Sponsors ploughing money into Formula One have been left squirming after the sport's rulers ignored human rights concerns and staged a race in Bahrain watched by hundreds of millions around the globe.
Blue-chip companies whose names adorn the high-speed cars distanced themselves from the event, saying they did not entertain clients at the Bahrain International Circuit and that the decision to race on Sunday was not theirs.
Formula One chief Bernie Ecclestone put a positive spin on a race that drew widespread condemnation from abroad and became a focal point for anti-government protests on the Gulf island.
“You know what they say - there is no such thing as bad publicity,” said Ecclestone, the sport's 81-year-old ringmaster who has expanded it from its European base to more lucrative but politically-charged venues in faster growing economies.
Not everybody takes such a sanguine view.
A group of British politicians warned sponsors they risked harming their brands by association with the race, held against a backdrop of protests aimed at the ruling Al Khalifa family.
Chris Avery, board chair of Business & Human Rights Resource Centre, said: “Based on what we have seen in the past, it is going to do damage to their reputations.
“It's hard to put a monetary value on that. Each of them has to decide whether this association with Formula One is worth the damage it is doing,” added Avery, whose organisation encourages companies to respect human rights.
Avery was disappointed that many firms involved in Formula One ignored a letter asking them to address concerns over the race. Ecclestone has now written an initial letter to the group asking them for more information.
Mobile phone group Vodafone, which sponsors the McLaren team of British drivers Jenson Button and Lewis Hamilton, was one of the few companies to comment on the race, saying it had sent no staff to Bahrain and had set out its concerns to McLaren.
Although firms said little publicly, executives were clearly loathe to be seen at the track while TV beamed footage of riot police firing teargas at demonstrators. There was plenty of room at the usually packed Paddock Club, where big-money sponsors treat prized guests to gourmet food and a trackside view.
PR PITFALLS
The episode shows that global sponsorship is not a one-way bet and illustrates the problems when sports and ethics collide.
Among other recent cases, campaigners seeking more compensation from Dow Chemical for victims of a 1984 poison leak in Bhopal, India have seized on the firm's sponsorship of this year's Olympics to publicise their cause.
Asia-focused bank Standard Chartered, shirt sponsor of former English champions Liverpool, raised its concerns with the club earlier this year after Uruguayan striker Luis Suarez became embroiled in a race row.
Simon Chadwick of Coventry University Business School in central England said many companies had not thought through the risks of sponsorships backfiring.
“What they tend to do is to deal with them on a case-by-case basis,” he said. “When you get customer boycotts, when you get clear evidence of a hit to the bottom line, that is when they start to get edgy,” added Chadwick, professor of sports business strategy and marketing.
LOCAL KNOWLEDGE
John Constantinou, head of global sponsorships and p artnerships at telecoms company Orange, said companies tapped local knowledge to look at potential deals.
“In terms of evaluating a sponsorship property, we work with our local teams to ensure we are looking into the background of organisers and events,” said Constantinou, whose company is a sponsor of this year's Euro 2012 soccer tournament.
“The tricky bit is where there are sporting events where we do not have a base. There we would work closely with the organisers of the event and we have to put a lot of faith in those third parties.”
Sponsors stress that the benefits of what they like to call partnerships extend beyond simply lifting sales in the short-term. They cite its impact on brand awareness, staff morale and ability to act as a showcase for their skills.
Chadwick said that in Formula One, Ecclestone's unabashed commercialism helped to shield companies from bad publicity.
“The culture of the sport is principally about money,” he said.
“Bernie Ecclestone can ride out the storms and be the lightning conductor because the intellectual property he owns enables him to do that.” - Reuters