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Martha Stewart had enjoyed a successful career all through her life until in late 2001 when she made a decision that almost turned her life and career upside down. In 1999, Martha bought 2,500 shares of ImClone, a biotech company that dealt with the manufacture of drugs. After some time, the shares split. Martha therefore had 5,000 shares for the company. In the year 2,000, she sold 1072 shares leaving her with 3,918 shares at ImClone (MSNBC, 2004).
All through this time, ImClone was doing fine. The company`s share capital was growing at an remarkable rate. Later on in the year 2001, the owner of the company, Sam Waksal expected his company to do better in the share market. The company had released a new drug called Erbitux for cancer patients. With this new drug, the company anticipated an increase in its revenue. However, the company had to await FDA approval for the selling and distribution of the drug. This was to be done on December 28th 2001 (MSNBC, 2004).
Three days prior to the announcement of the FDA verdict, Sam`s Brother gets a call from a friend who tells him that the FDA will not approve the drug. He immediately informs Sam about the decision. On hearing this, Sam decides to sell all his shares of ImClone and advices all his friends to do the same, including Martha Stewart. After Martha sold her shares, the values of the shares reduced by 16% on the next day of trading (MSNBC, 2004). This created a lot of fury and concerns in the stock exchange market.
When questioned about the incident, Stewart and her stockbroker, Peter Bacanovic, denied the allegations that they sold the shares after being tipped that the FDA will not approve Erbitux. Instead, they argued that they had an agreement to sell the shares once they fell below $60 per share. Sam Waksal on the other hand admitted that he sold the shares after getting word from the FDA that they would not approve the new drug. This led to him serving a seven-year sentence in jail.
The allegations that were laid against Martha led to her conviction in the year 2004. She was charged on the counts of obstructing justice, conspiracy and lying to the government. These counts negatively affected the reputation of Martha Stewart and any brand associated with her name including MSO.
A day after Martha was convicted, the value of Martha Stewart Living Omnimedia declined by over 22% (Anon, 2004). Martha Stewart Living Omnimedia (MSO) struggled to survive in the competitive market after the negative reputation that the brand was facing. This lead to mixed reactions that had a lot of impacts in the management and the employees at MSO.
Public Opinion and Perception
Martha Steward has played a critical role in promoting positive living towards women and their families for a long time now. This led to the growth of her company MSO and other associated products and services. Through her works and operations, Martha had become an icon in USA. Many people of all ages and sex were looking up to her.
However, after she was allegedly involved on conspiracy and lying to the government, the attitudes and perceptions of the public towards her changed. People felt that she had betrayed the society. This was due to the fact that she had broken the trust that she had with the community (CFIF, 2004).
Through her actions, Martha had obstructed the integrity of the justice system of the United States. Her actions amounted to fraud and corruption, vices that the United States has been working to remove from its society.
Due to this fact, the justice department had no option but to severely respond to the case. Due to her actions, the public felt that Martha had lied to the government and the society in general. This made them feel betrayed. Although she had people who supported her all through the trial, many other people felt that she should face the consequences of her actions (Stasi, 2004).
The Impacts of the conviction on MSO Management and Employees
In the course of running a business, change is certainly inevitable. Change in an organization might arise as a result of many factors such as changes in the market trend, consumer preferences, inflation, management and internal and external crisis.
With regards to the case at hand, MSO faced a huge crisis during the period when Martha Stewart was on trial and convicted on the counts of conspiracy, lying to the government and obstruction of justice. During this period, the performance of the company declined tremendously. However, for a company to be sustainable and successful in the short run and in the long run, it must cope with change and formulate methods and means through which it will redeem itself and succeed.
After the ImClone scandal and the consequent conviction of Martha, MSO faced a huge challenge as a result of the losing public trust. This had a great impact on the morale, performance and motivation of employees at MSO (Alkhafaji, 2003).
To ensure that the company maintains its direction, improve on the employee`s morale and maximize the production of the company, a lot of changes had to be made in the organization and management of the company. This would ensure that the internal problems that might arise in the company are controlled.
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First, the organization structure of MSO needs to be reviewed. After the verdict of Martha`s case, stepping down as the director of MSO was one among other conditions that were put against her. The company therefore had to cope with operating without its founder and mentor.
To ensure effective and efficient management, MSO has to adopt a new organization structure that can be able to cope with the stress that the company is undergoing. This new structure should ensure that all the employees understand the goals and objectives of the organization, instil proper communication channels, motivate and boost the morale of the employees.
At the same time, the company should adapt an organization culture that enables the employees to work together as a team, embrace the needs and concerns of their customers and at the same time have desirable values and morals that will enable the company to grow, develop and claim its position in the market. Having a strong organization culture will ensure that the operations within the company are effective and efficient. This will assure that the products and services produced by the company maintain its high standards.
As a result, the company will not only acquire its lost customers and fame but it will get new customers. This means that the revenue of the company will increase and the company will continue to grow and develop. The company should also have incentives to award hard working employees. In addition, the company should also hire qualified personnel in respective fields to ensure that operations are as per the required standards and guidelines.
The conviction of Martha Stewart following her involvement in the ImClone scandal had a huge blow in the operation and performance of MSO. It led to the decline in sales and growth of the company due to the negative reputation of Martha Stewart and her related brands. As a result, the management and employees at MSO were demoralized and lacked the motivation that would maintain and improve the performance of the company.
To revive the company a lot of changes in the management therefore should be put in place. This includes changing the organization structure, organization culture and motivating the employees. This will enable them face the crisis and succeed in improving the performance of the company in the short run and in the long run.
Alkhafaji, A. (2003). Strategic Management: Formulation, Implementation, and Control in a Dynamic Environment. Oxford: Haworth Press.
Anon,A. (2004). Martha Stewart Omnimedia’s Folio. The Magazine for Magazine Management, 33 (20), 17-21.
CFIF. (2004). Musing on Martha. CFIF. Web.
MSNBC. (2004). Martha Stewart Vows to Appeal a Conviction. MSNBC. Web.
Stasi, G. (2004). George & Martha: A Modern Twist On The Same Old Story. ICH. Web.