Tales of Tiger Woods' extramarital affairs not only jeopardize his marriage, they potentially endanger his relationship with corporate sponsors. The sex scandal has several companies reevaluating advertising ties with the golf star.

Woods is the latest in a string of sports celebrities to blow huge advertising deals due to bad conduct. Gambling, drugs, and steroid use have turned several big-name sports representatives into advertising embarrassments. When celebrities lose marketing appeal, corporate sponsors are often able to turn to special contract provisions called morals clauses to legally end endorsement agreements.

World’s Highest-Paid Athlete

Woods is the world's richest, best known athlete. Since turning pro in 1996, he’s won 71 official PGA Tour events, including 14 major championships. He’s credited with revolutionizing pro golf for dramatically increasing both the size of the sport's popularity and prize money.

Woods' extraordinary discipline and focus as a sports competitor made him a sought-after representative for a wide variety of companies and products. He's endorsed everything from sports drinks and golf clubs to cars, watches, and even a business consulting firm.

His corporate sponsors included such well-known brands as Nike, Gatorade, Gillette, and AT&T. According to Forbes, Woods is the world's best-paid athlete. He made $110 million in 2008-2009, mostly from corporate endorsements.

Tiger Loses His Focus

Woods' brand image took a serious hit after he crashed his SUV into a fire hydrant in November 2009. Since then, eleven women, including a porn star and a Las Vegas cocktail waitress, have come forward with tales about Tiger cheating on his wife.

The consulting firm Accenture was one of the first sponsors to back off its endorsement relationship with Woods after the news broke about his marriage difficulties. The company ended a six-year advertising campaign that was based on the tagline "Go on, be a Tiger." Gillette reportedly stopped airing advertisements that feature Woods.

Gatorade is pulling its Tiger Focus brand of sport drinks. But the company says it’d decided to discontinue the line months before Woods' car crash to make way for new 2010 products.

Although some companies have indicated a willingness to stand by Woods, all of his sponsors are likely evaluating the market impact that his marital cheating has on their brands.

Endorsement Contract Morality Clauses

Woods certainly isn't the first big-name athlete to have his pubic image tarnished by allegations of misbehavior. Michael Jordan was accused of gambling, Kobe Bryant was accused of sexual assault, and tennis star Jennifer Capriati was arrested on drug charges. More recently, cereal maker Kellogg dropped its sponsorship of Olympian swimmer Michael Phelps after a published photo showed Phelps smoking pot.

To guard against the risk that an athlete's commercial value might be damaged by misconduct, endorsement contracts commonly include morality or morals clauses. These clauses permit the advertiser to end the endorsement agreement if the athlete does something to tarnish his or her image, or the image of the corporate sponsor or its products.

Some morals clauses are written quite broadly to permit the corporate sponsor to cancel the contract if the athlete's behavior is embarrassing to the company or inconsistent with its interests. Others allow cancellation if the athlete tests positive for drugs or is charged with a crime. Some allow cancellations only if the athlete is convicted of a crime.

Terminating an advertising contract can lead to an expensive court battle and even more bad publicity. Companies also risk public backlash for disloyalty in abandoning star money makers when they are down and out.

It's often better for companies to quietly pull any advertising related to celebrity scandal and just wait for the endorsement contract to expire or for the athlete to regain star power. That may be what many of Tiger Woods' sponsors have decided to do.

Questions for Your Attorney

  • Family values are very important to my company's image. Can you draft a morals clause that permits an athlete's endorsement contract to be cancelled at the first hint of scandal?
  • Can an endorsement contract be canceled based on unproven rumors of misconduct?
  • Can an endorsement contract without a morals clause be canceled due to the celebrity spokesperson's bad conduct?

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