(FORTUNE Magazine) – Bad has almost always been good in sports. Depression-era baseball fans cheered Ty Cobb, famous for both his extraordinary batting skills and his extraordinarily bad attitude, just as their grandkids celebrate Dennis Rodman, the cross-dressing, photog-kicking Chicago Bulls forward. But is bad ever bad for business? Ely Callaway may find out soon. He's the 78-year-old founder and chairman of Callaway Golf, the highly respected golf equipment manufacturer (49% annual growth over the past four years; 1996 sales: $678 million) best known for the Big Bertha driver and its two titanium offspring, the Great Big Bertha and the Biggest Big Bertha. (What's next, Ely, the Bigger-Than-Biggest Big Bertha?) Last month Callaway seemed to be risking his company's vaunted reputation by signing oft-troubled 31-year-old tour pro John Daly to a five-year endorsement deal just days after he checked out of the Betty Ford clinic in Palm Springs, Calif., where he underwent treatment for alcoholism, his second such stint in five years.

Sure, Daly's prodigious drives and hard-drinking lifestyle made him a cult figure among the good-old-boy golf set after he shocked the golf world by winning the 1991 PGA Championship. But his life was a quadruple-bogey: a two-year probation for harassing his second wife, suspension from the PGA Tour, gambling debts, a trashed hotel room here and there, divorce from wife No. 3... getting the idea? Even Callaway says he was "glad" Daly was swinging rival Wilson's clubs during that stormy period. "Hell, a grown man can have a couple of beers now and then," he says. "But I watched him and listened to his constant denials about his problem and told my people to stay away from him."

So what changed the chairman's mind? It was a recent chance meeting (and the first) of the two men at Callaway's high-tech testing center in Carlsbad, Calif., while Daly was an outpatient at Betty Ford. Wilson had dropped Daly like a cursed putter in March, so Daly needed new clubs and had asked to come by Callaway's for a few swings with Bertha and her siblings. While there, something clicked between the Gen-X golfer and the septuagenarian executive.

Callaway, it turns out, knows a thing or two about the ravages of alcoholism. The anguish of watching his own grandfather wrestle with the disease until he died in 1930 is still fresh in Callaway's mind. "I saw the pain it brought to my mother," he says. He has also hired employees who were alcoholic at both Burlington Industries, where he was president and a director, and at Callaway Golf. "I know the symptoms and what someone must do to correct the problems," he says. "John knows what he has to do."

Specifically, Daly, who calls the deal the "biggest second chance" of his life (okay, so it's more like the 12th), has to avoid alcohol altogether and must attend daily AA meetings--or the contract is void. The deal is also heavily loaded with stock options that won't be fully vested until 2001. Callaway also made Daly cut his hair. "He basically saved me," says Daly. "He treated me like a son. he's been through this. His company's been through this. It was a warm feeling."

If nothing else, Daly has already earned a measure of Callaway's respect by outsmarting a battalion of marketing types who gathered at his home in Rogers, Ark., last month to plan the new advertising campaign. Daly had cooked up a few steaks and some chicken and was cleaning up the kitchen when the group called him into an adjoining room, announcing they were stumped. "They had a couple of slogans like 'Power on,' stuff like that," Daly recalls. "I just looked at them and said, 'How 'bout 'Keep it straight, John?' Then I went back and finished cleaning the kitchen. It was funny. They just sat there. They loved it."

--Roy S. Johnson