• Sports & Entertainment: Turning The Tables On Morals Clauses
  • June 23, 2004 | Author: Kirk N. Sullivan
  • Law Firm: Foley & Lardner LLP
  • Companies that engage athletes or other celebrity personalities to endorse their organizations or products are quite familiar with morality clauses. These "morals" clauses allow the companies hiring the endorser to terminate the relationship when the athlete engages in conduct that may tarnish the reputation of the company, its products or services. As with the current charges pending against Kobe Bryant, scandals or alleged criminal conduct can interfere with those lucrative sponsorship contracts.

    In the post-Enron world, particularly one in which even Martha Stewart cannot escape the long arm of the law, athletes are increasingly turning the tables and seeking protection in their endorsement deals that allow them to escape the contract in the event of corporate scandal. The issue now facing sponsoring companies is how to effectively craft a corporate "morals" clause that does not give the endorser a right of termination for seemingly insignificant problems. An entire company under investigation for alleged SEC violations, for example, is one thing -- but a low level executive's private problems with the law are quite another. In negotiating such an agreement, the company must be clear that only enterprise-wide "scandal" that draws negative attention to the endorser as a result of the relationship will suffice to create any right of termination. Whereas the company will likely seek very broad language to define the athlete's "moral compass," that same company should insist on very specific language to apply to it, so as not to create the possibility that just any negative news report could give rise to a claim of corporate scandal.