Martha Stewart Living Omnimedia
Abstract
This case analysis offers facts and opinions about Martha Stewart committing insider trading. It will examine how Martha knew about ImClone stock dropping and how she uethically spiraled out control. Severel articles will be used to support how Martha was sentenced and
This study notes that the light sentence for insider trading that resulted in a nearly 37% gain for Martha Stewart Living Omnimedia, Inc. also may have been responsible for a small but significant average loss for industry rivals on the sentencing date. The sentence that was ‘good’ news for Martha was also ‘bad’ news for her competitors on the sentencing date.
In the two and a half years since her release from Alderson Federal Prison Camp in West Virginia, …show more content…
where she spent five months for making false statements to U.S. government investigators about her role in the ImClone insider trading scandal, Stewart has jump-started her stalled company and moved forward full-throttle into a rich, packed, larger-than-life life.
The article examines how Martha Stewart staged her comeback after spending time in prison for lying to government investigators about a suspicious stock trade. Stewart plotted her comeback almost from the day she was convicted. The author suggests that Stewart's return may be the strongest evidence yet of her strategic sense and business acumen. To power her comeback, Stewart relied on the assistance of such people as Susan Lyne, CEO of Stewart's company, Charles Koppelman, her sidekick on "The Apprentice: Martha Stewart," Mark Burnett, Ann Richards and Jeff Zucker. In many ways, the attention paid to "The Apprentice" is a sidelight to a larger business challenge facing Stewart's company, Martha Stewart Living Omnimedia (MSLO), and that is MSLO's partnership with Kmart. INSETS: Backstage at Martha Inc.;Martha Speaks;The Winner Is…;Kmart? Kmartha
What started out to be just an insider trading scandal with ImClone a, biopharmaceutical company, became a white collar crime with Martha Stewart Living Omnimedia Inc. The CEO of ImClone was good friends of Martha Stewart, who happen to have shares in his company. Dr. Waksal, CEO, thought he would give his family and friends a heads up about the stock declining as soon as the FDA announced the denial of the new cancer drug Erbitux. With this news the CEO made unethical decisions that ended up putting Martha Stewart in the spotlight. This case analysis will discuss the ethical issues, if Martha Stewart did commit a serious crime or was she a scapegoat, did the media help or hurt her case, was her sentence appropriate; should Martha continue to be a part of her company after her sentence, and what is Martha’s current situation today after it is all over. Ethical issues: * Dr. Waksal decided to try and sale his stock for $5 million through brokerage accounts at Merrill Lynch & Co. and Bank of America Corp knowing that he would be violating the law and ethics of fair trade. * Then his father, daughter, and close friend Martha Stewart all sold shares before the bad news broke about the FDA refusing to accept an approval for ImClone’s promising new Erbitrix cancer drug. * A spiraling effect happened after Martha was under investigation for insider trading of ImClone stock that made her and other executive’s sale their stock in her company, Martha Stewart Living Omnimedia Inc. Dr. Waksal knew what he was doing was wrong he considered the alternatives available to him to minimize his losses. He knew since the selling of his stock would be based on information not available to the public it would be deemed illegal. He still decided to do it anyway. He felt obligated to protect himself and his family and friends who had invested in his company. Dr. Waksal was unable to think critically and created a conflict of interest for him and his family. A conflict of interest exists when an individual must choose whether to advance his own interests and those of the organization (Ferrell, 2008). This is exactly what the CEO did. Then his family and friends did as they were told because they were scared to lose any money because of the FDA’s disapproval of the cancer drug. Yes they probably knew that it was wrong but still they had invested money that was soon going to vanish. People do unethical things when pushed in a corner and not being able to focus on the consequences of their actions. Soon after Dr. Waksal was arrested he accepted a plea bargain to save his father and daughter from being charged. But he had to agree to tell who the other people were that knew about the stock possibly falling before the public found out. Martha Stewart was one of the people he mentioned. Therefore creating a spiral affect with her company. As soon as Martha thought that she may be under investigation she obviously thought her company will be in jeopardy because of it. Martha sold her stock along with other top executives in her company before she was arrested. Whether she was told by her financial advisor or she did it on her own it was still unethical to do so without the public not being aware of the situation.
Was Martha Stewart guilty of a serious crime or was she a scapegoat for other, more serious, CEO malfeasants, who had been brought to justice? Martha Stewart was guilty on four counts: obstruction of justice, conspiracy, and two counts of making false statements. Judge Miriam Goldman Cedarbaum sentenced Stewart under the federal sentencing guidelines.
'' Stewart's base offense level was twelve,'' and no other Chapter Two or Chapter Three adjustments applied.
Stewart had no criminal history, placing her in Criminal History Category I, for a guideline range of zero to sixteen months imprisonment.'' Despite the government's recommendation that Stewart be sentenced at the high end of the guideline range, Judge Cedarbaum sentenced Stewart to the minimum sentence of imprisonment, ten months, with five months to be served in prison and five months' community confinement, two years' supervised release, and a $30,000 fine (Chatham, 2007). It is obvious in this case that Martha had to of been alerted about the ImClone stock since she was good friends of Dr. Waksal. When it became clear that she might also be under investigation for selling her ImClone shares then she immediately sold her own shares in Martha Stewart Living Omnimedia Inc. thinking that the stock prices would fall once word got out. This shows unintentional amoral management. Martha did not think about the business activity in ethical terms. She just reacted like any other human being would in this situation. Or she could have been telling the truth about selling the stock if got to $60 and below. It is all circumstantial. In reading about this case I did not see where there was hard evidence of insider
trading.
Has the media attention given to the Martha Stewart case been excessive? Has this helped or hurt her case? Yes the media attention to Martha Stewart case has been excessive. She had celebrity friends like Rosie O’Donnell and Bill Cosby speak on her behalf and it seemed to have worked against her in court. Juror Hartridge felt that Martha was too sure of herself and did not need to prove anything. She also felt that the celebrity appearances in court were a tactic to sway the jury. Juror Hartridge asserted, “Like that was supposed to sway our decision (Carroll & Buchholtz, 2006).” Of course the media had fun with it because Enron had just been in the news about insider trading among other indictments. The court system really wanted to make an example out of companies who have been participating in insider trading. Martha only accepted the plea of guilty to make it go away faster. This way she could work on a strategy to rebuild her image.
Does Ms. Stewart’s sentence seem appropriate given the magnitude of her offense? Is a prison sentence the appropriate penalty for her offenses? Since the court dropped the most serious charge of securities fraud then her sentence was reduced. But what would a persons sentence be if they were not Martha Stewart? Well Dr. Waksal received a seven year prison sentence and he took the plea bargain. Martha Stewart only received 5 months in jail and 5 months house arrest. Something does not seem quite right about that arrangement. Martha Stewart's case is an example of a low sentence under a straight forward application of the guidelines. The light sentence reflects the nature of the charges of which she was convicted and the relative harm caused by her conduct (Chatham, 2007)."
If you were on the Board of Directors of Ms. Stewart’s company, what role would you say she should play after this case has been settled? Should she be kept away or kept close to her company? Why? If I was on the board of directors of Ms. Martha’s company I would want her to still play a significant role in it. I would first follow Fink’s three stages Model. The crisis has already been identified as insider trading, it has been isolated by Martha going to court, and the crisis has been managed by settling in court for her wrong doings. She was a lifestyle expert first, and a CEO second, and that's what makes her effective at pitching her products (Valiquette, 2010, p. 11). I believe that since she is doing the time that she should not lose her business that she has worked so hard for. She started her company so she should continue to be able to have say in what goes on. Perhaps not as CEO but a position that the board of directors and Margaret can agree on. As she stated in an interview, "My life is my business. My business is my life. I've said that a thousand times. I had to do it because I knew it would change things--jigger a change--in the company (Sellers & Levenson, 2005, pp. 100 - 122).”
Current update of Ms. Stewart’s personal situation and that of her company. Martha seems to be doing ok for herself considering what she has been through. She still owns the bulk of the company's stock and holds 92% of the voting power--prompting speculation that she may one day take it private--but she can't dictate the agenda (Business Week, 2006). She has made a strong come back in the market place this year. Martha Stewart’s Collection at Macy’s is the number one home brand and the elite target for textiles, kitchenware and tabletop items. Michaels craft store has also had an increase on sales with Martha Stewart Crafts with both independent and international retailers. Martha also has a pet line that will launch at PetSmart stores later this year in a range of categories including apparel, grooming, bedding, bath, leashes and collars, toys and more. These are just a few of the things that she has helped work on to get back her good name (Seeking Alpha, 2010).
On another note, the company’s code of ethics now has stated that insider trading will not be tolerated.
Employees, officers and directors who, as a result of their relationship with MSO, are in possession of material, non-public information about any publicly traded corporation, including MSO, may not engage in transactions in the securities of such corporations and should not share such information with anyone who might engage in such transactions. To do so is not only unethical but also illegal and could expose you to civil and criminal penalties [ (Martha Stewart Living Omnimedia Inc., 2010) ].
Business Week. (2006, November 6). The Reinvention Of Martha Stewart . Retrieved June 2010, from http://www.businessweek.com/magazine/content/06_45/b4008076.htm
Carroll, A. B., & Buchholtz, A. K. (2006). Business and Society 6th Edition. Thomson South- western Corporation.
Chatham, D. A. (2007). Playing with Post-Booker Fire: The Dangers of Increased Judicial Discretion in Federal White Collar Sentencing. Journal of Corporatrion Law , 619 - 639.
Ferrell, O. (2008). Business Ethics: Ethical decision making and cases (7th ed). Boston: Houghton Mifflin Company.
Martha Stewart Living Omnimedia Inc. (2010). Corporate Governance - Code of Conduct. Retrieved June 2010, from http://phx.corporate-ir.net/phoenix.zhtml?c=96022&p=irol-govconduct
Seeking Alpha. (2010, April 28). Martha Stewart Living Omnimedia Inc. Q1 2010 Earnings Call Transcript. Retrieved June 2010, from http://seekingalpha.com/article/201449-martha-stewart-living-omnimedia-inc-q1-2010-earnings-call-transcript
Sellers, P., & Levenson, E. (2005). Remodeling Martha. Fortune , 100 - 122.
Valiquette, M. (2010, February 15). The Perils of Marketing the Celebrity-in-Chief. Canadian Business; 2/15/2010, Vol. 83 Issue 1, p11-11, , p. p 11 .
This case analysis offers facts and opinions about Martha Stewart committing insider trading. It will examine how Martha knew about ImClone stock dropping and how she uethically spiraled out control. Severel articles will be used to support how Martha was sentenced and
This study notes that the light sentence for insider trading that resulted in a nearly 37% gain for Martha Stewart Living Omnimedia, Inc. also may have been responsible for a small but significant average loss for industry rivals on the sentencing date. The sentence that was ‘good’ news for Martha was also ‘bad’ news for her competitors on the sentencing date.
In the two and a half years since her release from Alderson Federal Prison Camp in West Virginia, …show more content…
where she spent five months for making false statements to U.S. government investigators about her role in the ImClone insider trading scandal, Stewart has jump-started her stalled company and moved forward full-throttle into a rich, packed, larger-than-life life.
The article examines how Martha Stewart staged her comeback after spending time in prison for lying to government investigators about a suspicious stock trade. Stewart plotted her comeback almost from the day she was convicted. The author suggests that Stewart's return may be the strongest evidence yet of her strategic sense and business acumen. To power her comeback, Stewart relied on the assistance of such people as Susan Lyne, CEO of Stewart's company, Charles Koppelman, her sidekick on "The Apprentice: Martha Stewart," Mark Burnett, Ann Richards and Jeff Zucker. In many ways, the attention paid to "The Apprentice" is a sidelight to a larger business challenge facing Stewart's company, Martha Stewart Living Omnimedia (MSLO), and that is MSLO's partnership with Kmart. INSETS: Backstage at Martha Inc.;Martha Speaks;The Winner Is…;Kmart? Kmartha
What started out to be just an insider trading scandal with ImClone a, biopharmaceutical company, became a white collar crime with Martha Stewart Living Omnimedia Inc. The CEO of ImClone was good friends of Martha Stewart, who happen to have shares in his company. Dr. Waksal, CEO, thought he would give his family and friends a heads up about the stock declining as soon as the FDA announced the denial of the new cancer drug Erbitux. With this news the CEO made unethical decisions that ended up putting Martha Stewart in the spotlight. This case analysis will discuss the ethical issues, if Martha Stewart did commit a serious crime or was she a scapegoat, did the media help or hurt her case, was her sentence appropriate; should Martha continue to be a part of her company after her sentence, and what is Martha’s current situation today after it is all over. Ethical issues: * Dr. Waksal decided to try and sale his stock for $5 million through brokerage accounts at Merrill Lynch & Co. and Bank of America Corp knowing that he would be violating the law and ethics of fair trade. * Then his father, daughter, and close friend Martha Stewart all sold shares before the bad news broke about the FDA refusing to accept an approval for ImClone’s promising new Erbitrix cancer drug. * A spiraling effect happened after Martha was under investigation for insider trading of ImClone stock that made her and other executive’s sale their stock in her company, Martha Stewart Living Omnimedia Inc. Dr. Waksal knew what he was doing was wrong he considered the alternatives available to him to minimize his losses. He knew since the selling of his stock would be based on information not available to the public it would be deemed illegal. He still decided to do it anyway. He felt obligated to protect himself and his family and friends who had invested in his company. Dr. Waksal was unable to think critically and created a conflict of interest for him and his family. A conflict of interest exists when an individual must choose whether to advance his own interests and those of the organization (Ferrell, 2008). This is exactly what the CEO did. Then his family and friends did as they were told because they were scared to lose any money because of the FDA’s disapproval of the cancer drug. Yes they probably knew that it was wrong but still they had invested money that was soon going to vanish. People do unethical things when pushed in a corner and not being able to focus on the consequences of their actions. Soon after Dr. Waksal was arrested he accepted a plea bargain to save his father and daughter from being charged. But he had to agree to tell who the other people were that knew about the stock possibly falling before the public found out. Martha Stewart was one of the people he mentioned. Therefore creating a spiral affect with her company. As soon as Martha thought that she may be under investigation she obviously thought her company will be in jeopardy because of it. Martha sold her stock along with other top executives in her company before she was arrested. Whether she was told by her financial advisor or she did it on her own it was still unethical to do so without the public not being aware of the situation.
Was Martha Stewart guilty of a serious crime or was she a scapegoat for other, more serious, CEO malfeasants, who had been brought to justice? Martha Stewart was guilty on four counts: obstruction of justice, conspiracy, and two counts of making false statements. Judge Miriam Goldman Cedarbaum sentenced Stewart under the federal sentencing guidelines.
'' Stewart's base offense level was twelve,'' and no other Chapter Two or Chapter Three adjustments applied.
Stewart had no criminal history, placing her in Criminal History Category I, for a guideline range of zero to sixteen months imprisonment.'' Despite the government's recommendation that Stewart be sentenced at the high end of the guideline range, Judge Cedarbaum sentenced Stewart to the minimum sentence of imprisonment, ten months, with five months to be served in prison and five months' community confinement, two years' supervised release, and a $30,000 fine (Chatham, 2007). It is obvious in this case that Martha had to of been alerted about the ImClone stock since she was good friends of Dr. Waksal. When it became clear that she might also be under investigation for selling her ImClone shares then she immediately sold her own shares in Martha Stewart Living Omnimedia Inc. thinking that the stock prices would fall once word got out. This shows unintentional amoral management. Martha did not think about the business activity in ethical terms. She just reacted like any other human being would in this situation. Or she could have been telling the truth about selling the stock if got to $60 and below. It is all circumstantial. In reading about this case I did not see where there was hard evidence of insider
trading.
Has the media attention given to the Martha Stewart case been excessive? Has this helped or hurt her case? Yes the media attention to Martha Stewart case has been excessive. She had celebrity friends like Rosie O’Donnell and Bill Cosby speak on her behalf and it seemed to have worked against her in court. Juror Hartridge felt that Martha was too sure of herself and did not need to prove anything. She also felt that the celebrity appearances in court were a tactic to sway the jury. Juror Hartridge asserted, “Like that was supposed to sway our decision (Carroll & Buchholtz, 2006).” Of course the media had fun with it because Enron had just been in the news about insider trading among other indictments. The court system really wanted to make an example out of companies who have been participating in insider trading. Martha only accepted the plea of guilty to make it go away faster. This way she could work on a strategy to rebuild her image.
Does Ms. Stewart’s sentence seem appropriate given the magnitude of her offense? Is a prison sentence the appropriate penalty for her offenses? Since the court dropped the most serious charge of securities fraud then her sentence was reduced. But what would a persons sentence be if they were not Martha Stewart? Well Dr. Waksal received a seven year prison sentence and he took the plea bargain. Martha Stewart only received 5 months in jail and 5 months house arrest. Something does not seem quite right about that arrangement. Martha Stewart's case is an example of a low sentence under a straight forward application of the guidelines. The light sentence reflects the nature of the charges of which she was convicted and the relative harm caused by her conduct (Chatham, 2007)."
If you were on the Board of Directors of Ms. Stewart’s company, what role would you say she should play after this case has been settled? Should she be kept away or kept close to her company? Why? If I was on the board of directors of Ms. Martha’s company I would want her to still play a significant role in it. I would first follow Fink’s three stages Model. The crisis has already been identified as insider trading, it has been isolated by Martha going to court, and the crisis has been managed by settling in court for her wrong doings. She was a lifestyle expert first, and a CEO second, and that's what makes her effective at pitching her products (Valiquette, 2010, p. 11). I believe that since she is doing the time that she should not lose her business that she has worked so hard for. She started her company so she should continue to be able to have say in what goes on. Perhaps not as CEO but a position that the board of directors and Margaret can agree on. As she stated in an interview, "My life is my business. My business is my life. I've said that a thousand times. I had to do it because I knew it would change things--jigger a change--in the company (Sellers & Levenson, 2005, pp. 100 - 122).”
Current update of Ms. Stewart’s personal situation and that of her company. Martha seems to be doing ok for herself considering what she has been through. She still owns the bulk of the company's stock and holds 92% of the voting power--prompting speculation that she may one day take it private--but she can't dictate the agenda (Business Week, 2006). She has made a strong come back in the market place this year. Martha Stewart’s Collection at Macy’s is the number one home brand and the elite target for textiles, kitchenware and tabletop items. Michaels craft store has also had an increase on sales with Martha Stewart Crafts with both independent and international retailers. Martha also has a pet line that will launch at PetSmart stores later this year in a range of categories including apparel, grooming, bedding, bath, leashes and collars, toys and more. These are just a few of the things that she has helped work on to get back her good name (Seeking Alpha, 2010).
On another note, the company’s code of ethics now has stated that insider trading will not be tolerated.
Employees, officers and directors who, as a result of their relationship with MSO, are in possession of material, non-public information about any publicly traded corporation, including MSO, may not engage in transactions in the securities of such corporations and should not share such information with anyone who might engage in such transactions. To do so is not only unethical but also illegal and could expose you to civil and criminal penalties [ (Martha Stewart Living Omnimedia Inc., 2010) ].
Business Week. (2006, November 6). The Reinvention Of Martha Stewart . Retrieved June 2010, from http://www.businessweek.com/magazine/content/06_45/b4008076.htm
Carroll, A. B., & Buchholtz, A. K. (2006). Business and Society 6th Edition. Thomson South- western Corporation.
Chatham, D. A. (2007). Playing with Post-Booker Fire: The Dangers of Increased Judicial Discretion in Federal White Collar Sentencing. Journal of Corporatrion Law , 619 - 639.
Ferrell, O. (2008). Business Ethics: Ethical decision making and cases (7th ed). Boston: Houghton Mifflin Company.
Martha Stewart Living Omnimedia Inc. (2010). Corporate Governance - Code of Conduct. Retrieved June 2010, from http://phx.corporate-ir.net/phoenix.zhtml?c=96022&p=irol-govconduct
Seeking Alpha. (2010, April 28). Martha Stewart Living Omnimedia Inc. Q1 2010 Earnings Call Transcript. Retrieved June 2010, from http://seekingalpha.com/article/201449-martha-stewart-living-omnimedia-inc-q1-2010-earnings-call-transcript
Sellers, P., & Levenson, E. (2005). Remodeling Martha. Fortune , 100 - 122.
Valiquette, M. (2010, February 15). The Perils of Marketing the Celebrity-in-Chief. Canadian Business; 2/15/2010, Vol. 83 Issue 1, p11-11, , p. p 11 .