Matha Stewart Lost Reputation

International Journal of Humanities and Social Science

Vol. 1 No. 15 [Special Issue – October 2011]

A Corporate Hero with Scandal: Lessons Learned from Martha Stewart’s Insider
Trading Crisis
Shuhui Sophy Cheng
Assistant Professor
Department of Communication Arts
Chaoyang University of Technology
168 Jifeng E. Rd. Wufeng District
Taichung 41349, Taiwan
Abstract
Martha Stewart places her name on her products. She becomes the face of her company and the voice of her brand. When her personal misconduct occurred, she made her company vulnerable and risky as well. This case study examines how Martha Stewart managed her corporate communication when her public image and reputation were tarnished on trial for alleged insider trading scandal. The trial not only led her to prison but also hurt her brand equity. The study shows that Stewart’s early response to her crisis demonstrated lack of situation awareness. In the beginning of her investigation, she kept her public persona intact, ignoring or downplaying her role in it. As a result, what Stewart called “a small personal matter” later became a full -blown crisis. If she had managed her communication in a more timely manner, the magnitude of her crisis might have been minimized.
This article also provides detailed insights for organizations to learn from her crisis response strategies.

Keywords: Organizational crisis, Crisis communication, Image restoration
1. Introduction
The personalities of strong business leaders can help shape and enhance their corporate image. In some cases, the leaders become the virtual icon of the corporate brand, lendi ng their personal prestige to the brand and personifying the company. They can also threaten the company when they are involved in a scandal. In this situation, the consequences for the company can be critical as in the Martha Stewart’s insider trading crisis in the
United States. The crisis management scholar, Roux-Dufort (2000) points out that

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