November 11, 2011 · 0 Comments
By SUSANNA KIM | ABC News
Now that it has dealt with a Penn State student riot over coach Joe Paterno’s firing, the university may soon have to deal with corporate sponsors rebelling against its brand.
The university-wide athletics program has dozens of sponsors, like Pepsi and AT&T, who are closely watching the university’s next move. The school’s football program is considered its crown jewel, bringing in $72 million a year, according to the Philadelphia Inquirer.
Sponsors Chevrolet, PNC Financial, John Deere, the American Red Cross and healthcare company Highmark told ABC News they are not jumping ship yet.
Since former assistant coach Jerry Sandusky was arrested on 40 criminal counts on Saturday for allegedly abusing at least eight boys over 15 years, no sponsor has publicly canceled its contract with Penn State.
Sandusky has been reportedly released on bail of $100,000.
The university’s board of trustees fired legendary head football coach Joe Paterno on Wednesday. Interim coach Tom Bradley will take Paterno’s place during the school’s last home game on Saturday against the Unversity of Nebraska. The board also fired university president, Graham Spanier, Wednesday evening.
Spanier, college president for 16 years, said in a statement his “heartfelt sympathies go out to all those who may have been victimized” and “he would never hesitate to report a crime if I had any suspicion that one had been committed.”
It is too early to tell whether Penn State’s corporate sponsors will bail on the university, said Scott Rosner, professor of legal studies and business ethics at the Wharton School of the University of Pennsylvania. Though the logo of paint company and Penn State sponsor Sherwin Williams was no longer on the press conference backdrop behind interim coach Tom Bradley on Thursday. Sherwin Williams did not return a request for comment.
Before the scandal broke on Saturday, Penn State was one of the most “undermonetized stars” in college sports, said Rosner, also associate director of Wharton’s Sports Business Initiative.
“It was a paradigm with safe, conservative, and tremendous values that were the best of collegiate athletics,” he said.
Pepsi has had a major partnership with Penn State, including a $14 million 10-year deal from 1992 that named it the official beverage on campus. Indra Nooyi, PepsiCo CEO since 2006, gave the Penn State commencement address in August 2010 and was awarded an honorary degree. The company didn’t return a request for comment.
Rosner said the school’s brand was strengthened by the football program and its reputation had a “halo effect” on not just the athletics department but the rest of the university as well. Rosner said the most important next move even more so than the next university president, is who they appoint as permanent head football coach, because of the importance of the football program.
Unlike other college scandals that have been contained within a particular college sport, or a university athletic department, the Penn State scandal has broad university-wide implications because of possible irresponsibility from a university leader, he said. Rosner suggested one way the university can begin to help the situation is to donate its ticket sales from Saturday’s football game to a charity for sexual abuse victims or a sexual abuse awareness campaign, or starting their own initiative. Penn State alums have already begun fundraising for victims of sex crimes.
Penn State did not return a request for comment.
Rosner said some sponsors may not be able to exit from deals with the university unless their contracts included a “morals clause.” A term like that would allow particular moral turpitude to void a sponsorship agreement.
But even if the football program were to lose all of the reported $72 million it receives from football ticket sales, fundraising and media deals with the Big Ten conference, Rosner said that is just a drop in the bucket compared with its reported $4 billion a year budget.
“Sponsors at root like to avoid controversy. The real question is whether Penn State is toxic yet,” said Stephen Greyser, Harvard Business School professor emeritus specializing in the business of sports.
“Tiger Woods got toxic in a hurry,” Greyser said of the pro golfer who took a break from competing as the media reported multiple alleged sexual affairs two years ago. Within the first three months of Wood’s car accident that eventually led to stories of his affairs, AT&T, Accenture, and Gatorade dropped their sponsorship deals with the athlete. Gillette did not renew its endorsement deal with him when it ended in December 2010.
Penn State is one of many universities that receive sponsorship funds from John Deere, based in Moline, Ill. A spokesman for John Deere said the company “will fulfill the contracted terms of our agreement” but declined to comment on the recent actions of Penn State University and the future of the sponsorship. The company has a program that allows independent dealers to promote products.
“As we do with all sponsorships, we routinely assess the conditions under which our brand name is used in the marketplace and we will do that in this situation,” spokesman Ken Golden told ABC News.
Pat Morrissey, a spokesman for sponsor Chevrolet, said “we plan to continue to support the student athletes, however, we will continue to review the various elements of our sponsorship.”
PNC Financial Services Group has had an advertising relationship with Penn State since 1982, and a company spokesman said “it has been an effective way to reach students and alumni in the state and around the country.” The company is one of many that has had a prominent place on Beaver Stadium’s scoreboard during football games.
Fred Solomon, spokesman, said the company is “aware of the very serious allegations at State College, and we are watching closely as events unfold.”
Insurance company Highmark has also had a “multi-year” sponsorship contract with Penn State athletics.
Aaron Billger, Highmark spokesman, said “we are saddened by the current allegations linked to the athletic program and any harmful impact to the young people who have participated in Second Mile activities,” referring to the charity through which Sandusky allegedly met a victim.
State Farm Insurance spokesman Jeff McCollum said the company will continue to support college athletic programs around the country as it has for decades.
“As a company that cares about building and sustaining safer communities, we are deeply concerned about the recent allegations involving Penn State,” the company said in a statement. “We support all efforts to fully investigate this matter.”
Laura Howe, spokeswoman for the Red Cross, another of Penn State’s sponsors, says the organization does not have plans to cancel its university partnership. The organization has conducted blood drives on campus for more than half a century, according to Howe.
“Members of the greater Penn State University family have a positive impact in their communities every day and we will continue to partner with them to help save lives,” she said.
Greyser said only after the details of the attorney general’s investigation develop, such as the timeline of events and who knew what, sponsors can decide for themselves how deep the situation looks.
“To some people, Paterno may be a convenient highly visible scapegoat,” he said. “He’s not in criminal trouble right now, but we don’t know what else will emerge.”
By Emma Brown