You Can’t Do or Say That: Constraining individual conduct in a public and commercial world - LawNow Magazine

You Can’t Do or Say That: Constraining individual conduct in a public and commercial world

picture of man with hand over his mouth. Title: You can't do or say that: Constraining individual conduct in a public and commercial worldGreek triple-jumper, Voula Papachristou, was expelled from the 2012 London Olympic Games because of a disparaging and racist tweet she broadcast days before the Games. European soccer players making negative comments about officials on or off the field now face suspension. An 18-year-old Canadian junior water polo athlete received a two-year suspension from the national sport organization for his role in the 2011 Stanley Cup riots in Vancouver. According to Water Polo Canada, “The message [of the suspension] is, you’re an athlete and you’re representing Canada all the time, whether you’re on the field of play or you’re out at a restaurant or in the general public.” (Canadian water polo player suspended two years for role in Stanley Cup riot, Sep.27, 2011) These examples reflect a seeming increase in measures aimed at censoring the conduct of athletes, on the field and off. Indeed, this trend affects not just athletes, and other celebrities, but can be seen increasingly in employment relationships. A number of factors can be identified as influencing this pattern, but perhaps most important is the exponential growth of social media and its instantaneous communication and global reach.

Public focus on morality clauses is a relatively recent phenomenon, even though they have been in use for some time.

Control over peoples’ conduct is typically done through the use of what are referred to as morals, or morality clauses – a contractual provision prohibiting a person’s immoral, illegal or otherwise disparaging conduct.  These clauses commonly appear in endorsement-type contracts of athletes, performers, and other famous personalities, but actually go beyond this sphere. Companies and organizations typically insist on morality clauses to protect their reputation and interests from being affected by the improvident conduct of people with whom they have contracted.

First, a little history

Public focus on morality clauses is a relatively recent phenomenon, even though they have been in use for some time. They had their origin in the movie industry of the 1920s as a response to the scandalous and often excessive behavior of some of the most famous movie stars of the time. At about the same time, Major League Baseball went through the aftermath of the Black Sox scandal. Eight White Sox players were accused of intentionally losing games in exchange for money from gamblers when the Chicago White Sox lost the 1919 World Series to the Cincinnati Reds. All were subsequently banned for life from organized baseball.

The use of morality clauses spread beyond the sports and movie industries when companies discovered the concept of “branding”.

Both groups were faced with having to stem increasing public criticism of seemingly lascivious and scandalous behaviour and threats by the U.S. Congress of censorship and greater regulatory control over their activities. Inserting strongly worded morality clauses into contracts, with the ability to terminate the contracts if the clauses were breached, was a way for these industries to start to control the conduct of these personalities.

Morality clauses again came to public attention in the movie industry in the late 1940s during the so-called McCarthy era. The U.S. Congress was holding hearings into “un-American activities”, generating huge public outcry and front-page editorials exclaiming a communist “infestation” of the movie industry. Studios once again used morality clauses, by then a mainstay in talent agreements, to terminate and disassociate themselves from scandalized actors, producers and other ‘undesirables’ within the industry.

The use of morality clauses spread beyond the sports and movie industries when companies discovered the concept of “branding”. Proctor & Gambling (P&G), with its Ivory Soap product, first pioneered this concept promoting the idea that there were differences in similar products produced by different companies. They also quickly learned that using a celebrity to promote their brand could be a double-edged sword. In the early 1970s, P&G hired model Marilyn Briggs to be the “Ivory Soap girl” on boxes of Ivory soap, posing as a mother holding a baby under the tag line “99 & 44/100% pure”. Millions of boxes of the soap with her picture on them hit store shelves the same week her X-rated film was released. The effect was catastrophic for P&G. Ivory’s association with ‘purity’ and ‘home values’ was disastrously undermined.

Morality clauses saw a third public resurgence in the early 2000s, when social networking really exploded. Indiscreet or disparaging comments could be broadcast to millions of recipients by the tap of a finger and a tweet or video could go viral in a flashThe primary concern for both parties drafting a morality clause is in describing the language around unacceptable conduct; that is, conduct that could lead to the termination of a contract.. At the same time, the value of endorsement deals skyrocketed and the exposure of companies and organizations in terms of reputation and brand value increased exponentially. For example, it is estimated Tiger Woods’ marital scandal cost the three sports-related companies (Tiger Woods PGA Tour Golf, Gatorade, and Nike) a 4.3-percent drop in stock value, equivalent to about $6 billion (Tiger Woods Scandal Cost Shareholders up to $12 Billion, Dec. 29, 2009). Companies and organizations responded by seeking greater protection from such unintended exposure. Indeed, the drafting of morality clauses has now become an important and increasingly sticky part of contract negotiations.

Issues facing morality clauses

The primary concern for both parties drafting a morality clause is in describing the language around unacceptable conduct; that is, conduct that could lead to the termination of a contract. The company or organization wants to have the greatest flexibility to determine inappropriate conduct so as to deal with even a whiff of a scandal. The endorsee (i.e., the athlete, personality or employee), on the other hand, wants to have as strict and narrow a definition of (mis) conduct as possible.  The company or organization would favour language in the clause making it the sole judge of whether conduct violates the language of the morality clause.  For example, the company or organization would be more likely to use language allowing it (but not necessarily requiring it) to take action should the endorsee bring him or herself into public disrepute, contempt, scandal or ridicule, or bring the company or organization into disrepute. The endorsee, however, would argue for wording requiring a much more serious degree of misconduct, such as a criminal conviction (as opposed to simply being charged with a criminal offence), before any action could be taken to terminate the agreement. He or she would also argue for more objective (and interpretable) language. What constitutes ‘disrepute’ or a ‘disparaging’ comment? This is definitely a debatable circumstance.

The bargaining strength, or leverage, of each party significantly influences the balance of the clause. The greater the apparent leverage of the endorsee, the more weak or lenient the morality clause. For example, Lance Armstrong, in spite of his past liabilities stemming from repeated allegations of doping, commanded a powerful position until his self-admission of doping in 2013, because of his ability to sell products through his image. For example, sales of Trek road bikes rose 143% from 2000 to 2005 largely, if not almost exclusively, due to the performance of Lance Armstrong, a key endorsee (Albergotti, R. & O’Connell, V.; Wheelmen, Gotham Books, 2013).

The wording of the morality clause raises a related issue: who decides, for example, when a comment is disparaging and when it is not? What is the test, if there is one? Would political comments be considered offside? What about comments or commentary directed at the business or organization itself, or its sponsors? The company or organization would favour language in the clause making it the sole judge of whether conduct violates the language of the morality clause. This certainly would disadvantage the endorsee, increasing with the vagueness of  the language (i.e., what constitutes public disrepute?). The endorsee would likely attempt to negotiate an arbitration clause whereby an independent third party would interpret the conduct in question in light of the language of the morality clause.

Variations in morality clauses

The wording of the morality clause raises a related issue: who decides, for example, when a comment is disparaging and when it is not?

Some morality clauses are drafted specifically to the individual. The Callaway Golf Company included a clause in an endorsement agreement with John Daly, a professional golfer, allowing it to terminate their agreement if he engaged in any gambling or drinking activities. This was no doubt done in light of Daly’s previous public conduct. In fact, Calloway did subsequently terminate its contract with Daly, relying on that particular clause.

Since the 1980s, it has become fairly commonplace to see reciprocal, or two-way, morality clauses, which allow the endorsee to terminate an endorsement agreement if the company or organization engages in fraud or some other criminal activity. Indeed, corporate malfeasance has meant endorsees have had to increasingly protect their own reputations and brands. For example, in 2008, the Houston Astros had no reverse morals clause in its endorsement agreement with the corrupt and bankrupt energy and financial trading company Enron Corp., which, at that time, was the seventh largest corporation in the United States. The Astros, faced with a huge public relations backlash, was forced to pay $2.1 million to the company’s creditors in order to sever its relations with the company.

Following alleged bribery and other improprieties by members of the International Olympic Committee (IOC) in 1999, a number of sponsors threatened to pull major sponsorship commitments for the 2002, and subsequent Games, unless the IOC agreed to include detailed reverse morality clauses in their sponsorship contracts.

Similar stories can be found with individual, as opposed to corporate, endorsees. Professional golfers, Vijay Singh, Camilo Villegas, David Toms and Morgan Pressel all wore the logo of the Stanford Financial Group on their clothing. In 2009, Stanford Financial Group and its principle, Allen Stanford, were alleged to have led a $7 billion fraud scheme. Without a reverse morality clause, none of the golfers could have removed the logo from their clothing and disassociated themselves from the disreputable company.  Most endorsement agreements now contain some form of reverse morality clause, albeit not necessarily a mirror image clause, which would depend upon the leverage, or negotiating power, of each party.

Conduct policies as an alternative

… professional and Olympic athletes’ conduct, and other employees’ conduct, can be narrowly controlled through conduct policies using language similar to that found in morality clauses…

So far, we have focused on morality clauses in endorsement contracts. Morality clauses are also found in employment contracts and other types of contracts such as, athlete agreements used by Olympic, and other sport organizations, and contracts for other professional services. But more particularly and typically, conduct in employment situations is regulated by way of a conduct policy. In such circumstances the company or organization has significant authority over the content of the policy. Note, however, that the British Olympic Committee was forced to retract a provision in its athletes’ agreement prohibiting athletes from commenting on human rights matters leading up to and during the Beijing 2008 Summer Olympic Games in the face of a ferocious athlete and public outcry. Nonetheless, professional and Olympic athletes’ conduct, and other employees’ conduct, can be narrowly controlled through conduct policies using language similar to that found in morality clauses not to bring the company or organization into disrepute (which is often vague and ill-defined and thus weak from a legal perspective).

Apart from athlete agreements and organizations’ conduct policies, the speech of Olympic athletes is further curtailed by way of Rule 50 of the Olympic Charter, which states, “No kind of demonstration or political, religious or racial propaganda is permitted in any Olympic sites, venues or other areas.” This rule could well be used to stop any athlete from supporting LGBT Russians at the 2014 Sochi Winter Olympic Games or speaking out against Russian anti-gay legislation at the Games.

Conclusions

The face of businesses and organizations is often portrayed by others hired to do the job, whether athlete, celebrity or employee. Their conduct can reflect upon the company or organization – and vice versa. It is understandable that parties would want to protect their reputation and brands. However, restrictions on conduct and freedom of speech can be onerous and overly controlling where they impinge on issues of ethical and social belief. Determining the bounds of control is a matter of negotiating leverage and reasonable accommodation, but must also be informed by principles of individual belief and human rights.

 

Authors:

Hilary Findlay
Hilary Findlay is an Associate Professor with the Department of Sport Management at Brock University in St. Catherines, Ontario.
 


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