Martha Stewart - Internet Article

This paper will provide a brief summary of:

Martha Stewart Sentenced To Prison

Punishment Postponed As She Appeals Verdict

By Brooke A. Masters

Washington Post Staff Writer

Saturday, July 17, 2004; Page A01

The paper also aims to relate the article to the assigned readings for the week. It gives an example of an ethics challenge which the authors former company, Ford Motor Company was involved in. The paper makes a recommendation to improve Ford and briefly provides a description of the 2002 Sarbanes-Oxley Act.

Article summary

The article provides an unbiased account of what Martha Stewart was accused of. Although the original charge was insider trading, she was convicted of obstructing a federal securities investigation. Basically she lied to government agencies and she was sentenced to five months in prison. Martha Stewart had unloaded 3,928 ImClone shares of stock. She dumped the stock because she was informed by the assistant to her broker, that that the owner of ImClone was trying to dump his stock. She basically got out while the getting was good. In doing so she was guilty of unethical behavior; however what really took her down was trying to cover the act up and lying. "Lying to government agencies during the course of an investigation is a very serious matter," said U.S. District Judge Miriam Goldman Cedarbaum, as she sentenced each defendant. "A term of incarceration is justified and appropriate in this case." The SEC is also seeking monetary damages and for Stewart to be barred from serving as director of a public company and her activities as an officer to be limited.

Insider trading is a grey area which companies need to take very seriously.

Sarbanes-Oxley Act

The issues of unethical behavior and lack of corporate social responsibility have become a compliance issue with the introduction of the Sarbanes-Oxley Act. The Sarbanes-Oxley Act makes corporate officials especially CEO's and CFO's accountable for unethical accounting practices. CEO's and CFO's now must comply with: Management Assessment of Internal Controls, which requires each annual report of an issuer to contain an "internal control report", Disclosure of Audit Committee Financial Expert. The SEC has implemented further rules that require issuers to disclose if at least 1 member of the audit committee is considered a financial expert. (Sarbanes-Oxley Act, 2002)

Ethics and Ford Motor Company

Ethics plays a huge role at Ford Motor Company. During the Firestone tire situation there were a number of rumors that Ford Motor Company knew that there was potential problems with the tires, ignored the problem and continued to install them anyways. Firestone headquarters were quick to point their finger at Ford; they tried to give all the blame to Ford. Meanwhile, Firestone was stalling in recalling the hundred thousands of tires which were still out on the streets. Ford took charge of the situation immediately; they shut down the two assembly plants where