Martha Stewart is one of the most well-known women in America, and author of books and a successful businesswoman. Coming from middle-class family she founded one of the world’s strongest brands and built $200 million Empire based on the ideas of domesticity. In 2002, a stock sales scandal ruins her future dreams, her empire and her life. Stewart is a woman who has made a success off of her home decorating TV show, magazine and books. Success came in 1997 when Martha Stewart created “Martha Stewart Living Omnimedia”. This company controlled all her enterprises under one corporate entity. Stewart owns approximately 61% of the equity of the company and 94% of the voting power. At this moment she realized that she was a successful businesswoman called “one of the most influential women in America” (Byron, p.54). Some estimates place her assets around 1 billion dollars.
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Problem background: the Case of Martha Stuart
In 2002, Stewart was under investigation for alleged insider trading for selling 3,928 shares of ImClone System. Martha Steward was found guilty of lying about a stock sale and sentenced to five months in prison (Martha Steward, 2004). On the 4th of March 2005 she was released. After being released she will spend five months under house arrest. She is allowed to leave her home for 48 hours a week, but will need to wear an ankle bracelet so she can be monitored. During the trial and sentenced period Martha Stewart was resigned from the board of “Martha Stewart Living Omnimedia”, her television show was closed, with no announced date of return. Her empire was ruined.
The case of Martha Stewart heated different talks about corporate ethics and ethical decisions made by a CEO and his/her responsibility before stockholders. The case of Martha Stewart demonstrated that high ethical standards are necessary because they help to protect human dignity and avoiding misleading or confusing claims towards the company. Duties and obligations help to control activities of organizations and celebrities. All efforts should be made to prevent false claims and pressure tactics. In spite of all accusations of unethical behavior Martha Steward did not offend other people while media and press in particular depicted her in an offensive manner. In spite of all attempts to protect her company and her good name, “on March 5th, 2004 Martha Stewart and her broker, Peter Bacanovic, were found guilty of conspiracy, making false statements and obstruction of justice” (Urban-Klaehn, 2004). The most impressive was the fact that “some stocks which were not even belonging to her company” (Urban-Klaehn, 2004). This situation shows that when one person’s actions begin to affect other persons and stockholders in particular, the company has moved from personal ethics to social ethics and often has to place some limits on human behavior.
During trial period Martha Stewart was “accused” of using her popularity and status as a celebrity to influence public opinion involving press and TV media; artfully designed television interviews to protest her innocence” (Byron 65). This campaign was used by Martha Stewart to protect her dignity and to prove her innocence. Accusing this successful woman of unfair behavior and publicity, journalists forgot about the constitutionally granted right for every person such as “freedom of expression”. Every person has the right to protect his/her honor publicly. Martha Steward did not violate ethical code, because she was publicly accused. Her trial procedure was widely discussed in press, so she had nothing to do but protect herself using media channels. Then a basic public relations policy was put forward to ensure that the public was influenced to react in the desired way. It is important to note that every celebrity decides, as an important matter of policy, what type of public image is required. To this end, all policies should reflect this overall policy of image. There is no political institute that could protect accused people. It shows the human necessity for survival, and the lengths to which a person will go to save his life (Martha Stewart, 2004).
The trial had a great influence on all businesses of Martha and proved that it is important for CEOs to adopt high ethical and moral norms as a guide to decision-making. They are a person’s fundamental orientation toward life, what a person sees as right and wrong, and his/her obligations towards stakeholders. Unfair and risky affairs are also closely connected with ethical responsibilities of a business which means how its decisions and actions show concern for what its stakeholders (employees, customers, stockholders, and the community) consider fair and just (Byron, p. 98).
To some extent, the ethics of the CEO was based on the ‘act’. This challenge was especially difficult because standards for what constitutes ethics are not clearly defined where clear-cut right-or-wrong answers may not always exist. After she was accused Martha addressed with an open letter “to my friends and loyal supporters”, and wrote: “I want you to know that I am innocent — and that I will fight to clear my name… The government’s attempt to criminalize these actions makes no sense to me… I am confident I will be exonerated of these baseless charges.” (Martha Steward, 2005).
The case of Martha shows that: “Stewart avoided a loss of about $51,000 by selling nearly 4,000 shares of ImClone stock on Dec. 27, 2001, rather than the next trading day, when the stock tumbled after regulators rejected the company’s application for a key cancer drug” (Steward Convicted in all Charges, 2004). To avoid situations like this, CEOs should adopt ethical standards as a moral justification that comes from a value system that is independent of the business itself and where individual opinion can be sharply divided. Few would disagree that people at work should be honest and that claims about financial position and financial matters should be accurate (Martha Stewart, 2004).
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In this situation, the most difficult ethical problem for the CEO was the question of to whom she was responsible when developing new strategies. In general, the simplest answer in private-sector organizations is the shareholders, and in public-sector organizations the politicians as representatives of the people. However, in practical terms most CEOs know that it is rarely so simple. Perhaps the only useful guide to the CEOs was to say that their analysis of their lines of responsibility needed to go beyond the legalistic answer. There was no question that, irrespective of the legal position, there was a clear ethical responsibility to the other stakeholder groups. CEOs are usually in a powerful position within organizations to influence the expectations of other stakeholders. They have access to information and channels of influence that are not available to many other stakeholders. With this power comes an ethical responsibility to behave with integrity. Given that strategy development is an intensely political process, managers can often find real difficulties in establishing and maintaining this position of integrity. To some extent, the CEO was unfaithful to its customers and employees engaged in risky operations which affected its stockholders, because these actions led to hazards and terrible consequences. Martha handled the indictment responsibly which influenced her business and stockholders greatly.
- Byron M. Ch. Martha Inc. The Incredible Story of Martha Stewart Living Omnimedia, Wiley; Updated edition, 2004.
- Martha Stewart. 2004.
- Steward Convicted in all Charges. 2004. Web.
- Urban-Klaehn, Jagode. Martha Stewart Process & Sentence- witch hunt or justice served? 2004.