Envy, Jealousy and Insider Trading: The Case of Martha Stewart

The case opens with Martha Stewart's 2005 release from prison following her conviction for obstructing an insider-trading investigation of her 2001 sale of personal stock. The scandal dealt a crippling blow to the powerful Martha Stewart brand and drove results at her namesake company, Martha Stewart Living Omnimedia (MSO), deep into the red. But as owner of more than 90 percent of MSO's voting shares, Stewart continued to control the company throughout the scandal.The company faced significant external challenges, including changing consumer preferences and mounting competition in all of its markets. Ad rates were under pressure as advertisers began fragmenting spending across multiple platforms, including the Internet and social media, where MSO was weak. New competitors were luring readers from MSO's flagship publication, Martha Stewart Living. And in its second biggest business, merchandising, retailing juggernauts such as Walmart and Target were crushing MSO's most important sales channel, Kmart. Internal challenges loomed even larger, with numerous failures of governance while the company attempted a turnaround.This case can be used to teach either corporate governance or turnarounds.Students will learn: How control of shareholder voting rights by a founding executive can undermine corporate governance The importance of independent directors and board committees How company bylaws affect corporate governance How to recognize and respond to early signs of stagnation How to avoid management actions that can make a crisis worse How weaknesses in executive leadership can push a company into crisis and foster a culture that actively prevents strategic revitalization

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Autophagy

Prescription for Change ◽

10.5149/northcarolina/9781469630625.003.0011 ◽

2016 ◽

Author(s):

Michael Kinch

Keyword(s):

New York ◽

Erectile Dysfunction ◽

Pharmaceutical Industry ◽

Mergers And Acquisitions ◽

Insider Trading ◽

High Profile ◽

The Past ◽

Innovative Company ◽

Martha Stewart ◽

A Company

The title of the chapter is a Greek term that literally translates into “eating oneself” and is representative of a trend of mergers and acquisitions that has subsumed the drug development enterprise over the past three decades and now fundamentally threatens our ability to develop new medicines. We begin with two examples of acquisitions by Eli Lilly & Company. One product resulted from an unexpected discovery by Pfizer scientists of a drug meant to treat angina that had the unexpected but not undesired effect of treating erectile dysfunction. The second acquisition, of New York-based Imclone, was the final step in a high profile controversy that led the jailing of its CEO and the celebrity Martha Stewart for insider trading. Despite these two acquisitions, Eli Lilly largely did not participate in the merger mania of the past few decades and we relate how this most innovative company fell through the rankings to become a middling contender. This waning resulted from the meteoric rise of Pfizer as one of the most aggressive purveyors of pharmaceutical industry consolidation and the unlikely rise of Valeant Pharmaceuticals, a company with a checkered history and ongoing woes.

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Can Insider Trading Information be an Effective Tool for Investment Managers?

Muma Business Review ◽

10.28945/4100 ◽

2018 ◽

Vol 2 ◽

pp. 055-061

Author(s):

Christian G Koch

Keyword(s):

Stock Market ◽

Insider Trading ◽

Individual Investors ◽

Institutional Investment ◽

Unique Information ◽

Information Signal ◽

Martha Stewart

The Legend of Martha Stewart: Insider Trading For decades institutional investment managers and individual investors have searched for different ways to make outsized returns in the stock market. Finance theories were created by academics to suggest that this task is not possible because the market is efficient. However, as a scholar-practitioner, I have come to realize that Insider Trading disclosure data provides a unique information signal that can be used as an effect tool for identifying investments at the company level.

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