Will "Morals" Clauses Impact Tiger's Endorsements?

tiger woods gatorade

“Nike supports Tiger and his family. Our relationship remains unchanged.”

Such was Nike’s statement last Wednesday, when we were just a few days, and a few mistresses, into the Tiger Woods scandal.

Nearly a week later, news came from CNBC that one of Woods’s sponsors, Gatorade, is discontinuing one of its products connected to golf’s biggest star.

Gatorade said the decision had “absolutely nothing to do with recent events,” and there is evidence it actually was not scandal-related. (“[I]ndustry trade Beverage Digest actually reported the discontinuation of the Gatorade Tiger Focus line on November 25, two days before the accident occurred, CNBC reported.)

But as the scandal continues to unfold and additional allegations pour out, no doubt Woods’s sponsors are holding closed-door meetings to decide how to move forward.

Woods’s endorsement deals are a massive part of his income.  He is projected to surpass $1 billion in career earnings by 2010, 90% of which will come from endorsements.

In discussing those endorsement contracts, one phrase being tossed around is “morals clause.” While Woods’s alleged behaviour may be morally objectionable to many, that has nothing to do with how “moral” may be legally defined in his various contracts.

Fernando Pinguelo, an attorney who has written extensively about morals clauses, said that, like all contract negotiations, the “leverage the ‘talent’ has in a particular deal,” as well as the capabilities of his agent, will direct what the clause says. Woods, of course, had maximum bargaining power and top tier representatives.

Though he has not seen any of Woods’s contracts, he speculated that any morals clause would be quite forgiving, such that the clause would only be triggered in the event of a felony conviction. While morals clauses can be very broad — prohibiting, for example, actions violating “societal norms” — there is zero chance that is what Woods’s contracts say.

Michael McCann, a professor at the Mississippi College of Law who focuses on sports law, agreed. He also pointed out that other athletes and agents are watching closely how Woods’s endorsers eventually react. If they had tried to drop him immediately for actions many athletes might themselves participate in, the companies could have had difficulty securing endorsement deals with big-shot athletes in the future.

Some morals clauses do allow remedies other than termination when circumstances like this arise. Pinguelo noted that an athlete may be required to pay a penalty, or the company could be allowed to publicly criticise the athlete’s behaviour.

Of course, like any other contract, there could be a myriad of ways for the relevant companies to get out, should they choose to do so. And his endorsers can always choose to end the relationship by breaching the contract and paying whatever penalties are required.

Morals clauses aside, nothing is stopping Nike et al. from ending their relationships with Woods, except, of course, business. And if the money indicates they should stay with him, whether because the penalties are too big or because the payout will continue to be worth it, no doubt they’ll (just) do it.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.