor for high performance anymore.”9
The relationship between Woods and his sponsors seems to have turned on his “immoral” or “bad behavior” and follows a whole string of celebrity deals gone bad in the recent years. Although the details of Woods’ contracts with the likes of Accenture are not known, it is presumed that the contracts were severed based up on a “morals clause” or “bad boy clause” given the size of Woods’ contracts and the prevalence of these clauses in celebrity endorsements.10 While a 1997 survey showed that less than half of the endorsement contracts had morals clauses in them, by 2003, seventy-five percent of the endorsement deals included these clauses.11
Morals clauses “enable one party to unilaterally terminate the agreement if the individual engages in conduct that could have some sort of negative impact upon the particular company or organization.”12 Thus, these clauses are used to “terminate a talent agreement when an actor’s conduct is detrimental to the buyer’s interests or otherwise devalues the performance due.”13 These clauses are especially frequent in sports and entertainment contracts because advertisers, endorsees, television networks and motion picture studios wish to “quickly eliminate the celebrity/product association in the mind of the consumer where the celebrity’s image has come into disrepute in the public’s view.”14 However, it is not always clear what constitutes an “immoral behavior” as envisioned by these clauses. Morals are usually defined by the society and the concepts that are prevailing in a particular period of time.15 Therefore, courts are usually required to interpret what parties intended to encompass within the concept of an “immoral behavior”.16
The history behind the morals clauses reveal their vagueness and how their meaning has become dependent on the society and the time period. The clauses were first used by Hollywood studios in early 1920s to protect themselves against erratic behavior of their contracted actors.17 The clauses became notorious during the McCarthyist era when they were used to terminate contracts of many writers, directors and producers who were accused of being having communist leanings by the House Committee on Un-American Activities.18 Thus, during this era morality clauses were used to attack political ideologies rather than actual immoral behavior.19
More recently, morals clauses have been used against likes of Michael Vick, Kobe Bryant and Kate Moss.20 These celebrities’ “immoral conduct” differed across the board. While Vick was indicted on federal charges relating to a series of alleged dog-fighting incidents,21 Bryant was charged with sexually assaulting a 19-year old22 and Moss was photographed using cocaine.23
What makes Woods’ situation unquestionably different than the aforementioned stars is that his extramarital affairs, however detestable or condemnable they may be, did not lead up to a criminal charge, or even a criminal investigation. He has issued a statement saying that he will take an “indefinite break” from golf, in order to focus on his personal life and to spend time with his family.24 Athletically, he is still on top of his game. Despite the breakout of the scandal, he was voted as the PGA player of the year, as well as the Athlete of the Decade by the Associated Press.25
So the question remains as to whether Woods will make a come-back to golf and his millions worth endorsement deals. History shows that it is possible. For example, in 2009, 5 years after charges against him were dropped, Bryant ranked as the 10th most powerful celebrity by Forbes magazine—having earned $45 million, $24 million of it from endorsement deals.26 Woods’ biggest endorser, Nike, has publicly backed Woods—saying that “Tiger just had a blip.”27 Therefore, it is not too far-fetched to assume that the world’s first billion-dollar athlete will be back and make a couple billion more—with morals clauses in tow.
1 Kurt Badenhausen. Forbes.com, The First Billion Dollar Athlete. September 28, 2009, available at: http://www.msnbc.msn.com/id/25691350/
3 See Andrew Farrell and Tom Van Riper. Billionaire Status is Tiger Woods’ Next Trophy. MSNBC. July 15 2009. Available at: http://www.msnbc.msn.com/id/25691350/.
4 Id. It is reported that he has made $750 million from his endorsement deals alone. See also Erin Geiger Smith Will “Morals” Clauses Impact Tiger’s Endorsements? December 8 2009, The Business Insider available at: http://www.businessinsider.com/will-morals-clauses-impact-tigers-endorsements-2009-12
6 Matthew Lynn, Jan 4 1010, BusinessWeek, Tiger Woods’ Sponsors Should Forgive and Forget. Available at: http://www.businessweek.com/news/2010-01-04/tiger-woods-s-sponsors-should-forgive-and-forget-matthew-lynn.html
7 Larry Dorman, Woods Says He’ll Take ‘Indefinite Break’ from Golf, N.Y. Times, Dec. 11, 2009, available at: http://www.nytimes.com/2009/12/12/sports/golf/12woods.html
8 Lynn, supra n. 6.
9 Brian Stelter, Accenture, as if Tiger Woods Were Never There, N.Y. Times, Dec. 16, 2009 (quoting Accenture spokesperson Fred Hawrysh), available at: http://www.nytimes.com/2009/12/17/business/media/17accenture.html.
10 See Dave Carpenter and Emily Fredrix, ‘Bad Boy’ Clauses Can Sink Woods, Other Endorsers, MSN MONEY, Dec. 17, 2009, http://news.moneycentral.msn.com/ticker/article.aspx?Feed=AP&Date=20091217&ID=10899054&Symbol=US:NKE
11 Fernando Pinguelo. 2008 SETON HALL UNIVERSITY SCHOOL OF LAW SPORTS & ENTERTAINMENT LAW SYMPOSIUM: FROM THE ARENA TO THE STREETS — THE PRESSURES PLACED ON ATHLETES, ENTERTAINERS, AND MANAGEMENT. 19 Seton Hall J. of Ent. And Sports Law 381, 485 (speech)
12 Id. at 482.
13 Noah B. Kressler, Using The Moral Clauses in Talent Agreements: A Historical, Legal and Practical Guide, 29 Columbia J. L. & Arts 235,
14 Fernando Pinguelo and Timothy D. Cedrone. Morals? Who Cares About Morals? An Examination of Morals Clauses in Talent Contracts and What Talent Needs to Know, 19 SETON HALL J. SPORTS & ENT. L. 347, 363 (2009).
15 Id. at 352.
17 Id. See also Pinguelo, supra n. 9, at 483.
18 Pinguelo and Cedrone, supra n. 12, at 355.
19 Id. at 356.
20 Id. at 357 (internal citations omitted).
21 Mark Maske, Falcons’ Vick Indicted in Dog Fighting Case, WASH. POST, Jul. 18, 2007, available at: http://www.washingtonpost.com/wp-dyn/content/article/2007/07/17/AR2007071701393.html.
22 Alex Markels, Decision to Charge Bryant Due Today, N.Y. TIMES, Jul. 18, 2003, available at: http://www.nytimes.com/2003/07/18/sports/basketball-decision-to-charge-bryant-due-today.html?scp=264&sq=&st=nyt.
23 Guy Trebay and Eric Wilson. Kate Moss is Dismissed by H&M after Furor over Cocaine, N.Y. TIMES, Sept. 21, 2005, available at: http://www.nytimes.com/2005/09/21/business/media/21moss.html.
24 Dorman, supra n. 7.
25 CNN.com, Tiger Woods Wins PGA Despite Personal Woes, Dec. 19, 2009, http://www.cnn.com/2009/US/12/19/tiger.woods.award/index.html.
26 Forbes.com, The Celebrity 100. June 3, 2009, http://www.forbes.com/lists/2009/53/celebrity-09_Kobe-Bryant_OKPF.html
27 Lewis Dean, Nike Boss: ‘Tiger Just Had a Blip,’ SkyNews Online, Dec. 15, 2009, http://news.sky.com/skynews/Home/World-News/Tiger-Woods-Affairs-Nike-Boss-Phil-Knight-Says-Golfers-Revelations-Are-Just-A-Minor-Blip/Article/200912215500097?f=rss.