On August 20, 1996, the North Texas Toyota Dealers Association filed suit against Michael Irvin, the Dallas Cowboys player who entered a no contest plea to charges of cocaine possession earlier in the month. The Toyota dealers’ suit alleges Mr. Irvin represented himself as a moral person when he signed an endorsement contract with the Association and that, with the drug plea; he can no longer be used as a spokesperson. The suit also asked for the return of the Toyota Land Cruiser (valued at $50,000) that Mr. Irvin was given as part of the endorsement contract.” The lawsuit also asked for the costs of the aborted campaign and $1.2 million in lost sales. Total damages requested were S1.4 million.” Mr. Irvin returned the car voluntarily and received a sentence of four years, with deferred adjudication; a fine of 510,000; and 800 hours of community service. He was also suspended by the NFL for the first five games of the 1996-1997 seasons for his involvement with drugs.” The Irwin situation was an early case that signalled the beginning of a long line of celebrity endorsement cases that continue to present issues for companies, advertisers, and sponsors. In fact, the Irwin situation marked the beginning of the common use of the “morals clause.” A morals clause permits the organization to end the endorsement relationship with the celebrity if the celebrity engages in illegal or immoral conduct, generally defined to include drug use, arrest, violence, and, in the case of CEOs, affairs. In 2005, international model Kate Moss appeared in a grainy videotape showing her using cocaine. On the tape she is heard to say that she doesn’t “do drugs more than any-one else.” Following the release of the confession and the pictures from the video in London’s Daily Mirror, the supermodel apologized. However, Burberry and Chanel, two of the companies who use Ms. Moss as their representative indicated that they would not be renewing her contract. H&M, Europe’s largest clothing company (with seventy-eight stores) that carries designers such as Stella McCartney, listened to Ms. Moss’s side of the story and initially agreed to give her a second chance. However, public reaction in London was so negative that the company withdrew the contract.” Customers inundated the stores, complaining that allowing such a role model for teen-type clothes was unacceptable. The public relations representative for the store said, “If someone is going to be the face of H&M, it is important they be healthy, wholesome and sound.’ Ms. Moss has since had her contracts with H&M and several other companies reinstated. In 2006, Paramount Pictures ended its multibillion relationships with superstar Tom Cruise. Mr. Cruise had had a fourteen-year relationship with Paramount Studios, a division of Viacom. However, Sumner Redstone, the chairman of Viacom, announced (to the surprise of many) the termination. The Cruise-Paramount partnership has earned $2.5 billion in box office sales since its inception. Citing Mr. Cruise’s personal behaviour, Mr. Redstone indicated, “As much as we like him personally, we thought it was wrong to renew his deal. His recent conduct has not been acceptable to Paramount.” He also added, “It’s nothing to do with his acting ability, he’s a terrific actor. But we don’t think that someone who effectuates creative suicide and costs the company revenue should be on the lot.” He also added, in reference to Mr. Cruise jumping on the chair during an interview on the Oprah Winfrey show, “He had never behaved this way before, and he really went over the top.” The other conduct Mr. Red-stone was referring to was Mr. Cruise’s public disputes over depression, psychiatry, and treatment (grounded in his Scientology faith), and his public romance with much younger actress Katie Holmes (the couple were expecting their daughter, Suri, prior to being married). However, an insider said the issue was the cost of the contract, the overhead, as well as the cost of Mr. Cruise’s executive team. Mr. Redstone also estimated that Mr. Cruise’s behaviour prior to the release of Mission Impossible III resulted in lost sales of about $100 to $150 million. Mr. Redstone added, “I feel badly. Essentially he’s a decent guy and a great actor.” In 2007, Verizon withdrew its sponsorship of the Gwen Stefani tour when a raunchy video of her opening act, Akon, appeared online. The video shows Akon engaged in questionable on-stage behavior with a young fan that was under the age of eighteen. The video resulted in considerable coverage and outrage from parents and commentators. Akon indicated that the club where the video was made was supposed to be checking IDs and he assumed that the young woman (a pastor’s daughter) was eighteen. He issued the following apology: “I want to sincerely apologize for the embarrassment and any pain I’ve caused to the young woman who joined me on stage, her family and the Trinidad community for the events at my concert.” Akon’s album, Konvicted, has sold 2.2 million copies and was number II on the Bill-board charts in May 2007. Ms. Stefani’s album had sold 1.2 million copies. Under the terms of its sponsorship contracts, Verizon had the right to end its relationships with singers for criminal charges or other misconduct. Ms. Stefani’s manager said,” This kid is not getting a fair shake [referring to Akon). I strongly disagree with their take on it. How this has anything to do with Gwen Stefani I have no idea.” Verizon was still required to pay Ms. Stefani the cash due under the contract (estimated at $2 million), but it would no longer have advertisements or other promotional materials as part of the tour. Verizon issued the following statement “We made a decision, based on what we saw, and, in this case, our own customers, who we listen to, were reacting.
Does the decision of the companies/associations in terminating the contract with such celebrities emerge from a concern about the moral health of a society or does is emerge from a simple costbenefit analysis? Comment with reference to the above cases?