Martha Stewart Ethical Behavior

During my courses, I frequently remind students that most corporate executives, accountants, and auditors are honest and ethical. This case provides a stark and powerful example of one such individual. When I discuss a case such as this in my courses, I try to provide other examples of positive role models among corporate executives. Granted, most of these examples do not involve accounting or auditing matters, but, nevertheless, they help to blunt the impression that students may receive from studying my cases that most corporate executives are “crooks.”

1. The SEC is often called the “watchdog” of corporate America. How does it assist in preventing fraud?

The Securities and Exchange Commission has the mission of protecting investors by maintaining fair, orderly and efficient markets. The SEC does this in a number of ways, and firms need to pay attention to these ways in order to ensure SEC compliance. The SEC has enforcement authority over a number of areas related to the nation's capital markets, including insider trading, accounting fraud, and providing false information. The SEC's jurisdiction extends to all securities that are traded publicly. Privately-held companies do not need to register with the SEC (SEC.gov, 2012).

Martha Stewart may be America's most famous businesswoman. Considered a "cultural icon" (Byron, 3), she made a name for herself through

Melinda has now involved Alex in a sex scandal, that could potentially affect the company and her career. Melinda should have informed Alex about the situation, before the situation escalated. Instead of reporting, she proceeded, making an unethical decision. She was using her sexuality to make a business deal, which caused her to get pregnant, as well as jeopardize her job, and the company's credibility. Alex needs to think about if Melinda is worth keeping. She has been causing issues that can impact the company, and their credibility.

In this paper the main focus will be on the clause of 'Liability to contemporaneous traders for insider trading' which is section 20A in the Securities Exchange Act of 1934. The paper will start off by giving some basic points that make up this section followed by the history and background of the Securities Exchange Act of 1934. The paper will then highlight the major impact that this act has made on the industry in the current global standing. Some of the basic points that make up the subsection 20A clauses include the following:

The Securities and Exchange Commission (SEC) establishes and improves standards of financial accounting and reporting for the guidance and education of the public.

Everyone has heard of the OJ Simpson court case – a rich and famous man is accused of murdering his ex wife and despite an overwhelming amount of evidence presented against him, he somehow manages to be found not guilty. Many people find themselves wondering how that could possibly happen. Was his defense team simply that good? Were there mistakes made? Was he actually innocent? Simpson’s case is not the only one that has yielded such a strange outcome because of his status and stellar defense team, and certainly not the only court case to cause such an uproar in the media. Martha Stewart’s 2001 case, Scott Peterson’s 2004 case, and Lorena Bobbitt’s 1994 case are all examples of court trials that sparked interest in the eye of America.

The effects of the economic market crash of 1929 appeared in how the public sustained severe losses at the hands of securities traders and corporations. With the unmistakable need to restore financial specialist trust in the securities market President Roosevelt pushed for a huge securities regulation and the creation of the Securities Act of 1933 sprouted along with the approval of Congress. Then in a year later in 1934 Congress observed the need to make modifications to the 1933 Act by establishing an independent governmental regulatory body the Securities and Exchange Commission (SEC). The SEC main responsibility came to be to ensure and protect the public against malpractices in the securities and financial markets. As the years passed businesses and technology advances developed and the economic market expanded. With the economy market positive rise many companies needed to keep up and acted upon fraudulent acts in order to stay in the business competition. Companies acted fraudulent by “cooking the books” in recording

If you want to report potential wrongdoing to the Securities and Exchange Commission (SEC, you are protected by the SEC Whistleblower Program. The program, created by the Dodd-Frank Wall Street Reform and Protection Act, offers employment protections as well as a monetary incentive to report a tip to the SEC. You don't have to work for a company to report possible fraud, however, finance, compliance and accounting employees are more likely to have access to specific transactions that are potential violations.

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.

With the Martha Stewart scandal her actions initially saved her $45,673 but in the end did it really help? She ended up serving less than a year in prison and was fined $250,000. In hind sight she ended up losing a lot more money from selling the stocks and lying about it then if she would have just kept the stocks and took the hit when ImClone’s value fell. But selling stocks based on inside information so you’re sure you don’t lose money in an investment; doesn’t that seem like the right thing to do? No one ever wants to lose money especially in an investment, but avoiding a loss by selling stock the way Martha Stewart did is considered illegal. Having inside knowledge of a company and using that knowledge to make moves before the market price changes at that time probably seemed like a great idea but is profoundly illegal and known as inside trading. Martha Stewart was and is a well-known business woman and at that time served as President, CEO and chairwoman of her publicly traded company. She was educated and knowledgeable about what is allowed or not allowed as far as selling, buying and trading stocks. Her understanding of SEC regulations is especially disconcerting since she had been a part of the board of directors of the New York Stock Exchange. Martha was aware of the consequences that came with breaking the rules. Not only did she participate in insider trading and benefited from it but she also tried to cover it up claiming she and her stock broker

Are businesses in corporate America making it harder for the American public to trust them with all the recent scandals going on? Corruptions are everywhere and especially in businesses, but are these legal or are they ethical problems corporate America has? Bruce Frohnen, Leo Clarke, and Jeffrey L. Seglin believe it may just be a little bit of both. Frohnen and Clarke represent their belief that the scandals in corporate America are ethical problems. On the other hand, Jeffrey L. Seglin argues that the problems in American businesses are a combination of ethical and legal problems. The ideas of ethical problems in corporate America are illustrated differently in both Frohnen and Clarke’s essay and Seglin’s essay.

Enron’s ride is quite a phenomenon: from a regional gas pipeline trader to the largest energy trader in the world, and then back down the hill into bankruptcy and disgrace. As a matter of fact, it took Enron 16 years to go from about $10 billion of assets to $65 billion of assets, and 24 days to go bankruptcy. Enron is also one of the most celebrated business ethics cases in the century. There are so many things that went wrong within the organization, from all personal (prescriptive and psychological approaches), managerial (group norms, reward system, etc.), and organizational (world-class culture) perspectives. This paper will focus on the business ethics issues at Enron that were raised from the documentation Enron: The Smartest Guys

The illegal construction of the Bernie Madoff securities pyramid scheme grew to preposterous proportions from legal, auditing, and regulatory weaknesses of the Securities Exchange Commission, the designated regulatory body of the U.S. financial markets. The required expertise, authority, and relevant penalties needed to deter management from committing ethical breaches lacked substance in the case study of BMIS (Crews 11). Even after the wake of the Enron and WorldCom scandals that occurred in the early 2000s, the SEC unexplainably revoked provisions created to help avoid fraud. The provision the SEC revoked specifically mandated firms structured like Madoff’s to be audited by accounting firms registered and audited by the Board. By revoking the provision, BMIS was allowed to continue its Ponzi scheme for another half a decade with the aid of utilizing an unregistered, small accounting firm called Freihling & Horowitz (“Madoff’s Jenga”