Martha Stewart: Organization Ethics of Insider Trading

2442 words 10 pages
Abstract
Insider trading mostly occurs by individuals close to the upper level management of an organization. This type of unethical behavior undermines the stability of the organization. In the ImClone scandal where Martha Stewart was indicted for her involement, the stability of her company suffered and the companies and people associated with Ms. Stewart suffered as a result of her decision. In this essay I will examine the parties that were privileged to knowing ImClone’s stock was going to drop and those who did not know. I will look at the effects of Ms. Stewart’s action, what she could have done different, and the consequences of her actions. Ethical and public issues must be considered when a business executive makes a decision
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Once Martha Stewart became aware of the possible decline in ImClone stock, she had a decision to make too. Her decision was whether to do nothing or to sell her stock. The decision she made affected more people than just herself. It affected every stakeholder she was associated with at that time. This included her employees at Martha Stewart Living Omnimedia (MSO), customers and competitors of MSO products, the Kmart Corporation, CBS’s “The Early Show” where Ms. Stewart was a style contributor, and other business leaders and the public. Employees of MSO were left wondering if their jobs were in jeopardy, customers and competitors of MSO did not know the fate of the company, Kmart’s revenues suffered, Ms. Stewart was no longer needed at CBS, and the public was left with mixed views. The ethical thing that Ms. Stewart should have done that would have spared her company’s reputation and prevented the public scrutiny that each company and person close to her had to endure would have been to not act on the tip she received about ImClone’s stock. The company’s reputation would have been saved and Ms. Stewart would have saved money. She avoided a loss of $47,673 by selling her stock in ImClone before the news of the FDA’s decision was made public. (White, 2006). “The cost to her of selling that stock, factoring in penalties, restitution, and legal cost has been estimated to be about $300 to $400

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