Published on May 22, 2018, at 8:48 a.m.
by Maret Montanari.
It is any brand’s worst nightmare to have its name attached to a scandal. Imagine being Adidas right now.
The first shoe dropped in September 2017 when the Federal Bureau of Investigation (FBI) charged Adidas executive James Gatto with bribing college basketball recruits and arrested 10 men, including college basketball coaches, for connections to accepting bribes to steer recruits toward certain National Collegiate Athletic Association (NCAA) schools. The second sneaker dropped this April when Gatto and two other Adidas employees faced a second round of charges, stating they made or attempted to make cash payments to the families of college basketball players in exchange for the players attending an Adidas-sponsored school.
The irony is not lost that Adidas’s slogan is “All In,” and with recent events, the slogan carries even more weight as the brand is “All In” this scandal. The sneaker company was founded on the principle of helping and supporting players, but the brand has done more harm than good in the wake of the college basketball investigation.
Companies often use a code of conduct or ethics to guide their employees’ actions. Lying and deception seem like black and white subjects, but what happens when the two mix and it becomes gray? What happens when an employee diverges from the company’s code and creates an untrustworthy environment? Is it a personal or professional ethical dilemma?
“You can put anything on paper and say these are our code of ethics, but there’s not necessarily repercussions unless it’s illegal,” said David Vinturella, adjunct professor at The University of Alabama. “There’s only a certain amount of information that is public record at this point. You really want to make sure your company is not reporting on hearsay or information they believe to be true. They need to carefully vet their employees to get to the root of the issue.”
Adidas’s code of conduct touches on the brand’s Fair Play policy: “Our company’s commitment to Fair Play not only underlines a strong dedication to ethics internally, but also enhances our dealings with and perception by the outside world.” Yet, Gatto and other Adidas employees facing charges did not abide by the company’s policies.
“You have a lot of personal moral concerns in the way these [Adidas] executives did this,” said Dr. Kenon Brown, associate professor at The University of Alabama and director of the Alabama Program in Sports Communication. “They took advantage of college kids. I feel there is an ethical dilemma there. Even if the NCAA doesn’t have a code of ethics, Adidas does. I don’t think you can say it’s a personal ethical dilemma without saying it’s a professional ethical dilemma and vice versa.”
Adidas is likely in crisis mode as it seeks to repair its image in not only the public’s eye but also the eyes of the schools it sponsors. University of Louisville, also named in the investigation, signed a $160 million sponsorship deal with Adidas earlier this year. The FBI alleges Louisville agreed to pay a recruit $100,000, which was funded by Adidas.
Before the investigation, Adidas had pushed its sneaker sales to become the world’s second most popular sneakers behind Nike and ousting Jordan Brand for the title. Now, there is the possibility schools sponsored by Adidas will look for loopholes in the contract or buy themselves out to avoid being tied with the shoe brand.
“The Adidas CEO [Kasper Rørsted] needs to take the charge,” said Dr. Brown. “He needs to say this isn’t how we operate and do business. He needs to set the standard that will trickle down within the organization.”
A brand’s reputation is essential to its success in many areas, including performance. Yet, the Adidas brand might not suffer from this scandal. Industry experts, such as Matt Powell, noted Adidas sales “got better right after.”
Perhaps the increase in sales can be credited to Adidas’s response to the recent charges to its former executives.
The company issued the following statement: “Adidas is committed to ethical and fair business practices and to full compliance with applicable laws, rules and regulations. We have cooperated fully with the authorities in the course of their investigation and will continue to do so as this case proceeds.”
No matter the financial impact on Adidas, Dr. Brown said Adidas needs to restore its reputation and relationships with NCAA-sponsored schools. The brand must not just focus on repairing its image now but also in the future.
The scandal could be considered an eye-opener for the sport of college basketball as the probe of the NCAA and FBI investigation is sweeping. Many schools, players, coaches and companies will suffer in some manner from the scandal.
It is a black eye for the college sports world, but Adidas might use the black eye to its advantage. With effective crisis communications and an emphasis on ethics, the company’s footprint in the aftermath of the fallout might prove positive.