Collateral Brand Damage: Lessons from Lance

 

Takeaway

  • Analysts estimate that Armstrong will lose roughly $30 million in endorsements
  • Rather than waiting to see how a scandal plays out, companies should start to distance themselves relatively quickly

In the weeks since Lance Armstrong was stripped of his seven Tour De France titles over doping allegations, the fallout continues to take its toll on his reputation. The cyclist’s sponsors have jumped ship one by one, and he has formally severed ties with his nonprofit organization, the Livestrong Foundation. A month later, the dust has yet to settle.

Nike, which sponsored Armstrong since 1996, was one of the first companies to drop him, citing “seemingly insurmountable evidence that Lance Armstrong participated in doping and misled Nike for more than a decade.” In the days that followed, most of his other major sponsors announced their departure, including Anheuser-Busch, Trek Bicycle Corp., 24 Hour Fitness, sports drink maker FRS, Honey Stinger and Giro helmets.

As a result, analysts estimate that Armstrong stands to miss out on roughly $30 million he could have made through those deals.

While it may be easy to view Armstrong’s situation as a cautionary tale about the pitfalls of gaming the system, it also offers important lessons for any organization that builds its image around a high-profile personality. 

Below, legal experts and University of Texas faculty offer insights into the risks associated with these kinds of relationships and suggest strategies for how to move forward in the aftermath of an endorsement deal gone bad.

In Bad Company

“I think it’s always a mistake when an organization has one representative and thousands of people beholding their careers to one person. … For anybody that has one person — whether it’s Miley Cyrus or Tiger Woods, whoever it is — there is a danger that something can happen with that one person. … Any [organization] has to understand how they’re vulnerable to something like this happening. When this first came up, did they ignore it? Were they blind to it? Were they just hoping it wouldn’t affect them? Should they have pulled away from him?”

Terry Hemeyer, public relations professional and lecturer in the College of Communications at the University of Texas at Austin

Damage Control 

“[Nike] did the wrong thing. When it first happened, I would advise any big client like that to pull back — not cancel him, but start pulling back his commercials, start pulling back the visibility and wait until the thing plays out, until they see what the final result is. But they didn’t do that. They kept going and kept going and then all of a sudden when the last decision was made, they said he was canceled.”

Terry Hemeyer

“His sponsors need to put as much distance as they can between themselves and Armstrong. You can’t afford to have your brands affected by someone engaging in systematic violation of rules and systematic deception. … You’ve got to disassociate quickly — Nike already pulled the plug. If he won’t contest the allegations against him, they have no choice.”

Howard Prince, director of the Center for Ethical Leadership at the LBJ School of Public Affairs

Collateral Damage 

“I think [Livestrong is] going to get hit financially. I think what they have to do is gradually pull away from him. They need to get a second mission or objective going, whether it’s the good cause they represent, or another person, or many people. They need to get many third parties to support them and have Mr. Armstrong fade away over time.”

Terry Hemeyer

“A nonprofit has certain obligations to use the funds consistent with its mission statement and what's represented to its donors. ... On a practical level, it's going to have an adverse impact on the fundraising ability of the foundation. There's a question in my mind as to whether the foundation is actually viable going forward because of that, but in terms of people getting their money back, I don't think they have any claim at all.”

David Ulich, partner at Sheppard Mullin, speaking at a recent forum sponsored by the Texas Review of Entertainment & Sports Law

“One thing that Lance Armstrong did that’s helpful to the foundation is that he resigned as its president. They need to get him out of all the high-profile roles he’s involved in. … They need to distance themselves from him and keep standing for what they stand for. … Livestrong depends on the goodwill of potential donors, and they need to show them that they’re doing business cleanly. … They’ll take a hit in the short term, [but] they just have to go out and show people they’re still doing important work. After the sensation wears off, they’ll be able to move forward. It’s about more than just Armstrong’s name.”

Howard Prince

 

Reporting by Courtney Boedeker 

Faculty in this Article

Howard Prince

Clinical Professor, Loyd Hackler Endowed Chair in Ethical Leadership LBJ School of Public Affairs

Howard Prince is a clinical professor and holds the Loyd Hackler Endowed Chair in Ethical Leadership. He served previously in the LBJ...

Terry Hemeyer

Senior Lecturer, Department of Advertising College of Communications, University of Texas at Austin

Professor Terry Hemeyer is one of the few public relations executives that have attained C-suite status beyond typical communications functions. In...

About The Author

Rob Heidrick

Writer, McCombs School of Business

Born and raised in Austin, writer Rob Heidrick has spent several years as a contributor and editor at local magazines and community newspapers. He...

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