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Martha Stewart Insider Trading Case Essay

 

Fraud, lying, conspiracy...not terms that any individual generally wantsassociated with their history, nonetheless with their reputation andpersonality; especially if that individual happens to be Martha Stewart.Martha Stewart: a name which almost every person who calls themselves anAmerican can recognize. Her name pronounces itself across cookbooks,magazines and even has its own show on Style and The Learning Channel. Itnow pronounces itself with yet another captivating theme, as part of one of America's major scandals. The high profile nature of the Martha Stewart insider trading case led toabundant research and writing by academic and media professionals. In thispresentation we seek to discuss the central moral and ethical issuessurrounding the case. In addition, the greater issue of insider trading will beexamined and moral foundations for the issue will be established anddiscussed. Finally, the presentation will conclude with a suggestion for themost consistent ethical approach to insider trading.

Background:

Martha Stewart owned shares of a company Called ImClone SystemIncorporated, which was founded in 1984, it is a biopharmaceutical companycommitted to advancing oncology care by developing a portfolio of targetedbiologic treatments designed to address the medical needs of patients with avariety of cancers. In 2001 ImClone received notification that a newprescription drug, in which the company poured extensive money intoresearch and development, would not receive approval by the Food and DrugAdministration. The CEO of ImClone, Sam Waskal, in an effort to avoidfinancial losses to his shares of ImClone, made a call to his stock broker todump his shares of the company stock. The broker, who also served as abroker for Martha Stewart, notified Stewart that the CEO was liquidating the

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Essay on Martha Stewart: Organization Ethics of Insider Trading

2451 WordsMar 16th, 201110 Pages

Abstract
Insider trading mostly occurs by individuals close to the upper level management of an organization. This type of unethical behavior undermines the stability of the organization. In the ImClone scandal where Martha Stewart was indicted for her involement, the stability of her company suffered and the companies and people associated with Ms. Stewart suffered as a result of her decision. In this essay I will examine the parties that were privileged to knowing ImClone’s stock was going to drop and those who did not know. I will look at the effects of Ms. Stewart’s action, what she could have done different, and the consequences of her actions. Ethical and public issues must be considered when a business executive makes a decision…show more content…

High level employees of an organization are privileged to insider information. The spouses, friends, bankers and lawyers are connected to individuals who have “awareness of material information that’s not publicly available” to everyone. (Clark, 2009) Martha Stewart and Dr. Waksal were close friends at the time of the ImClone scandal. (Carroll & Buchholtz, 2009, p. 815) This allowed her to have an inside advantage. When Dr. Waksal received the news that the FDA was not going to accept Erbitux’s application for approval, he had an ethical dilemma. He knew that he could not control what was about to happen to ImClone, but he wanted to “minimize his losses, and maybe the losses of some family members and close friends”. (Carroll & Buchholtz, 2009, p. 814)
Dr Waksal; his father, Jack; his daughter Aliza; and a number of close friends had significant investments in ImClone…Of course, selling his stock and advising his father, daughter, and friends to sell their stock would reduce their loses… Dr. Waksal was faced with a tough decision. On one hand, he could refrain from engaging in questionable trading practice and thereby incur a significant amount of losses in his investment. On the other hand, he could choose to sell his stock based on the information he received, reducing his investment losses, but violating the law and ethics of fair trade. (Carroll & Buchhlotz, 2009, p. 814)
Dr. Waksal influenced each person he told about the FDA’s decision and each person who knew

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