...and back again--Some may hear this and think of a rollercoaster. Some may hear it and think of a yo-yo. But ask Martha Stewart and she'll say, "That was my life". Let's take a ride on the Martha Roller-Coaster. • 1976: Martha Stewart founds a catering company in Connecticut. • 1982: Stewart's first book, Entertaining, is published. • 1987: Kmart signs Stewart to a five-year consulting contract. • 1990: The first issue of Martha Stewart Living is published by Time Inc. • 1993: Stewart begins hosting a weekly television show, Martha Stewart Living. • 1995: Martha Stewart Living is voted "Magazine of the Year" by Ad Age; the Martha by Mail catalogue is launched. • 1997: Stewart buys the company bearing her name from Time Warner. • 1999: Martha Stewart Living Omnimedia, Inc. goes public on the New York Stock Exchange. The initial public offering was one of the most successful ever and made her a billionaire. • 2001: Stewart avoided a loss of $45,673 by selling all 3,928 shares of her ImClone Systems stock • 2002: Martha Stewart resigned her position, held for four months, on the board of directors of the New York Stock Exchange, following a deal prosecutors made with Douglas Faneuil, assistant to Bacanovic • 2003: Stewart was indicted by the government on nine-counts including charges of securities fraud and obstruction of justice. Stewart voluntarily stepped down as CEO and Chairwoman of MSLO but stayed on as chief creative officer. • 2004: After...
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...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 casestudy 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...
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...Aretha Jackson, president of a private investment firm received a call from a client asking for her advice whether to invest in Martha Stewart Living Omnimedia (MSLO). Jackson emailed Kate Prescott, director of Research, and asked her to prepared reports for her which will help Jackson assess the risks of investing in MSLO. Prescott delivered three reports to Jackson: one on the MSLO business model, one concerning the company’s core competitors, and one detailing consumer attitudes and behaviors (Herman, 2002). These three reports provided Jackson a complete overview on MSLO and it’s up to her to decide whether it’s favorable to invest in MSLO or not. The MSLO business model report mentioned that on October 19, 1999, MSLO went public. At the close of business day, MSLO reached a market value of $1.73 billion and a stake for Stewart worth $1.21 billion. MSLO described itself as a branded and highly integrated content company dedicated to helping people improve the quality of living in and around the home. MSLO produced original how to information and related product in seven core content areas such as home, cooking and entertaining, gardening, craft, holidays, keeping, and weddings. According to 60 Minutes, Stewart sold “that most indefinable and ambiguous of all products.” MSLO keys areas of strengths were in publishing, television, merchandising, internet and ecommerce (Neal, 2007). The company’s core competitor report defined MSLO’s competition based upon major and...
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...include CEO’s, executives, and directors that are exposed to the information. Insiders that also may have to keep quit consist of Accountants and Investment Bankers. According to the article by Reem Heakal, "In the second part of Rule 10b5-2, the SEC has outlined three nonexclusive instances that call for a duty of trust or confidentiality: (1) when a person expresses his or her agreement to maintain confidentiality, (2) when history, pattern and/or practice show that a relationship has mutual confidentiality and (3) when a person hears information from a spouse, parent, child or sibling (unless it can be proven that such a relationship has not and does not give rise to confidentiality)" (Reem Heakal). It all began about a year after Martha Stewart sold 3,928 ImClone shares in late 2001 a day before a rigid slow down sent the stock tumbling. The stock market world was waiting for the FDA to make a decision on Erbitux. The pharmaceutical company...
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...Throughout the case study on Martha Stewart, evidence provided illustrates how public relations can alter the image of a national personality in both negative and positive lights. In particular, the case illustrates how Stewart’s initially poor public relations responses tarnished her image and, only after changing her tactics, did she actually work toward correcting the problem. Ultimately, the Martha Stewart case is pivotal in illustrating how the power of public relations, if used correctly, can revamp a person’s public portrait----even if formal charges of criminal activity exist. Martha Stewart, a “model student” and iconic legend of the kitchen, has been world renown for her success and outspokenness in the past; however, upon receiving allegations of insider trading, Stewart actually became a ‘silent diva’ by inevitably isolating herself from all media and society (Seitel, 17-18). Although this initial public relations response helped Martha avoid responding to the pressing questions from the media, I believe that her silence was counterintuitive to proving her innocence in the sense that her natural personality was “typically feisty” (18). Using logical thinking, most Americans accused of a crime that they were not responsible for would protest, appeal, and flat out become outraged----actions that an already “feisty” Stewart surely would have carried out had she truly believed in her innocence. By remaining silent and withdrawing from her daily life on talk...
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... Charges against Martha Stewart and her broker Peter Bacanovic: According to Associated Press (2003) “Count 1: Conspiracy, filed against Martha Stewart and Peter Bacanovic. Conspired together to produce false information in the stock scandal. Maximum penalty: 5 years in prison, $250,000 fine. Count 2: False Statements, filed against Bacanovic. Lied claiming he spoke with Stewart and she told him to sell the shares when they reached $60 per share. He also lied about telling Stewart the stock price fell. Maximum penalty: 5 years in prison, $250,000 fine. Count 3: False Statements filed against Stewart. She lied to the Security and Exchange Commission, FBI and federal persecutors saying that she and Bacanovic made a prior arrangement to sale the stock if it fell below a certain figure. Maximum penalty: 5 years in prison, $250,000 fine. Count 4: False Statements, filed against Stewart. She was not honest in being tipped off that her family friend Waksel were selling their shares in Im Clone. Maximum penalty: 5 years in prison, $250,000 fine. Count 5: filed against Bacanovic. Making and using false documents. He changed paper documents making it look as if Stewart had previously told him to sell when the shares fell. Maximum penalty: 5 years in prison, $250,000 fine. Count 6: Perjury, filed against Bacanovic. He lied several times to the Security Exchange Commission agents about trading of ImClone and talks between him and Stewart. Maximum penalty:...
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...An Autocratic Leadership: Martha Stewart ABSTRACT In this essay, leadership will be explained and analyzed when it comes to the leadership skills of Martha Stewart. I am going to describe her leadership skills and how I feel that it is effective or ineffective in achieving her goals in the workplace. Leadership is a critical and essential role in the success or failure of a company. Leadership can be seen through the interaction of this particular leader and the employees or team members that are involved. Within the scope of leadership there are usually good and bad leaders and then there are effective leaders. Bennis states, "leaders have a significant role in creating the state of mind that is the society. They can serve as symbols of the moral unity of the society. They can express the values that hold the society together. Most important, they can conceive and articulate goals that lift people out of their petty preoccupations, carry them above the conflicts that tear a society apart, and unite them in pursuit of objectives worthy of their best efforts” (2009). The success of a business is determined by the leader themselves. Martha Stewart is well known CEO, most known for her role in the home. In a world where men were often looked at for CEO positions, Martha Stewart exceeded. She has excelled in the leadership role from cooking to home improvement and crafts. According to an article, “she has gained success through a variety of business ventures,...
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...MGMT 4500 Martha Stewart Case May 9, 2012 What were some of Martha Stewart’s illegal or unethical actions? What made her take these controversial actions? What would you have done if you had received a similar call from your broker? When Martha Stewart knew “ImClone is going to start trading downward”, which is the nonpublic information, from Bacanovic’s phone message, she tried to connect with Sam Waksal to learn more information and then, she sold all her ImClone shares. This should be a kind of illegal insider trading. During the period that Stewart and Bacanovic were interviewed by SEC, FBI, and U.S. Attorney’s Office, they had unrecorded meeting and Bacanovic changed worksheet. Stewart denied knowing the message from Bacanovic even though she just changed the content of the message. She declared that she did not know any nonpublic information at the time. And she told a lie that she had a preexisting agreement to sell ImClone’s shares if the price fell below $60 a share. She tried to deny her illegal insider trading misdeed and conspired with Bacanovic to conceal evidence for covering the truth. The actions cheated the government attorneys to hamper their investigation. And she had made a series of false statements about her innocence to mislead investors and prop up her company’s share price. During the trial, the lead prosecutor Karen Patton Seymour argued that Stewart’s motive is “a desire to protect her ‘multimillion dollar business empire’”...
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...HBS Martha Steward Case Assignment Questions 1. In what ways did Stewart’s control of shareholder voting rights disrupt the functioning of the board? How did her control of the board interfere with directors’ carrying out their fiduciary duties? Stewart highly influenced and controlled all aspects of the company and board of directors. Because Stewart was the founder, major shareholder, and the face of the company it was difficult to bypass her demands and have a fully functional board. The name of the company itself was Martha Steward Living Omnimedia and at the end of the day the firm was founded on her image and work. On top of that, having over 90% of the shareholder voting rights and a big ego proved to be detrimental to the company’s well being. No matter what the board would advise or how good the vision of new CEO’s were she would always decline their plans and eventually make them resign. Furthermore, she appointed most of the board members. Just to name a few people, CEO Sharon Patrick was someone she met on a hiking trip to Kilimanjaro, Frederic Fekkai on the board was Martha’s hairdresser, Charlotte Beers and Michael Goldstein were also appointed by Martha. By her having the most control and appointing a board that back her up no matter what left many executives who wanted to make changes with their hands tied. 2. What changes in the makeup of the board would have improved governance? Had there been a more diverse group that was searched for by third...
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...Challenges of Investigating and Prosecuting Inside Traders Following the stock market crash of 1929, former President Franklin D. Roosevelt signed into law the Securities Exchange Act of 1934. It was under this action that the SEC was created to regulate and monitor U.S. securities markets and create rules to establish a level playing field for all investors. Under The Code of Federal Regulations pertaining to and agreed upon by the SEC, rule 10b5-1 states; “…the purchase or sale of a security of any issuer, on the basis of material nonpublic information about that security or issuer, in breach of a duty of trust or confidence that is owed directly, indirectly, or derivatively, to the issuer of that security or the shareholders of that issuer, or to any other person who is the source of the material nonpublic information”. (Corresponding Federal Regulations adopted by the SEC: Section 10b5-1) A person, who possesses nonpublic information, is considered an “insider”. Insider trading, therefore, is defined by the U.S. Securities and Exchange Commission (SEC) as, “buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security” (U.S. Securities and Exchange Commission, 2001). It is both illegal and unethical for vital information, known only by “insiders”, to be shared with investors who can then make timely, informed financial decisions ahead of other “outside”...
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...PROSECUTING MARTHA STEWART: THE OVERVIEW; Martha Stewart Indicted by U.S. On Obstruction By CONSTANCE L. HAYS Published: June 05, 2003 Martha Stewart was indicted yesterday on charges of conspiracy, obstruction of justice and securities fraud, all linked to a personal stock trade she made in 2001. She pleaded not guilty and pledged to fight the charges. Hours after her arraignment in federal district court in Manhattan, the media and merchandising company she founded, Martha Stewart Living Omnimedia, announced that she was stepping down as chairwoman and chief executive. She will continue as a director and is expected to remain a force as the company's ''chief creative officer.'' [Page C1.] The indictment depicted Ms. Stewart as going out of her way to conceal the circumstances of the sale of nearly 4,000 shares of ImClone Systems, a transaction that investigators say she made after learning that her friend, Samuel D. Waksal, the company's founder, and his daughter were selling their own stock. Indeed, the charges focused less on the trade than on an elaborate cover-up that prosecutors say came afterward. According to the indictment, Ms. Stewart lied to investigators by telling them that she and her stockbroker had previously agreed to sell the shares if their market value fell below a certain price, and altered a phone message from the broker in her assistant's computer ''immediately following a lengthy conversation with her attorney.'' At a news conference announcing...
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...studies: * Case Study: Martha Stewart’s Lost Reputation, pg. 34 * Case Study: Texaco: The Ecuador Issue, pg. 41 * Case Study: Where Were the Accountants?, pg. 44 Ethics Case: Martha Stewart’s Lost Reputation In June 2002, Martha Stewart began to wrestle with allegations that she had improperly used inside information to sell a stock investment to an unsuspecting investing public. That was when her personal friend Sam Waksal was defending himself against Securities and Exchange Commission (SEC) allegations that he had tipped off his family members so they could sell their shares of ImClone Systems Inc. (ImClone) just before other investors learned that ImClone’s fortunes were about to take a dive. Observers presumed that Martha was also tipped off and, even though she proclaimed her innocence, the rumors would not go away. On TV daily as the reigning guru of homemaking, Martha is the multi-millionaire proprietor, president and driving force of Martha Stewart Living Omnimedia Inc. (MSO), of which, on March 18, 2002, she owned 30,713,475 (62.6 percent1) of the class A, and 30,619,375 (100 percent) of the class B shares. On December 27, 2001, Martha’s Class A and Class B shares were worth approximately $17 each, so on paper Martha’s MSO class A shares alone were worth over $500 million. Class B shares are convertible into Class A shares on a one to one basis. Martha’s personal life became public. The world did not know that Martha Stewart had sold 3,928 shares of...
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...being aware of any new customers that may need or want their products and / or services. ("What is CRM? | PCMag.com", 2013., p. 1) When a manager attracts a prospective customer and they buy into a product or service, the prospective customer changes to a regular customer. At this point the relationship changes towards maintaining that relationship by keeping that customer happy. ("What is CRM? | PCMag.com", 2013., p. 1) Email Integration involves creating open means of communication such as a Microsoft Exchange server or a cloud-based email server. ("What is CRM? | PCMag.com", 2013., p. 1) Automated Workflow involves keeping the customer and potential customers informed about the company's progress by providing information to them in real time. ("What is CRM? | PCMag.com", 2013., p. 1) Collaboration involves managers communicating with their customers as well as their team members that are working on the same deal for...
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...the similarities and differences between these individuals. The individuals I will be discussing are Martha Stewart, Ivan Boesky, Michael Milken, Manuel Noriega, Timothy McVeigh, and Terry Nichols. All of these individuals were convicted of Federal crimes and sent to a Federal prison to serve their time. Martha Stewart was assigned to the minimum security women's prison in Alderson, W. Va., known as "Camp Cupcake." It is called that because it is a very low security prison and your time spent there should be easy. The West Virginia federal correctional facility is located in the hills of the Allegheny Mountains; this prison is more than 400 miles south of Stewart's Westport home. Martha Stewart wanted to go to a prison closer to her home so she could be close to her elderly mother. The low security facility was opened in 1927 as the first federal prison for women, Martha wasn’t the first big name to spend time at the facility. The prison once housed Billie Holiday, as well as Lynette Fromme and Sara Jane Moore. Both of these women tried to assassinate President Gerald Ford. The prison has no perimeter fence, and inmates can spend their free time playing volleyball and tennis or even doing aerobics. So that explains why they call it “Camp Cupcake”. Regardless of Martha Stewart's great talents as a lifestyle entrepreneur and trendsetter, prison guards watched Martha Stewart like a hawk to make sure she didn’t receive special attention or conduct any business while she was behind...
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...2002 Martha Stewart was tried for securities fraud and obstructing justice. Martha had used her awareness of inside information that dealt with a review being made by the FDA on an anti-colon cancer drug Erbitux created by a company called ImClone to which Martha owned stock in. There are many ethical dilemmas Martha Stewart ignored at the time she used the inside information for her own financial benefits, or in this case her protection. She ignored any morals to practice fair trade in the stock exchange and instead only protected her own interest in at the expense of the people who bought the stock of ImClone from her. Martha knew the stock value of ImClone was going to decrease after the FDA’s announcement and decided that she shouldn’t be the one to take a hit. Martha failed to contemplate how her actions would impact others included the stakeholders of her business. Martha didn’t conduct herself in ethical manner which resulted in her being accused of insider training; greatly affecting her own business, Martha Stewart Living Omnimedia Inc. (MSO) and the stakeholders of the business. At the time of the allegations, MSO stock went from being valued at $17 to $5.26 a decrease of a 70%. As well Martha had to resign as the CEO of her company because her reputation and judgment became tarnished after beings indicted and charged for fraud and obstruction. All of this occurred because Martha didn’t want to lose $45,673 from the drop in ImClone stock, but mostly because Martha failed...
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