Scandals: can they be good for a brand?

That iconic “swoosh” is easily recognized by millions of people around the world as the logo for Nike. Its influence reaches far and its endorsements are many, so it’s understandable that devout sports fans (and anyone that watches the news) remembers when Michael Vick lost his Nike endorsement after pleading guilty to dog fighting charges in 2007.

Just one month ago, Nike decided to renew its contract with Vick. The quarterback has had a moderately successful comeback since signing with the Philadelphia Eagles in 2009.

“Michael acknowledges his past mistakes,” Nike spokesman Derek Kent told CNBC. “We do not condone those actions, but we support the positive changes he has made to better himself off the field.”

Many are upset that Nike may appear to support criminal activity with Vick’s contract renewal. This has prompted me to wonder: does disassociating one’s brand from a scandal (like Nike did initially) help or hurt a brand?

I believe a brand that disassociates itself from a scandal will flourish or flounder based on how it has already branded itself in the past. If a company has established itself as a smart, successful enterprise, then the public will most likely reference that image and see the disassociation as a tactical move. However, if the company has defined itself as a continuously error-prone brand that dabbles in illicit activities, then the public will see the company as irresponsible for cutting its ties.

Take Disney World, for example. Several people have died on the park’s attractions, but is that what you think of when you ride “It’s a Small World?” Probably not. Disney is highly adept at branding itself as a provider of wholesome happiness, so it can quickly disregard an issue and move on without a hitch. The public knows that what the Disney brand can offer them outweighs any scandalous slights.

I think Nike ultimately made a wise decision to terminate Vick’s contract in 2007. There was a lot of bad blood associated with the controversy, and Nike probably would have received some flak for it. But, if Nike had ridden it out, I think it would not have suffered a devastating blow either. Nike’s brand — a profitable, dominant, and powerful sportswear provider — can afford to take a hit. And although many don’t agree with Nike’s decision to reinstate Vick, I think we can safely assume that the brand won’t be hurting for business anytime soon.

Contributed by Allison Meeks