Crisis Management for Martha Stewart

Martha Stewart is the creator and namesake of Martha Stewart Living Omnimedia Inc. (MSO) She was indicted and sentenced for lying about ImClone stock sale which was based on insider information she got from Samuel Waksal, the founder and former CEO of ImClone System Inc. After this seemly innocent deal, MSO stock began a steady fall. Ms .Stewart lost her credibility, her position as the chairman and Chief Executive officer of MSO, her splendid future as a director of a US publicly traded firm or about $400 million in stock value.

The situation could be better if Ms. Stewart applied crisis management when she dealt with this scandal.

From the perspectives of Public relations, time is very important when crisis happens. “A quick response is an active response because it tries to fill the vacuum forms”. Ms. Steward released her statement about this scandal on June 12^th. But the news was breaking out in the early June. Her slow reaction generated enough time for public to think about whether she got insider information or not. Oppositely, her public relation people should be very sensitive to notice what happened and act properly once the scandal broke out. If I am her PR, once I got to know what was going on, I will tell shareholders of MSO and media that we are investigating into this trade devotedly. We faithfully trust the law and will be responsible to the fair conclusion.

Besides Ms. Martha herself, there were several representatives make public announcements for her, such as her spokewoman, Susan Magrino and assistant Ann Armstrong. Furthermore, they gave public entirely different information. Ms. Stewart defended herself being innocent in this scandal confidently. Her sporkwoman did it as well. When the truth was coming out, Ms. Stewart’s assistant testified that Stewart personally altered the log of a message Bacanovic left on the day she told her ImClone stock. What they did is a blunder accord to crisis management theories. Consistency means that various messages sent by an organization are free of contradictions.Inconsistency erodes the believability of a message. The contradicted messages didn’t provide Ms. Stewart is innocent but disclosed her dishonesty and guilty. If I was Ms. Stewart, I wouldn’t assert Ms. Martha got insider information or not before I get enough evidence to support my statement.

I think the most controversial recommendation, openness, in Ms. Stewart’s is crucial. Ms. Stewart didn’t make openness in the whole process. What she did is try to conceal the truth. She always denied she got the insider information. Meanwhile, Ms. Stewart and her associates sold $79 million worth of MSO stock. These trades made some shareholders became disgruntled because they were made prior to information about Stewart’s investigation being made public. I think she could deal with this problem better is she fully admit she got the insider information. As one of 46 who got ImClone failure news, selling her share is reasonable. Ms. Stewart couldn’t refuse others to give her information. Gotten this message, conservative shareholders would definitely get rid of stocks expected devaluated. If Ms. Stewart can frankly admit her trade based on the insider information and be responsible for this results. From perspectives of PR, full apology is very high acceptance and corrective action is high acceptance. If I was her PR, I would help her to analysis the crisis and encourage her to admit what she heard and what she did. Even though frankness may be damaging, for a long term, it will help to reinforce a positive, honest, responsible American idol. Furthermore, I will persuade her to correct what she did. In this situation, I think the best correction is making up in other ways. For example, donate the unlawful income to charity. Doing this will clarify that Ms. Stewart is not a greedy woman; she makes mistakes involuntarily and tries her best to correct them.

Another detail needed to be mention is Ms. Stewart’s emotion control. In the whole process, Ms. Stewart’s action and talk is improper. She used adjectives such as ridiculous to blame literally everyone from the media to her brokerage to public. She canceled future segments on the show where she was asked a question about ImClone by the anchor. She always emphasized good thinks she did but avoid the unlawful trade. Even after she got the final judgment, she tired to testify she is a good person by analogy herself with South Africa’s persecuted anti-apartheid hero, Nelson Mandela. Ms. Stewart‘s image was demolished is no doubt. In PR practice, attitude is important. When crisis happen, no matter your organization is right or false, innocent or guilty, the crisis team should be modest and genuine. If I was Ms. Stewart’s PR, I hope when the crisis came out, she could behave as normal as before. I won’t advise her cancel any segments because of unpleasant experience and use excessive expression either.

If Ms. Stewart knows how to manage crisis or apply what I suggested above, I believe the final situation will be more favorable to her.