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Martha Stewart: The Ethical and Legal Challenges With Respect to ImClone Shares

Introduction

Martha Stewart is one of the most well-known women in America, an author of books, and a successful businesswoman. Coming from a middle-class family she founded one of the world’s strongest brands and built a $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” (“Steward Convicted in all Charges” 2004). At this moment she realized that she was a successful businesswoman called “one of the most influential woman in America” (Byron, 2003). Some estimates place her assets around 1 billion dollars.

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The ethical and legal challenges and problems with respect to ImClone shares

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 (Paine and Bruner 2006).

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 the activities of organizations and celebrities. All efforts should be made to prevent false claims and pressure tactics. Despite all accusations of unethical behavior, Martha Steward did not offend other people while media and press, in particular, depicted her offensive manner. Despite 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 (Paine and Bruner 2006).

Ms. Stewart’s sale of shares in ImClone, and her conduct surrounding that sale

During the 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” (Kidder, 2004). 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 the ethical code, because she was publicly accused. Her trial procedure was widely discussed in the 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 (Paine and Bruner 2006).

The government’s pursuit of Martha Stewart

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 the 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. 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 the financial position and financial matters should be accurate.

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In ordinary day-to-day practice, most CEOs when making decisions tend to combine these different approaches, although frequently without being aware of the mental processes they are using. It was helpful for Martha to be aware of whether one was thinking in terms of ‘acts’ or ‘ends’, especially when analyzing a dilemma. It is important to note that while economic and legal responsibilities were separate levels of obligation, they coexisted because they represented the minimum threshold of socially expected business behavior. They were a per­son’s fundamental orientation toward life—what she saw as right and wrong. Some critics complain that “Martha Stewart is a scapegoat, and that her crimes are petty compared to other corporate wrongdoers” (Martha Stewart, 2004). In any case, the CEO is liable for her actions and should follow duties and obligations which are set forth become enshrined in custom and law, and people stop giving them or their consequences much thought – they are simply assumed to be correct (Paine and Bruner 2006).

The “greed” in the financial markets

This raises the question of how the activities of organizations affect the behavior of individuals and the values of society and concerns important ethical questions about the role of CEOs in the strategic management process. Much of the initial discussion on these issues centered on the social responsibi­lity of corporations and was reflected in policies inclined towards corporate social responsibility. More recently, the debate has widened somewhat and is now more generally described as business ethics. Critics state that: “Nothing like that happened to Martha Stewart and her company. But the consequences of her sentence may be devastating to her company” (Urban-Klaehn, 2004). 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 (Paine and Bruner 2006).

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. “Martha Stewart is successful and wealthy; she has access to good legal advice and has presumed to take on the role of icon, teacher, and guru. She has no excuses, and her bad conduct resonates throughout the culture. With privilege comes responsibility, and she didn’t meet hers” (Money, Greed and Prosecutorial Discretion, 2004).

Possible market reforms

It is possible to say that professional ethics is about someone’s conduct of behavior and practice when carrying out professional work. The institutionalization of Codes of Conduct and Codes of Practice is common with many professional bodies for their members to observe. These codes can be considered as a formalization of experience into a set of rules. Establishing ethical standards allows a firm to take corrective action by punishing employees who do not comply with company standards and rewarding those who do. This code is adopted by the community and it means that the members of the community accept the adherence to these rules and restrictions. First of all, a person with this profession has to be honest and adhere to confidentiality agreements. It is very important to provide good customer service, be helpful and understanding. To provide all that one must be a professional in what he/ she is doing, the lack of knowledge can have a bad effect on the results of the work (Paine and Bruner 2006).

Conclusion

The case of Martha Stewart shows that the businessman needs to have the ability to settle the conflicts of interest between the customer and the bank. All the above-mentioned factors are important in decision–making. Sometimes there can be cases when your decision will influence the future life of the customer and it is vital to make the right one, not to offend the person or be rude with him/her. The knowledge and understanding of universally accepted norms and regulations are necessary as well. Good moral values and principles have to be applied.

References

Byron M. Ch. Martha Inc. The Incredible Story of Martha Stewart Living Omnimedia, Wiley; Updated edition, 2004.

Martha Stewart. 2004. Web.

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Paine, L. Sh., Bruner, Ch. M. Martha Stewart. Harvard Business School. 2006.

Steward Convicted in all Charges. 2004. Web.

Urban-Klaehn, Jagode. Martha Stewart Process & Sentence- witch hunt or justice served? 2004. Web.

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StudyCorgi. "Martha Stewart: The Ethical and Legal Challenges With Respect to ImClone Shares." November 9, 2021. https://studycorgi.com/martha-stewart-the-ethical-and-legal-challenges-with-respect-to-imclone-shares/.

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StudyCorgi. 2021. "Martha Stewart: The Ethical and Legal Challenges With Respect to ImClone Shares." November 9, 2021. https://studycorgi.com/martha-stewart-the-ethical-and-legal-challenges-with-respect-to-imclone-shares/.

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StudyCorgi. (2021) 'Martha Stewart: The Ethical and Legal Challenges With Respect to ImClone Shares'. 9 November.

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