Management Unethical Issues at Martha Stewart
Evaluating the behavior of the two parties
The behavior of the two parties; those who were aware of the drop in stock and those who had no idea of the impending drop in stock rates portrayed different ethical values. Those who were aware of the gloomy days to follow the Food and Drug Administration decision took advantage of the non-public information to offload their stock which is an unethical deed among top management. This is especially bad as they went further to inform their relatives and close of kin of the move hence making the insider trading a serious issue (Buchholtz, 2009).
On the other hand those who did not know of the expected public information that the drug was being confiscated as it failed to meet the FDA qualifications. Hence as it as expected of them they did not react before the announcement as they lacked access to the information. However, the fact that they supported Martha Stewart to the extent of saying tat she was innocently charged proved that they had not anticipated such a move. They were ignorant of the insider trading activities (Buchholtz, 2009).
Similarities between the two parties
The executive management of Martha Stewart and Stewart herself failed to see the unethical aspect of Stewart offloading her stock one day before the FDA decision was made public. Stewart defended her by saying that she had instructed her broker to sell her shares when they traded below $60. This was a valid reason but then it was not true as the impending drop in stock was the key reason as to why the sale was made in a hurry especially at that time. The jury and friends who were not aware of the move or the financial position of the firm did not regard the ethical aspect of insider trading hence they failed to see Martha as guilty of such actions. This is evident in the nature of verdict which was given by the jury where insider trading charges were not part of the final sentence (Buchholtz, 2009).
The difference between the two parties
While one party had access to the non-public information regarding the value of stock at ImClone, the other party had all the details which made it possible to sell their share of stock to avoid losses. Martha, the executive management and family were given a chance to sell their stock when it was still profitable rather than wait as other stakeholders until the bomb was dropped. This was a major difference between the two parties as one group had access to confidential details while the other was denied that privilege (Buchholtz, 2009).
The other equally notable difference was on the ability to decipher the ethical and unethical values regarding insider trading. While the law recognizes insider trading as a legal way of avoiding stock losses, taking advantage of non-public information to conduct insider trading is illegal and unethical. Thus the top management at ImClone took advantage of this information so as not to suffer as other shareholders and the public after the decision by FDA was made public (Buchholtz, 2009).
Consequently, the parties who were not aware of the intending drop in stock lacked evidence of responsibility that the top management had sold its share of stock after making use of non-public information. The fact that Martha had sold her share of stock upon an agreement with her broker was not adequate enough to condemn the suspects. The top management had no solid evidence that they had engaged in insider trading as well thus making them not guilty of such charges (Buchholtz, 2009).
Parties influenced by business decisions
Business decisions are usually a major influence on top management and the moves they undertake in the course of everyday business. This is because managerial decisions rarely get to the junior employees or shareholders in time. Even when this eventuality is eliminated, the business top executive is always the first to react such that in case of the Martha Stewart insider trading it is rare that the reverse could have happened. Chances of allowing the public to sell their stock prior to top management is unheard off and ethics are rarely applicable in such scenarios (Buchholtz, 2009).
While the jurisdiction on insider trading calls for business managers, who disclose details of non-public information to one person to tell the entire public, it does not occur often. At such scenarios business ethics takes a different approach all together with little regard for the fate of other shareholders in the company (Buchholtz, 2009).
Ways through which Martha Stewart could have applied ethics to enhance the company’s reputation
The decision by FDA to withdraw the drug from the market was not unusual a several companies have been faced with similar challenges and scenarios. However, Martha cold have held a public conference and given her position regarding the event after the FDA’s public release hence winning the trust of customers. This information could have been released after that of the FDA while at the same time appealing to shareholders to be patient as the stock would rise again after implementing strategies of enfacing the drug (Buchholtz, 2009).
The other ethical decision that could have saved the face of ImClone was avoiding large scale sale of stock by key managers and the CEO prior to the FDA release. This is seen as an unethical move by management to make use of the non-public information for their profitable gain. Though Stewart’s reason could have been valid to some extent, the timing was coincidental especially with Waksal and family following suit to sell all their stock. This demonstrates further that the move was known by the entire top management hence the rapid decision to sell all stock belonging to ImClone. Therefore, the sale could have been gradual among top executive over a given period of tie rather than all at once to avoid suspicion from the stakeholder (Phillips and Freeman, 2003).
The other vita ethical strategy that could have been used to save the reputation of ImClone was demonstrating to the public that things were not looking up hence the non-public information on stoic could have been made public. This goes in line with publishing accurate financial statements for the public as a way of giving them an opportunity to sell or invest in the ImClone stock (Buchholtz, 2009).
Appropriateness of Martha Stewart’s punishment
The punishment that was accorded to Stewart was appropriate especially banning her from undertaking any CEO or CFO positions. This ensured that for the next five years, she would not prepare, audit or make public financial details. This could be due to lack of trust by the public on her conduct or a repeat of another illegal insider trading scandal (Buchholtz, 2009).
Similarly, the sentence on fraud or short-swing profits from sale of stock within a short notice was in order as the law prohibits fraud in any setting especially regarding securities. Consequently, the charges of conspiracy and obstruction of justice were awarded appropriate punishment such that CEOs who were on the verge of committing similar crimes could be discouraged (Buchholtz, 2009).
Ethical and public issues consideration in a stakeholder relationship
The ethical consideration of the stakeholder relationship in any business is essential as it allows the firm to satisfy the needs, as well as, wishes of various categories of stakeholders namely; customers, employees, investors and suppliers. Business ethics calls for a balance between the stakeholders and management to ensure that each benefits from the other mutually (Phillips, 2003).
The public’s opinion towards the business is the other equally vital element of the stakeholder relationship as members of the pubic play a vital role in attainment of the firm’s goals. Thus by establishing a balanced relationship among the players who are not necessarily decision makers, the firm will be in a position to realize its mission. It is equally advantageous to provide a list of the specific role of each member who is a stakeholder as a way of ensuring that either party does not fail in delivering results (Phillips, 2003).
References
Buchholtz, C. (2009), business and society: ethics and stakeholder management. 7th ed. South Western
Phillips, R., R. and Freeman, E. (2003), Stakeholder Theory and Organizational Ethics. Berrett-Koehler Publishers
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