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Wednesday, August 15, 2007
Authority through Morality: Nike Can Terminate Michael Vick's Endorsement Contract

A couple of weeks ago, I wrote about the morals clause in Michael Vick's endorsement contract with Nike. Despite publicly supporting Vick immediately after his indictment, the company suspended Vick's contract. The clause's language entitled Nike to do so.

At the time, however, the exact language of the clause was unknown, and we were left to speculate its possible meaning. We wondered if, for instance, Nike could terminate the contract based alone on Vick's indictment. Another and more contentious possibility would be that Nike could terminate the contract based on public outrage directed at Vick. That speculation generated some outstanding reader comments, and I appreciate all of those who commented.

Thanks to the intrepid reporting of CNBC's Darren Rovell, we now know the language of Vick's morals clause. Over on SportsBiz, Rovell reveals that if Vick is indicted or if he "causes harm to company," Nike can unilaterally terminate the contract. In other words, Nike could have already terminated Vick's contract based on his indictment, but has not. Instead, it has suspended the contract. It will not pay Vick while the contract remains suspended and could still terminate the contract at any time.

As Rovell discusses, Vick's particular morals clause is somewhat unusual, as historically, moral clauses usually require a conviction before a contract can be terminated. On the other hand, as Rovell notes, a recent trend in endorsement contracts between athletes and companies has been to characterize an indictment as a sufficient condition for termination (for a related television interview with Rovell, click here). For another recent trend on morals clause, check out a Harvard Law Bulletin article on "reverse morals clauses."

Rovell's article also poses an interesting poll question:
Nike Has Suspended Vick. Knowing this information, do you think it will help their brand at all to terminate him?
Interestingly, 80% of readers have thus far said "yes." Granted, the poll is not scientific, but any thoughts on why folks do not see a suspended contract as a sufficient-enough separation for Nike from Vick? Put another way, is Nike doing the right thing by not terminating the contract until more information about Vick's potential criminal exposure emerges, or should it have already severed all ties with him?


I think Nike would be justified in terminating Vick. However, assuming that Nike has not and will not suffer any backlash for merely suspending Vick, it might be a wise decision to hold off on terminating him.

Assume, however unlikely, that Vick is completely exonerated. Nike still has a very marketable athlete under contract. If Nike were to dump Vick now and later it comes to light that Vick is completely innocent (again however unlikely), I am sure Vick would have no interest in resigning with Nike, who bailed on him when things got tough.

If and when Vick is found guilty or takes a plea, it would be very simple for Nike to terminate him at that time, and presumably Nike wouldn't have lost any goodwill.

Anonymous Anonymous -- 8/15/2007 8:14 PM  

What are you talking about? Vick, no matter what happens to him, is no longer marketable. No chance. There is no risk if Nike cuts him that he ever goes to a competing company to sell shoes and apparel.

Anonymous Anonymous -- 8/19/2007 3:26 PM  

Nike terminates a contract with Vick for killing dogs and manufactures NFL Jerseys in China where they eat dogs. Globilization at it's best.

Anonymous Anonymous -- 8/20/2007 4:48 PM  

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