February 26, 2013
Martha Stewart continues to skate along the thin edge of business ethics.
She served five months in prison for her 2004 conviction on conspiracy and obstruction. Already a billionaire at the time of the offense, Stewart engaged in insider-trading to avoid a paltry $45,673 loss on her ImClone Systems stock. Was that a deficiency in ethics or simply poor judgment?
Likely both. Stewart seems so driven to maximize her wealth and status that anything in the way has to go. And that includes good-faith contracts.
The latest case is her contract with Macy's Department Store. After getting out of prison, Martha rebuilt her media and merchandising company, Martha Stewart Living Omnimedia. Macy's bankrolled Martha's rebranding, devoting 40% of its marketing to push her merchandise for which it thought it had exclusive rights.
But Stewart wanted more…
So on the sly Stewart signed a deal with J.C. Penney—Macy's arch competitor. A loop-hole in the Macy's contract allows Stewart to sell her items directly to the public if it is done in her own stores. But what's in a name? The J.C. Penney deal establishes Martha Stewart "stores" within its own department store! Ha-ha! Fooled you Macy's! Took you for a ride! Aren't I clever! Knifing my business partner in the back is fun and profitable!
A court trial is now deciding whether this end-run is legal. Whether or not it is legal, it is unethical. Driving a Mack truck through a loophole may be what savvy business people and lawyers do, but it is not what someone of character and conscience would do in this circumstance.
Meanwhile, shares of Martha Stewart Living Omnimedia, Inc. are selling for $3, a catastrophic drop from their initial public offering close of $37 in 1999. There may be a reason the investing public does not trust Martha.
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