Now, more than ever, brands need to ensure that the morals clause in their endorsement agreements has evolved to meet the risks of a changing media world.
Recent scandals involving high-profile endorsers have shined a light on the morals clause. For example, Nike, Trek, Oakley and others dropped pro cyclist Lance Armstrong after he was stripped of his Tour de France titles and banned for life from competitive cycling due to a "massive" doping scheme, and HanesBrands terminated NFL runningback Rashard Mendenhall from endorsing its Champion brand following his controversial tweets about the death of Osama Bin Laden and the terrorist attacks of September 11.
Such scandals should convince brands and their agencies to push for broader "out" clauses in any endorsement agreement.
Morals clauses often give the brand the ability to suspend or terminate the agreement, or obtain a reduction in fees, in the event that the endorser commits an act that falls within the scope of such clause. But morals clauses, which are frequently found to be enforceable by the courts, are one of the most heavily negotiated and controversial provisions in endorsement agreements.
Neither the brand nor the endorser will likely argue that a conviction or an indictment -- such as Michael Vick's conviction for dog-fighting activities -- does not cause the endorser to be subject to public disrepute. But headline-generating activities that are less than criminal -- such as Tiger Woods' marital infidelities -- may still cause harm to the endorser, and by association, the brand.
The key is the tension between the brand and the endorser as to the type of publicity or activity covered by the morals clause. The brand favors broad, subjective language ("if endorser becomes, in the opinion of Company, the subject of public disrepute, contempt or scandal") that will enable it to terminate or suspend an endorser. On the other hand, the endorser favors specific, objective language ("if endorser is convicted of, or pleads guilty to, a felony") because what is a disreputable, contemptable or scandalous act in one context may be quite acceptable in another. The final negotiated language will depend on the context of the endorsement given the type of brand and the type of endorser, and, of course, the bargaining positions of the parties.