Martha Stewart and the ImClone System’s Scandal Case Study

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Updated: Feb 15th, 2024

The roles Martha Stewart’s image played in the insider trading scandal

Martha Stewart played numerous roles in the ImClone System’s scandal. She sold nearly 4000 shares of the company’s stock. This occurred when she realized that the stock values of the company would drop (Ferrell, Fraedrich & Ferrell 2010, p. 129). She later rejected the claims stating that the shares were sold because they had gone lower than US$ 60 (recommended benchmark). In her defense, Steward said that she had previously called Bacanovic and ordered him to sell the shares. Additionally, she claims to have made a call to her friend, Waksal, so as to know the problem that ImClone was going through (Ferrell, Fraedrich & Ferrell 2010, p. 137).

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Conversely, Stewart later accepted that she wanted the concerned shares to be sold. As evident from the case provided, this occurred while she was on her way to Mexico. The following day after selling her shares, she decided to leave the stock exchange membership board. Additionally, Stewart and her friend Bacanovic were not able to give credible proof that there was a decrease in the stock exchange when they were asked to present their proofs. These indicated the roles that Martha Stewart’s image played in the insider trading scandal claimed earlier.

Consequently, the committee investigating the scandal was not able to obtain some credible evidence on the contract between Stewart and Bacanovic to sell ImClone System’s shares (Geis, Pontell & Pontell-Geis 2007, p. 348). However, when the investigators checked on Stewart’s accounts (both phone and email records) associated with the ImClone stock trade, there were no clear records. Her business manager’s account (Merrill Lynch) could hardly provide credible evidence regarding the sales of the concerned shares.

Besides, the committee investigating the scandal could not read some parts of the documents given as evidence (Howell 2003, p. 253). Martha Stewart refused to testify before the investigators after the scandal but instead hired some lawyers to represent her. This made the committee strongly believe that Stewart was not only trying to interfere with their investigations but was also not ready to cooperate. This is a critical provision when considered decisively in regard to this case.

Many People wondered whether Stewart was saying the truth about her story since she was not able to open up and articulate it as an affidavit (Howell 2003, p. 279). Conversely, they had waited in vain for her public address on the issue but she downplayed the whole story. Stewart, along with her spokespersons was also not able to give any statement regarding the scandal. Additionally, they were unreachable throughout the period of the scandal and this made people think that that they actively participated in the scandal.

However, this later prompted the committee to surrender Martha Stewart and ImClone’s case to the department of justice in the United States to find out whether she was not open about that whole story (Kendal 2005, p. 189). Her close associate Mariana Pasternak later testified that she had previously given some statement which signified that she was involved in the scandal. According to Mariana, (Stewart) acknowledged the importance of having a broker who can give some important advice on when to sell or buy the shares. Additionally, this happened barely before the alleged scandal, and this testimony greatly sealed Stewart’s fate.

Conversely, these testimonies and her inability to give viable evidence made the situation to be worse than what people had thought (Kendal 2005, p. 214). Although Stewart did not accept any unlawful activity, the scandal affected her stock price and reduced her net worth by almost a quarter. Precisely, the mentioned incidences indicated the roles that Martha Stewart’s image played in the insider trading scandal as discussed earlier.

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The fate of Martha Stewart Living Omni media if she was to leave the company

If Martha Stewart was to stop operating the company, it (the company) would still survive since she was not the only manager (Markham 2005, p. 387). Evidently, she had an assistant and other business managers who could easily control the company given the experience they had previously acquired while working with her. The provided case indicates that Stewart believed that the business could still operate without her (Markham 2005, p. 395).

The popularity she had gained across the world (being one of the most influential women in the world) was enough to maintain the image of her company in case she left. Additionally, by placing her name on the products, she turns out to be the voice of the brands and the face of the company (Markham 2005, p. 431). From the case provided, it is clear that Martha Stewart could still communicate with her fans through the website even in prison. This is a clear indication that the fans not only like her ideologies but also in love with everything associated with her. Though Martha’s brands were built on a single personality, they will still survive simply because of her fame. In addition, the company has enough assets and quality brand labels, which are sufficient enough for its upkeep (Oestreicher 2011, p. 167).

It is crucial to agree that Martha’s absence was highly felt and her departure had a strong effect on the shareholders and the company at large. It is crucial to agree that Martha Stewart might experience some atrocities when she decides to quite the concerned company

Additionally, people believed that Martha Stewart possessed some unusual business prowess. Hence, they could still use the company’s products after her departure. Besides, Martha Stewart’s Omni media Company could still operate minus her. The company had a working senior management team, advanced infrastructure, and talented employees (Oppenheimer 1998, p. 287). They also had huge cash in the bank to boost their financial strength. This sails them through even without Stewart. Additionally, they had numerous models, which could help in developing the company (Kendall 2005).

However, the New York-based Stewart Omni Media was still able to make huge profits despite the fact that Martha was not on the managing board. Consequently, this implied that the company could still make recommendable profits without Stewart. For the company to ensure its survival, it requires some duration of time to change its image and make people believe that Stewart brand is different from Stewart the person (Pride & Ferrell 2006, p. 218).

The company should not feature the name of Martha Stewart on the cover of its magazines. This will ruin the continuity of her fame. By doing this, people will get the difference between Martha (as a person) and Martha (as a brand). In addition, TV shows might neglect her appearance in return. This is a critical provision when considering the fate of Martha Stewart Living Omni Media.

Conversely, they are supposed to reduce the level at which they associate with Stewart as this would make them become independent. In addition, this company will ensure that they keep in touch with their fans. This company should also take some steps to ensure that the brand of their products does not feature only a single person (Pride & Ferrell 2006, p. 243). Workers should be trained ethically by the organization. This can occur through innovative policies and procedures. This will strengthen the company’s stance on ethics. Additionally, Employing an innovative CEO and a chairperson will definitely assist the company to re-examine its future. This change in management will help the organization withstand the challenges ahead as Stewart continues to uphold her virtue (Stewart & Spungen 1999, p. 198).

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How Martha Stewart’s conviction has impacted the business environment today

Martha’s conviction proved that individuals of high profiles (including CEOs) will be punished for gross misconduct. Currently, it is becoming compulsory for companies to account for their doubtful behaviors. A clear confirmation is when Mark Hurd was forced to leave his job at Hewlett-Packard after he was found guilty of sexual harassment. Organizations have now started to apply recommendable ethical standards in their management since lawmakers are stern on them (Werther & Chandler 2006, p. 286).

Additionally, they have now learned how to adapt to various situations like future failures and crises. By corresponding to the lessons learned, organizations are taking protective measures through increasing their vigilance and showing the value of their organization. Consequently, organizations can prepare for any probable crisis. Precisely, this indicates how Martha Stewart’s conviction has impacted the business environment today.

List of References

Ferrell, C, Fraedrich, J & Ferrell, L 2010, Business ethics: ethical decision making and cases: 2009 update, South-Western Cengage Learning, Mason, OH.

Geis, G, Pontell, H & Pontell-Geis, D 2007, International handbook of white-collar and corporate crime. Springer, New York, NY.

Howell, M 2003, Predators, and profits: 100+ ways for investors to protect their nest eggs, Reuters, London, UK.

Kendall, D2005, Framing class: media representations of wealth and poverty in America, Rowman & Littlefield Publishers, Lanham, MD.

Markham, W 2005, A financial history of modern U.S. corporate scandals: from Enron to reform, SHARPE, Armonk, NY.

Oestreicher, P 2011, Camelot, Inc.: leadership and management insights from King Arthur and the Round Table, PRAEGER, Santa Barbara.

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Oppenheimer, J 1998, Just desserts: the unauthorized biography: Martha Stewart, Avon Books, New York, NY.

Pride, W & Ferrell, O 2006. Marketing: concepts and strategies, Houghton Mifflin Co, Boston, MA.

Stewart, M & Spungen, S 1999, Martha Stewart’s hors d’oeuvres handbook, C. POTTER, New York, NY.

Werther, W & Chandler, D 2006, Strategic corporate social responsibility: stakeholders in a global environment, SAGE, Thousand Oaks, CA.

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