'Martha Stewart Lost Reputation Essay\r'

'Martha Stewart places her name on her products. She becomes the face of her troupe and the voice of her brand. When her contributionl misconduct occurred, she made her fellowship vulnerable and risky as well. This brass prove examines how Martha Stewart managed her unified talk when her universe check and constitution were tarnished on discharge for alleged insider handicraft s shagdal. The trial not hardly led her to prison plainly in any lawsuit hurt her brand equity. The study shows that Stewart’s early chemical re march to her crisis demonstrated lack of line aw arness. In the beginning of her probe, she kept her exoteric mortala intact, ignoring or downplaying her role in it. As a result, what Stewart called â€Å"a undersized personal matter” ulterior became a full -blown crisis. If she had managed her dialogue in a to a greater extent sentencely manner, the magnitude of her crisis might pay off been decrease. This article also provides detailed insights for organizations to learn from her crisis solution strategies.\r\nKeywords: Organizational crisis, Crisis communication, Image restoration\r\n1. Introduction\r\nThe personalities of lovesome care leadership can help mark off and enhance their corporate simulacrum. In some chemises, the leaders become the virtual icon of the corporate brand, lendi ng their personal prestige to the brand and personifying the company. They can also threaten the company when they are involved in a scandal. In this situation, the consequences for the company can be critical as in the Martha Stewart’s insider transaction crisis in the United States. The crisis management scholar, Roux-Dufort (2000) points out that corporate crises as â€Å"a privileged moment during which to derive things differently” (p. 26).\r\nAs such, there is a growth body of literature on organizational nurture in the wake of corporate crisis (Mitroff, 2002; Shrivastava, 1998). The St ewart case, in particular, force the attention of media for years. The crisis of Martha Stewart’s insider concern raised the retail store al more or less the Martha Stewart’s multiplatform franchise; that is, the media world and homemaking subscriber line are intricately interwoven with her persona. Stewart’s conglomerate has an impressive business synergy as shown by her TV programs that promote her magazines, her website which sells her products, and her p roducts which are a link to her TV programs.\r\nShe is the face, voice and personality stinker the brand and, thus, the two †Stewart and the brand †are inseparable. aft(prenominal) Stewart’s personal misconduct, the interlocking nature of her business proved to be vulnerable and risky. Moreover, Stewart’s crisis had twain sanctioned and ordinary relations components (Jerome, Moffitt, & deoxyadenosine monophosphate; Knudsen, 2007). Allegations of insider transaction against Martha Stewart led to her imprisonment. Her strategic plan in receipt to the insider art accusations and the media attention su rrounding this crisis left Stewart trying to upshot action to restore her image. In a sense, it is pregnant to understand how Stewart herself and her company managed their corporate communication when her public image and re regularizeation were tarnished under the investigation of the insider vocation scandal. This article explores how the high profile iconic Martha Stewart replyed when confronted with an organizational crisis that threatened existence. It also provides detailed insights for organizations to learn from her crisis solution strategies.\r\n2. Background of Martha Stewart’s Insider Trading\r\nBeginning with the 1982 matter of her book Entertaining, Martha Stewart made a name for herself as a homemaking diva. In September 1997, Stewart became chairperson, president, and CEO of her novel company, Martha Stewart Living Omnimedia . Martha Stewart Living Omnimedia has been listed on the New York tiredpile Exchange under the ticker symbol MSO since 1999. As the chief of MSO, Stewart mapd her name and face to begin connections with various businesses including a line of housewares, television shows, tuner channels, magazines and a series of books on entertaining.\r\nOn declination 27, 2001, Stewart sold 3,928 shares of her ImClone stock worth US$228,000 the daytime before the U.S. Food and Drug Administration (FDA) jilted approval of Erbitux, ImClone’s anti -cancer drug. By exchange ahead of the FDA rejection, Stewart received some US$45,000 more than if she had sold the stocks later. Compared to her wealth, it was certainly an insignificant sum and in fact, during her Larry King Live interview, she express it was â€Å"miniscule, really, about 0.006 pct of my net worth” (Four nier, 2004). Stewart had denied any wrongdoing, insisting she did not receive any advance knowledge from surfa ce-to-air missile Waksal, the founder and CEO of ImClone about the decision on Erbitux (Pollack, 2002).\r\nInstead, her sale of ImClone stock was part of a preset plan to sell if shares fell below US$60. Later, Stewart was officially indicted on charges of securities fraud and obstructing justice connect to her sale of ImClone stock on knock against 5, 2004. say Cedarbaum dismissed the securities fraud charge against S tewart, utter prosecutors had failed to present enough evidence on the deal (Masters & international deoxyadenosine monophosphateere; White, 2004). However, obstruction of justice, charges of conspiracy, and making false statements remained. Stewart served a five-month prison sentence between October 8, 2004 and March 4, 2005 for these charges. On August 7, 2006, Martha Stewart reached an harmony with the securities’ regulators over the insider-trading civil charges and agree to pay US$195,000 to settle a five-year legal battle.\r\n3. Literature Review\r \nCrisis events can and do arrogate organizations of all types. Ein truth kind of organization, from larger organizations to small family owned businesses, have the potential of being a victim of crisis (Seeger, Sellnow, & Ulmer, 2003). In many circumstances, crisis now raises questions from an organization’s many different publics (Marra, 1998). In this view, for an organization to manage the effects of a crisis it must(prenominal) communicate to both internal and external stakeholders. Ulmer, Sellnow, and Seeger (2007) invoke all crises involve the general communication strategies of minify uncertainty, responding to the crisis, resolving it, and learning from it.\r\nThe ability to communicate cursorily and effectually is clearly an important component of successfu l crisis management. Effective crisis communication can not only defuse or eliminate crisis, but it can sometimes bring an organization a more positive reputation than before the crisis occurred (Kauffma n, 2005). On the early(a) hand, Marra (1998) argues if an organization fails to respond to a crisis in the specify manner, a bad situation can be made worse. Hence, crisis communication strategies can substantially lessen the misemploy caused by a crisis or go ballistic the harm if mismanaged.\r\nIn this study, the stream of crisis response models from communication scholars and public relations professionals (Benoit, 1995; Coombs, 1999, 2007) are utilized as the theoretical framework to interpret the crisis response strategies that Martha Stewart occupied in her insider trading crisis. According to Benoit (1995), firms or individuals whitethorn take preventative and restorative approaches to image difficultys. tailfin strategies (i.e., denial, evasion of state, reduction of the offensiveness of the act , disciplinary action, and mortification) make up the rhetoric or image repair discourse. Each of these strategies has a set of tactics within them. Denial is the dodge employed when the rhetor apparently chooses to deny the actions he is being accused of or shift the blame from the organization to outside individuals or agencies.\r\nThe second outline is evasion of responsibility is the strategy that the rhetor can blame circumstances beyond his control. It consists of quadruple possible tactics: provocation, defeasibility, accident and good intentions. Benoit’s third major image restoration strategy, occurs when the rhetor attempts to tighten up the degree of offensiveness experienced by the accuser. To this end, Benoit includes six tactics: bolstering, minimization, differentiation, transcendence, attacking the accuser, and compensation. The tetradth category of the typology is corrective action, which attempts to correct the situation rather than counterbalance it. The concluding image restoration strategy, mortification, requires the rhetor to take responsibility for the action and to issue an apology.\r\nBenoit and colleagues ha ve applied the model to a variety of different crisis situations. For instance, Benoit and Brinson (1994) analyzed AT&T’s defense following an good luck of its long-distance service in New York in September of 1991. Initially, AT&T attempt to shift blame to low-level workers. As the collar allegory emerged, however, AT&T apologized for the fault (mortification) and began to bolster its image by stressing its commitment to excellence, the billions of dollars invested in service, and the quality of its employees. Finally, AT&T promised corrective action and introduced a comprehensive review of its operations to anticipate and prevent further problems. It also emphasise its commitment to providing excellent service and its willingness to spend billions of dollars to do so. Given these corrective action strategies, AT&T’s in the end restored its image. Benoit (1995) also examined summation Carbide’s response to the Bhopal, India, gas leak that killed thousands and wound hundreds of thousands.\r\nUnion Carbide’s primary strategies, bolstering and corrective action, were cerebrate on four specific actions: a ministration fund, an orphanage, medical supplies, and medical personnel. Although these strategies were appropriate and timely, Benoit claimed that Union Carbide failed to greet the most important question: What were they doing to prevent some other tragedy?\r\nCoombs (1999, 2007) develops situational crisis communication theory, creating 10 categories of basic organizational crisis communication strategies. These strategies are further grouped into four emplacement: 1) â€Å"denial raiseure” including attack the accuser (confronting person claiming a crisis occurred), denial ( asserting no crisis), and scapegoat (shifting the blame to others outside the organization), with an attempt to eliminate the crisis by denying its existence or the organization’s responsibility for the crisis; 2) â€Å"diminishment posture” which takes the forms of excuse (denying intend to do harm or claiming inability to control) and plea (minimizing severity of damage) with the target of weakening the link between the crisis and the organization by claiming the crisis is not the organization’s fault;\r\n3) â€Å" reconstruct posture” of compensation (providing money or other gifts to the victims) and apology (taking full responsibility), which strives to restore legitimacy by seeking public approval and forgiveness; and 4) â€Å"bolstering posture” which includes reminder (telling stakeholders about its past good works), innuendo (praising stakeholders and/or reminds them of past good works) and victimage (reminding stakeholders that the organization is a victim of the crisis, too). Using Coombs’s typology of crisis response strategies, Wilcox and Cameron (2006) examined the case of Intel. In 1993, Intel initially denied there was a problem with i ts Pentium 586 chip. As the crisis was covered in the mainstream press, Intel used the justification strategy by assuring that the problem was not sober enough to warrant replacing the chips. It minimized the concerns of consumers. In fact, Intel mismanaged the handling of its crisis communication.\r\nFirst, it did not disclose to the public the information about the Pentium flaw when they initially realise there was a problem. Then when the problem finally did come out into the open, they downplayed it instead of helping the users who had purchased the flawed chips. After considerable damage had been done to Intel’s reputation and IBM had suspended baseball clubs for the chip, Intel took corrective action to stand in the chips. Subsequently, Andy Grove, Intel’s president, issued a full apology. Based on Benoit’s image repair theory and Coombs’s typology of crisis response st rategies, the following research questions are posited:\r\nRQ 1. What strat egies did Martha Stewart use to manage her insider trading crisis? RQ 2. Were these strategies effective or unavailing?\r\nRQ 3. What can we learn from Martha Stewart case?\r\n4. Methodology\r\nThe case study is employed in this study, as it is effective in illustrating public relations management in real situations (Hendrix, 2004). According to Yin (1994), the six sources of evidence that are typically associated with the case study include documents, archival records, interviews, direct observation, participant -observation, and physical artifacts. In this study, texts documenting Stewart’s discourse in response to incidents that threatened her image were composed from multiple sources.\r\nSpecifically, this study used preponderantly two types of entropy: documents and archival records. It began with gathering selective information and finding facts related to cases and defining the specific tasks. The actions and communication strategies used by Martha Stewart wer e revi ewed with information from her corporate websites, press ceases and media coverage. MSO is a publicly traded company. A visit at the organizational archival records (e.g., stock prices, gross sales and annual reports) and official government records (e.g. , court records and delegating reports) contributed to understand the impact of corporate scandals have had on the companies’ financial performance and their stakeholders.\r\nThe media coverage on the Martha Stewart case was found by Lexis Nexis Academi c keyword search of â€Å"Martha Stewart & insider trading” in The New York Times and The uppercase Post. These newspapers were selected because of their large circulation, prominence and influence on public opinion. For the purpose of the valance of news narration in this study, the period of digest covered two time frames (during the crisis and post crisis). The first time frame started from the trading day to the verdict, beginning in December, 2001 and r unning through March, 2004. The second time frame started from the day of sentencing to her discover from prison, beginning on July 16, 2004 and running t hrough March 2005. Since the research questions of this study were related to crisis communication strategies, the unit of analysis of this case study was Martha Stewart’s response to stakeholders during and post crisis. Thus, the strategies were apparent through the types of evidence. 14\r\nBy examining corporate communication employed by Martha Stewart during the crisis and post -crisis period, the procedures for analysis involved three steps. First, after the data were collected from multiple sources, a detailed timeline of applicable events leading up to the crisis itself, and the post-crisis process was created. For example, the chronological order of the Martha Stewart case was constructed in the following manner: 1) the investigation (January, 2002 †June, 2003); 2) indictment (June †December, 2003); 3) v erdict (January †May, 2004);\r\n4) sentencing (June †July, 2004); 5) in prison (October, 2004); and 6) release from prison (March, 2005). Second, after the chronological order of veridical events was refined, a narrative description and process analysis of each event was thus constructed. A worksheet served as an organizing tool for evaluating each event. All data collected were analyzed using the typology of crisis response strategy. Finally, a thick(p) descript ion and analysis of the findings of each research question was conducted.\r\n5. summary of Martha Stewart’s Crisis Response Strategies 5.\r\n1 Investigation\r\nThe story about Martha Stewart’s ImClone stock sale was blue to the public in the Wall Street daybook on June 7, 2002 (Adams & Anand, 2002). In the article, her lawyer, John Savarese, indicated that Stewart had set the price at US$60 for merchandising the stock but in fact, as of June 7, 2002, the stock price of ImClone sank to a low US$8.45 a share. Using the strategy of differentiation, Savarese further was trying to put distance between Stewart and Sam Waksal.\r\nThere is dead no evidence whatsoever that she spoke to Sam, or had any information from anybody from ImClone during that week … I am absolutely sure that there was no communication of any kind between her and Sam, no breathing out of any information from him to her. (Adams & Anand, 2002, p. B2)\r\nOn June 12, 2002, Waksal was arrested for insider trading and soon after, the stock price of MSO plunged 12 percent, termination at US$15. From June 6, 2002, when congressional researchers started looking into Stewart’s sale of ImClone shares, the stock price of MSO had dropped 22 percent. Stewart straight off denied any insider trading or wrongdoing and, in a public statement, she said she knew nothing about the pending FDA announcement. She claimed that when the share price dropped below US$60 †the level at which she had agreed with her broke †she returned a call from her broker and sold the s hares on December 27, 2001.\r\nShe acknowledged that after the trade, she straightway called Waksal but could not reach him, and he did not call her back. The message she left read: â€Å"Martha Stewart called. Something is dismissal on with ImClone and she trusts to know what” (Hays, 2002a, p. C1). She proclaimed her innocence in her statement: â€Å"In placing my trade, I had no haywire information. My transaction was entirely lawful” (White, 2002, p. E1). However, the congressional investigator questioned Stewart’s sale, noting that ImClone dropped below $60 at to the lowest degree once before while Stewart owned it (White, 2002).\r\nOn June 18, 2002, Stewart tried to resolve concerns about her sale of ImClone shares and hired a new lawyer, James F. Fitzpatrick, who submitted several documents to congressional investigators. This was the first time Stewart used a strategy of correc tive action as a response to the inquiries. On June 19, 2002, MSO stock rebounded sharply, climbing from US$2.05, to US$14.4 and then to US$16.45, suggesting that her corrective action was working.\r\nHowever, heap Johnson, a spokesman for the House Energy and Commerce Committee, said the documents would help answer some questions but â€Å"we dummy up don’t have an answer to the most nagging one: was Ms. Stewart’s pre-existing agreement to sell reached in late November, as she says, or in mid-December as some reports have indicated?” (Hays, 2002b, p. C7). On June 25, 2002, she appeared on CBS’s The Early Show, and when asked by the host, Jane Clayson, about the ImClone shares during a cooking segment, she replied while slicing a cabbage with a big knife.\r\nI’m involved in an investigation that has very serious implications. I have nothing to say on the matter. I’m really not at liberty to say. And as I said, I have in mind this will be resolved in the very near future and I will be exonerated of any ridiculousness. And I just want to focus on my salad because that is why we’re here. (Clayson, 2002)\r\nApparently, Stewart had no idea how to handle the situation and was unwilling to respond to the questions. She continued to dodge public inquiries and ignored the increase outcry for answers about her role in the insider trading scandal.\r\n'