Photos of Kate Moss snorting cocaine, videos of John Galliano hurling anti-Semitic slurs, throngs of women reporting extra-marital affairs with Tiger Woods… and then there was Lance Armstrong, our cancer fighting champion among champions, stripped of his medals and Tour de France titles. Now it’s the rappers from Lil Wayne to Rick Ross over inappropriate lyrics in their songs. No, we’re not strangers to celebrity scandal, but as marketing leaders we are fierce protectors of brand image and reputation, and its news stories like these that remind us that even the seemingly pure and most promising celebs (at least in the case of Lance Armstrong) can fall. And when that celeb is the face of our brand, we cross our fingers, call our PR reps and pray to the powers that be that they don’t take us down with them.

It’s a known fact that aligning with the right celebrity through an endorsement or sponsorship can significantly boost brand image. Companies typically select an endorser who has achieved a certain level of status or esteem with the brand’s target market, or who shares values embodied by the brand[1]. Such affiliations allow the brand to leverage the personality, image and success of the celebrity, generally at a significant cost. But no matter the price tag, such partnerships are never without risk. It’s always possible that the talent, being human, will engage in conduct that is detrimental to the brand’s image. In some cases, it may even be foreseeable (#RickRoss #LilWayne). The actions of misbehaving celebrity endorsers can irreparably damage years of good will and brand value created by the partnership.

So, how does a brand protect itself from the deleterious effects of a spokesperson’s damaging or scandalous behavior? How does it mitigate the financial and publicity fall out caused by such behaviour? Besides having a phenomenal PR firm on hand, we must look to contractual protections and, specifically, the “morals clause”.

Morals clauses provide advertisers with termination rights in the event the celebrity engages in prohibited conduct. They were initially introduced in the early 1900’s to protect Hollywood studios against the embarrassing actions of its high priced stars. While morals clauses are ubiquitous in talent agreements these days, they can be drafted very broadly (granting a right to terminate for any action that may offend public decency or which may bring the brand into contempt or disrepute) or narrowly (granting a right to terminate only if the talent is charged or convicted of a criminal offence). A typical morals clause looks like this:

Performer agrees to conduct himself with due regard to public conventions and morals and has not done and will not do anything which will degrade Performer in society or bring Performer into public disrepute, contempt, scorn or ridicule or that will shock, offend or insult the community, public morals or decency, or prejudice or reflect poorly upon the Company.

Morals clauses enable the company, without penalty, to terminate the endorsement relationship, cease paying the celeb’s endorsement fees, and may even allow a company to levy fines or recoup certain previous payments.

Reebok, Pepsi, Accenture, Nike and H&M presumably each relied upon a morals clause when they terminated their relationships with the naughty celebs outlined above. While the offending behaviour is often a surprise to the brand, the decision whether or not to terminate an endorsement relationship isn’t always an easy one. Nike’s termination of Lance Armstrong following the U.S. Anti-Doping Agency’s allegations that Armstrong used performance enhancing drugs in cycling was pretty predictable. However, Nike famously stood by Tiger Woods after he admitted to repeatedly cheating on his wife, re-signed Michael Vick following his conviction for illegal dogfighting, and supported Kobe Bryant after his arrest for sexual assault. Where to draw the line depends on the values and image of the particular brand. For Nike, the difference is that the latter cases of “bad behaviour” happened “off the field”. In contrast, Armstrong’s doping allegations tied directly to his authenticity and performance in sport, which hits the brand at its core. Nike’s reaction was a strategic move to support its marketing focus on purity and performance in athletics. In addition, and perhaps most offensive, Lance had used the brand’s platform to directly refute doping allegations in Nike commercials. While Nike could credibly stand by Tiger Woods, Kobe Bryant and Michael Vick as their discretions were of a personal nature, Accenture let Tiger Woods go as their campaign focused specifically on the athlete’s character. Similarly, H&M broke its contract with Kate Moss due to her actions not being consistent with the company’s clear policy against drug use.

Unlike Nike, however, other brands may have less of an appetite for certain conduct. Before entering into a costly endorsement agreement, it’s a good idea to know your talent, their industry and what previous acts or allegations have been levied against them. For example, many rappers often include offensive statements in their lyrics. Similarly, it’s not uncommon for star athletes to engage in extramarital affairs. It’s also important to know the boundaries of the brand. If your brand supports entities that aim to combat drunk driving, there will be little tolerance for endorsing a celebrity who is (or has been) arrested or associated with drunk driving (sorry #ReeseWitherspoon). The key is to draft a morals clause that takes into consideration the type of conduct that is likely to damage the core values of the brand. Also consider whether the morals clause addresses new conduct or whether it applies retroactively to conduct that may have occurred in the past but that is discovered during the term of the engagement. And, if your celebrity endorser unfortunately “pulls a Lance” (or a Tiger, or a Kate for that matter), take comfort in knowing that you have protected your brand by a well thought out and carefully drafted morals clause. Caution! Before relying on such a clause, a company will want to carefully evaluate its options from a business and reputational perspective. It’s important to evaluate the conduct against the values of the brand and to discover the truth before reacting, as termination may also trigger a negative public reaction. But, for your sake, we sincerely hope it never comes to that.

Key takeaways:

  • Due diligence. Research your candidate well and know what skeletons are in the closet (e.g., past allegations of drug abuse, domestic violence, cheating).
  • Contemplate the kind of action that would be particularly damaging to your brand image or reputation.
  • You can’t anticipate everything. Have a broad and well-defined morals clause that may be triggered by many different situations.
  • Expect A-level talent to negotiate and pare back the morals clause to be more limited and specific (e.g., a conviction of a crime involving moral turpitude, or a violation of league rules)
  • Do not act arbitrarily, irrationally or unreasonably in exercising your discretion to act under a morals clause. Severing ties can also have negative consequences.