Please ensure Javascript is enabled for purposes of website accessibility

Be a Good Sport: Cancel the Contract

By Rich Duprey - Updated Apr 5, 2017 at 8:08PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Now's a good time for companies to cancel their expensive celebrity endorsement contracts.

It's not just the banks and carmakers that are suffering in these turbulent markets. Take pity on poor sports athletes, whose once-lucrative endorsement deals are getting torn up faster than a decal-littered race car flies around a NASCAR oval.

Leading the pack was General Motors (NYSE:GM), which knocked Tiger Woods into the sand trap when it severed a nine-year relationship with the pro golfer. After all, it's tough to go to Washington with hat in hand, begging for a taxpayer handout, when you're paying a celebrity sports star $8 million in cash that could keep you afloat a while longer.

Now landing with both feet on the court is basketball phenom LeBron "King" James, who finds Microsoft (NASDAQ:MSFT) rethinking what he has to do with computer software. OK, maybe I'm not the biggest basketball fan, but when I was shopping for a new laptop recently, I can assure you that points scored and rebounds didn't enter the equation.

In reality, shareholders ought to be asking management and their boards just what the heck they're doing squandering their money on such agreements in the first place. I never once bought a ticket from Continental Airlines (NYSE:CAL) just because I'd parked next to the arena with the company's name on it. I doubt that Phillips-Van Heusen (NYSE:PVH) will see me buying an Izod shirt now that the name of Continental Airlines Arena has changed to the Izod Center. And does Barclays (NYSE:BCS) think I'll be doing any investment banking when the Nets leave the Izod Center for the Barclays Center sometime in 2011? 'Fraid not.

Sometimes, there is a rational relationship between the company and the athlete. For example, you can see the symbiotic nexus between LeBron James and Nike (NYSE:NKE) sneakers -- the seven-year, $90 million contract that just happened to be the subject of the very first article I wrote for The Motley Fool almost five years ago.

But with all of the tenuous relationships that do exist between corporations and their celebrity endorsers, no one should be surprised by the chutzpah at Citigroup (NYSE:C), which decided not to back out of its $400 million contract to call the new stadium for the New York Mets "Citi Field," despite needing tens of billions of dollars from taxpayers to stay afloat.

All too often, these endorsement contracts amount to little more than a case of executives wanting to rub elbows with celebrity superstars. Now as companies struggle to remain solvent, it's a good time for them to re-evaluate the contracts they might have been too embarrassed to back out of before, and stick to their knitting of providing goods and services that consumers want to buy. Leave the celebrities on the field and on the court, and keep them out of the executive boardroom.

Microsoft is a Motley Fool Inside Value pick. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Rich Duprey has no financial position in any of the stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Microsoft Corporation Stock Quote
Microsoft Corporation
MSFT
$291.32 (-0.26%) $0.77
Citigroup Inc. Stock Quote
Citigroup Inc.
C
$53.76 (-0.78%) $0.42
General Motors Company Stock Quote
General Motors Company
GM
$38.40 (-1.51%) $0.59
Barclays PLC Stock Quote
Barclays PLC
BCS
$8.29 (-1.78%) $0.15
NIKE, Inc. Stock Quote
NIKE, Inc.
NKE
$117.04 (-0.86%) $-1.02
PVH Corp. Stock Quote
PVH Corp.
PVH
$70.39 (-0.83%) $0.59

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
402%
 
S&P 500 Returns
129%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/17/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.