Business Ethics and Martha Stewart

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"I'll be back ….I'm not afraid. Not afraid whatsoever. I'm very sorry it had to come to this." (Gasparino, 22). Those were the words that Martha Stewart said on the courthouse steps on July 16, 2004, as she had just been sentenced to five months in prison. A defiant Martha Stewart was trying to instill confidence in her stock holders and save a sinking ship, her company, Martha Stewart Living Omnimedia Incorporated (MSO). That day her companies stock closed at $ 12.25 a share a 36 % jump. ( Therefore as one asks the question; as a CEO did Martha Stewart handle the indictment responsibly; you could easily argue that at least on that day she did. She made her shareholders a bunch of money. Isn't that the bottom-line, isn't that what a CEO is supposed to do? If you take Martha Stewarts's actions from when she got indicted to the day she walked out of prison and ask the same question again you will find out the answer is yes and no. Now I'm not trying to ride the fence here but I will take this question and ask it again and again in chronological order and you will start to notice "a tale of two Marthas" as she goes from saving her skin to trying to save her company. BACKGROUND

Since this is an ethics course one might ask, did Martha do right or wrong? I can absolutely say that she did some very very bad things: alleged insider trading and obstruction of justice. She was tried and convicted for obstruction of justice and she served her time. She should have been thrown under the jail. She belongs in the same boat as the Tycos and Enrons, the law is the law and she tried to get away with it. She tried to cover-up evidence in a very "NIXON-esqe" way by erasing phone longs and concocted a story with her broker on why they sold the stock when they did. Her actions as a CEO and as a human were horrible, despicable and yes very irresponsible. She tarnished her image forever, cost her company jobs and millions of dollars. But the question asked wasn't, "As a CEO did Martha Stewart handle herself responsibly", or "were her actions ethical?" That would be an easy answer absolutely not. But did she handle the indictment responsibly? In the long run yes she did. Her job title was CEO, she was in charge of making the company money and at that she did. If you look at figure 1 in the middle of the page entitled "MSO Stock From 2002-2005", you can derive a direct correlation to its CEOs actions and stock price. Once Martha Stewart started acting on behalf of the company MSO stock went up. However in the beginning Martha wasn't thinking like a CEO she was running scared and her actions in 2002 and 2003 on the way she handled the indictment lost the company and its shareholders lots of money.

In June of 2002 Sam Waksal CEO of ImClone was indicted for insider trading for tipping off friends about his stock, one of those friends was Martha Stewart. Later that month, Martha Stewart issued a statement to the press insisting she had done nothing wrong and protested her innocence. She also gave an explanation for her timely ImClone stock sale. ("Stewart on defense" 4; Masters E2). That day her stock jumped 14 percent. By these statements and results one could argue that Martha Stewart as a CEO acted responsibly that day, she made everyone money and she tried to distance herself from Waksal. Unfortunately, she was lying. This was the start of her cover up scheme which once prosecutors vetted; used it as evidence to indict her on securities fraud. Later these charges got dismissed due to lack of evidence, but this was start of her stocks downward death spiral which hit an all time low of just under $ 6 a share in October 2002. Throughout the rest of that year and next year leading up to her indictment, Martha Stewart acted completely irresponsible. She started running scared not thinking about her company but thinking about her own skin and her company lost...
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