Martha Stewart: Whipping Up a Storm (a)

9 Pages Posted: 21 Oct 2008

See all articles by Gerry Yemen

Gerry Yemen

University of Virginia - Darden School of Business

Erika Hayes James

University of Virginia - Darden School of Business

Lynn Perry Wooten

University of Michigan, Stephen M. Ross School of Business

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Abstract

Sixty-year-old Martha Stewart, founder and former CEO of Martha Stewart Living Omnimedia Inc., was charged with four legal actions alleging she breached her fiduciary duties to MSO when she made “materially false and misleading statements” about her involvement in trading ImClone stock. Although Stewart's firm was not accused of any crime, she and her company were being likened to corporate villains such as Enron and WorldCom. The A case outlines events and Stewart's initial reactions, providing students an opportunity to examine issues of crisis containment and communication. Through the disaster, what might she anticipate for herself, for her role at MSO, and for the survival of the company she created? How should Stewart deal with unwanted media attention and negative attacks? And what audience was Stewart speaking to when she finally did appear publicly?

Excerpt

UVA-OB-0793

MARTHA STEWART: WHIPPING UP A STORM (A)

Sixty-year-old Martha Stewart, founder and former CEO of Martha Stewart Living Omnimedia, Inc., (MSO), spent 15 years earning her title as media baroness. By January, 2004, Stewart faced the possibility of spending the same number of years in a federal prison or on probation. The government was investigating Stewart's actions over the sale of her ImClone stocks one day before the Food and Drug Administration rejected the biotechnology company's cancer treatment drug. Stewart was met with four legal actions alleging she breached her fiduciary duties to MSO when she made “materially false and misleading statements” about her involvement in trading ImClone stock.

A comparison of Stewart's statement to shareholders in the firm's annual reports in 2002 and 2001 revealed a sharp contrast:

Martha Stewart Living Omnimedia (MSO) had another outstanding year in 2001. Despite the difficult economy we achieved; record revenues, record earnings before interest, taxes, depreciation, and amortization (EBITDA); and record earnings per share. We made great progress in further establishing a strong foundation for our future growth.

2002 was an extremely difficult and challenging year for Martha Stewart Living Omnimedia. Our year-end financial results reflected both the substantial negative impact of the ongoing government investigations relating to my personal sale of non-Company stock and the generally unfavorable economic environment of the past year.

. . .

Keywords: Crisis management, career management, communication process, communication strategy, community relations, government regulation, law, legal environment, media planning, public relations/publicity, women in business, ethics

Suggested Citation

Yemen, Gerry and James, Erika Hayes and Wooten, Lynn Perry, Martha Stewart: Whipping Up a Storm (a). Darden Case No. UVA-OB-0793. Available at SSRN: https://ssrn.com/abstract=1281840

Gerry Yemen (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

Erika Hayes James

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4796 (Phone)
434-924-0714 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/james.htm

Lynn Perry Wooten

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-763-0486 (Phone)

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