Corporate Governance at Martha Stewart Living Omnimedia: Not “A Good Thing”

The case begins with Martha Stewart’s release from prison in 2005 after she was hampered in 2001 for interfering with an internal investigation into her sale of personal shares. The scandal dealt a devastating blow to the powerful Martha Stewart brand and resulted in results for her eponymous company, Martha Stewart Living Omnimedia (MSO), in the red. But as the owner of more than 90 percent of MSO’s voting shares, Stewart controlled the company throughout the scandal. The company faced significant external challenges, including changes in consumer preferences and increased competition on all ad prices, under pressure as advertisers began to fragment their spending across multiple platforms, including the internet and the social media, where MSO was weak. The new entrants attracted readers to MSO’s flagship publication Martha Stewart Living. And in their second-largest business, merchandising, retail giants like Walmart and Target wiped out MSO’s main sales channel, Kmart. Internal challenges became even greater, with numerous governance failures as the company attempted a change of course. This case can be used to teach corporate governance or restructuring. ”

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