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Martha Stewart: Organization Ethics of Insider Trading

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Martha Stewart: Organization Ethics of Insider Trading
Abstract
Insider trading mostly occurs by individuals close to the upper level management of an organization. This type of unethical behavior undermines the stability of the organization. In the ImClone scandal where Martha Stewart was indicted for her involement, the stability of her company suffered and the companies and people associated with Ms. Stewart suffered as a result of her decision. In this essay I will examine the parties that were privileged to knowing ImClone’s stock was going to drop and those who did not know. I will look at the effects of Ms. Stewart’s action, what she could have done different, and the consequences of her actions. Ethical and public issues must be considered when a business executive makes a decision that could affect the entire company.

The Organization Ethics of Insider Trading On December 27, 2001, Martha Stewart made a decision that changed her life, and the decision jeopardized the livelihood of her stakeholders. Ms. Stewart received a call from her stockbroker’s assistant letting her know that Dr. Samuel Waksal was trying to sell his holdings in ImClone. Dr. Waksal was the chief executive officer and founder of ImClone, and he had just received notice from the Food and Drug Administration that the drug Erbitux did not receive approval to be used as a cancer drug. Stock in ImClone was at a high due to expectations of Erbitux getting approval, and once the news of it not getting it reached the public, Dr. Waksal knew that the price of its stock was going to decline. (Carroll & Buchholtz, 2009, p. 814) This is an example of insider trading. “Anytime a company executive or employee buys or sells stock in the company that person works for, an inside trade has occurred.” (Newkirk, 1998) In this essay I will explore who the ‘insiders’ were that knew that the stock was in danger, and the people who did not know. I will examine how Martha Stewart’s decision affected her company, Martha Stewart Living Omnimedia,



References: Carroll, A. B., & Buchholtz, A. K. (2009). Business & society: Ethics and stakeholder management Clark, Josh. (2009). How Insider Trading Works. HowStuffWorks.com. http://money.howstuffworks.com/insider-trading.htm. Hoffman, Drew. (2007). Martha Stewart 's insider trading case: a practical application of Rule 2.1 Hurtado, Parricia. (2004). Broker’s assistant fined $2,000 for part in Stewart scandal. Newsday (Melville, NY) Martha Stewart Living Omnimedia Reports Third Quarter 2010 Results. (2010). PR Newswire Newkirk, Thomas C. (1998). Insider trading- a U. S. perspective. Securities and Exchange Commission

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