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by Kenneth Choi

Dear Ms. Stewart,

I am writing to address some concerns I have about the future of your company, Martha Stewart Omnimedia (MSO). Perhaps the one issue that you are grappling with at present is about the Imclone scandal. You have been accused of selling $227,000 worth of Imclone stock based on inside information. Because of these charges of insider trading, your critics have summarily associated you with other disgraced company directors: Kenneth Lay of Enron and Bernard Ebbers of WorldCom. But the strange thing about your case is that while other CEOs have been charged for making use of their own companies to gain profit for themselves, you, on the other hand, have not purposefully misled investors or doctored MSO’s accounts.

William Evan and Edward Freeman, in their essay “A Stakeholder Theory of the Modern Corporation,” argue that the objective of a company and its managers is not only to maximize profit for its owners and stockholders, but also to balance the benefits received or losses incurred by other stakeholders—employees, suppliers, customers, and the local community, all of whom may be influenced by company decisions. As the owner of MSO, your aim is ostensibly to maximize profits for yourself, but unlike most other indicted CEOs, you have not tried to obtain personal gains at the expense of the stakeholders of your enterprise. Rather, the charges that have been brought against you are for your dealings with another company; in this day and age where investors bemoan the lack of ethics of CEOs who use the power of their position in the boardroom to achieve selfish gains at the expense of their own company and its stakeholders, the charges of insider trading against you have, in fact, no direct connection with MSO. In developing their arguments for the stakeholder theory, Evan and Freeman argue that a corporation and its owners or managers should not “violate the legitimate rights of others” (333); it seems then that even if you were guilty of insider trading, it could not be said that your actions had a direct influence on your company’s stakeholders, or violated their rights in any way.

However, it is perhaps not entirely right to say that your actions, or what you have been accused of, have nothing to do with MSO. Joan Didion, in her essay “Everywoman.com,” suggests how your reputation is integral to MSO, and she quotes from MSO’s 1999 prospectus: “Our (MSO’s) business would be adversely affected if Martha Stewart’s public image or reputation were to be tarnished” (146). Indeed, a New York Times article by Constance L. Hays, dated 1 May 2003, reports that MSO’s “total revenue fell 14.6 percent in the first quarter” and that “the share price, battered after Ms. Stewart’s name surfaced in connection with the ImClone insider-trading investigation last summer, fell another 11.3 percent.” One could argue that MSO’s poor performance is necessarily due to the difficult state of the economy at present, but according to MSO’s accounts, your company was in fact posting growing revenue figures until you were implicated in the Imclone scandal. So as you can see, your public image is closely intertwined with the survival and prosperity of MSO. Your actions do indeed affect your stakeholders.

Your public image has always suggested trustworthiness and reliability, and it is fair to say that the survival of your enterprise depends on whether or not you are able to uphold that image. More important, it is not only the survival of MSO that you should be concerned with, but also the survival of the stakeholders of your company; the collapsing of MSO, one of the largest enterprises in America today, would affect not only your as the owner, but also MSO’s investors, employees, and suppliers; in other words, being incriminated in the Imclone scandal hurts your public image, and a subsequent fall in MSO’s revenue hurts your company’s stakeholders as well. The second principle that Evan and Freeman speak of in developing their stakeholder theory is that a corporation and its managers “are responsible for the effects of their actions on others” (333), and in this sense, it is crucial that you realize that anything you do that adversely affects your reputation also affects your company’s employees, investors, and suppliers.

So what can you do about this? Certainly, you have already attempted to reverse this trend of falling revenue through a gradual process of dissociating yourself from the Martha Stewart brand name—by removing your picture from the cover of the Martha Stewart Living magazine. This is laudable. You have a clear responsibility towards the welfare of the people with a direct relation to MSO, and the measures you have taken so far do show a sense of social responsibility towards your company’s stakeholders. However, I believe that there is much more that you can do.

You see, the peculiar thing about your role as the CEO of MSO is that you’re not simply the leader of your enterprise but also a leader of women. In “Everywoman.com,” Didion argues that “the dreams and the fears into which Martha Stewart taps are not of ‘feminine’ domesticity but of female power, of the woman who sits down at the table with the men and, still in her apron, walks away with the chips” (152). As a woman who has used her skills as a mother and wife to create a multimillion dollar corporation, you seem to be sending out the message that other women can do what you have done. I am sure that your fans are fans not only because you are able to teach them how to make “the perfect piecrust,” as advertised on MSO’s website, but also because your success story encourages and empowers other women in their own pursuits. In your own way then, you are a role model for women today.

Being socially responsible to your company’s stakeholders undoubtedly involves the maximizing of profits for MSO’s employees, investors, and suppliers, but you should understand that it also entails the maximizing of benefits for the community, who may or may not have a direct association with your company. A survey of your company accounts shows that MSO has done little in the area of philanthropy, and a search on the Internet for the charities or social organizations that MSO supports turns up almost nothing. Perhaps you ought to focus on the fact that you are a role model for women, and you should strive to use your position, both as a leader of MSO and as a leader of women, to generate benefits for the community, especially for women. RAINN (Rape, Abuse & Incest National Network), which assists victims of sexual assault, was co-founded by singer-songwriter Tori Amos, who was herself a rape victim. She turned adversity toward community action. Similarly, as the CEO of one of the biggest corporations in America, and more important, as a role model for other women, you could found an organization that helps women who are in need, or at least, you could show more than a cursory interest in your support for charities and contemporary women’s issues.

Andrew Carnegie, who was once the richest man in the world, writes on this idea of philanthropy in his essay, “Wealth.” He speaks of how the accumulation of wealth should not be “deplored” (280); rather, he calls for the rich to be “trustee(s) of the poor; entrusted for a season with a great part of the increased wealth of the community, but administrating it for the community far better than it could or would have done for itself” (284). As one who is regularly named in Fortune magazine’s top 20 most powerful women in the United States, you too possess the power to make a difference in our national community. Superficially, if you were to utilize your wealth to “administer” to the community, it would surely help change your detractors’ opinions about you and your legal troubles today; it might also help stem the fall in MSO’s revenue. However, you should realize that the issue here is not simply about enhancing your public image or raising your company’s share prices. Evan and Freeman show how the concept of good leadership in the corporate world today certainly entails the social responsibility of maximizing profits and minimizing losses for all stakeholders, but as Andrew Carnegie urges in “Wealth,” one should not disregard social responsibility towards the community, even if the community is ostensibly unrelated to the company in question. As the CEO of MSO, you have the capacity to use your wealth and power to assist the community, especially women; as the leader of one of the largest companies in the United States that is perhaps exactly what you need to do now.

Works Cited

Carnegie, Andrew. “Wealth.” Advanced College Essay: Business and Its Publics. Ed. Pat C. Hoy II and Denice Martone. New York: McGraw-Hill, 2002. 279-84.

Didion, Joan. “Everywoman.com.” Advanced College Essay: Business and Its Publics. Ed. Pat C. Hoy II and Denice Martone. New York: McGraw-Hill, 2002. 143-52.

Evan, William M. and Edward R. Freeman. “A Stakeholder Theory of The Modern Corporation: Kantian Capitalism.” Advanced College Essay: Business and Its Publics. Ed. Pat C. Hoy II and Denice Martone. New York: McGraw-Hill, 2002. 329-38.

Hays, Constance L. “Martha Stewart Living Says Revenue Fell 14% in the Quarter.” The New York Times. 1 May. 2003. <http://www.nytimes.com/2003/05/01/
business/01MART.html?ex=1052842206&ei=1&en=9a279f75103ff87e>

Martha Stewart Omnimedia. Martha Stewart Omnimedia. 16 Oct. 2001. http://www.marthastewart.com

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