4. Martha Stewart’s Lost Reputation
Discussion of ethical issues

1. What was the basis of Martha Stewart’s reputation?
2. Why did MSO’s stock price decline due to Martha Stewart’s loss of reputation?
3. Who is Martha Stewart’s target market?
4. What qualities were associated with the Martha Stewart brand, before the controversy? Which of these were affected by the accusations of insider trading, and how? How would you find out for sure?
5. What level of sales and profits would MSO have reached if Martha’s reputation had not been harmed? Refer to SEC or MSO websites for information on financial trends.
6. What range would the stock price have been in at the end of 2002 based on your estimates?
7. Martha’s overall net worth was huge relative to her investment in ImClone. Assuming she did not have inside information, was there any way she could have avoided the appearance of having it?
8. How could Martha have handled this crisis better?
9. Why is insider trading considered harmful? Should insider trading be banned if it assists in moving a stock price to a new equilibrium quickly, so that non-insiders are trading at appropriate prices sooner?
10. If you wished to sell an investment in a company where one of your friends is an insider, or even a significant employee, should you call your friend to advise him you are about to sell? Why, or why not? 5. China’s Tainted Baby Milk Powder: Rumored Control of Online News
Discussion of Ethical Issues

1. Given strong profit growth, has there been any damage to Baidu.com’s reputation?
2. What would future reputational damage affect, and how could it be measured?
3. What steps could Baidu.com take to restore its reputation, and what challenges will it have to overcome?
4. Governments throughout the world have been slow to react publicly to serious problems such as SARS, mad cow disease, and now