Martha Stewart: Free Trading or Insider Trading?

Running head: MARTHA STEWART: FREE TRADING OR INSIDER TRADING?

Martha Stewart: Free Trading or Insider Trading?

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Martha Stewart: Free Trading or Insider Trading?

Martha Stewart: Free Trading or Insider Trading?

Martha Stewart case is one of the most publicized cases in the corporate history of
America (Archie and Buchholtz, 2008). Martha Stewart case happened at the same time
as the Enron case. The case received a lot of media attention but it has elicited more
controversy in the legal, corporate and ethical study world than any other case. There are
those who feel that Martha Steward was wrongly accused while there are others who feel
that she ought to have taken the responsibility for her action.
Question 1
The main ethical issue in the case study regards the conduct of Martha steward
during trial and her involvement in insider trading. The fact that Martha was given
information regarding the impending fall in share prices helped her make the right
decision to sell her shares before the price dropped (Archie and Buchholtz, 2008). There
were no ethical issues in this aspect since she did in the best of how any investor would
have acted. However, the main ethical issue in the case arises from her conduct after she
was taken through SEC and the court. She made fabricated story of the reason why she
had to sell her shares. She should have said the trust rather than fabrication lies to support
her action.
Question 2
Apart from tallies lies, Martha Steward was not guilty of any serious crime. The
fact that she learned of impending fall in share prices, she would not have waited for the
shares to fall to make loss. After all, if there was someone who ought to have been
blamed for the insider trading, it should have been Waksal. The only crime that Martha
Stewart had committed was lying through fabricating a story about why she had to sell

Martha Stewart: Free Trading or Insider Trading?

her shares. The original crime that Martha Steward was charged for was insider trading,
which should not be considered a crime at all because every investor in the stock market
makes decision based on a degree of insider information (Archie and Buchholtz, 2008).
Although she was allowed to settle fines for insider trading, she was accused convicted of
other crime including lying to federal investigators and obstruction of justice. This was a
miscarriage of justice and did not amount to any felony. She was a with-hunt against
corporate excess and corporate accounting scandals, a euphoria that had ruined the
relationship between corporate and legal environment at the time.
Question 3
Martha Stewart case received a lot of media attention. It was one of the most
publicized corporate scandal cases apart from Enron case. Martha Stewart case received a
lot of media attention due to the fact that she was considered a celebrity owing to her
success in business (Drew, 2007). If the case involved a normal person who stole
government money, the media would not have given the case such widespread media
coverage. In addition, this case also received a lot of media attention since it happened at
the same time as Enron signifying an important era of corporate scandals. Even before
the case came to limelight, Martha Stewart was still a known public figure accorded a
celebrity status which means this case did not help her by bringing her to public
limelight. Instead, it portrayed a bad picture about her and this hurt her public image. Her
businesses were affected and she lost a lot from publicizing her case. The hyped media
attention that her case received id not help but it rather hurt her personal and business
image.
Question 4

Martha Stewart: Free Trading or Insider Trading?

No. Mr. Stewarts sentence of two years in jail and liquidation of almost half of
her wealth was not appropriate for the magnitude of her offense (Rasmussen, 2010). Her
sentence was a miscarriage of justice and did not reflect the true face of justice in the
country. Stewart convicts leave a bitter aftertaste in the political circles. Looking at her
conviction in legal and political lens shows that Stewart ended up of a victim of class
warfare, a struggle between lift-wing politicians that had perpetrated to juries. During her
conviction, juries commented that she was sentenced so that she would send a message to
the rich and powerful that they dont expected to repeat the same act and get away with
it. This only means that conviction of Martha Stewart could have been used to send a
message rather than being punished for a crime she committed. Her two years prison
sentence as not fair for accusations of obstructing justice and lying to federal judges. It
was not a fair conviction at all.
Question 5
In 2006, Martha Stewart was barred from holding any position as a CEO, CFO, or
director of any company for a period of five years. She was barred from holding any
position which would make her be responsible for preparing, auditing, or disclosing
financial statements (Drew, 2007). This barring would be expiring on 2011 upon which
Martha Stewart would be ready to take up the job as a director again. I would propose her
to take up the position of a director for the company again. This is because she had
showed exemplary record as a business magnate who can improve the performance of the
company. I still believe that her convictions were unfair and she should be given a change
to run her business again. Her conviction has not changed my perception of Martha
Steward brand she was a victim of circumstances.

Martha Stewart: Free Trading or Insider Trading?

Reference:
Drew, H. (2007). Trading Case: A practical application of rule 2.1. The Georgetown
Journal of Legal Ethics, July 2007
Archie, C. & Buchholtz, A. (2008). Business and Society: Ethics and stakeholders
Management. Cengage Learning
Rasmussen, H. (2010). Insider Trading. Retrieved May 10, 2010, from
http://economics.about.com/cs/finance/a/insider_trading.htm