Saturday, March 5, 2005

Buy the Sentence, Sell the Release?

With Martha Stewart's release from prison yesterday, her company's stock (Martha Stewart Living Omnimedia [MSO]) took a nearly 10% fall in price, and for the week is down almost $7 per share.  For those keeping score, yesterday's fall cost Stewart approximately $90 million, although that is not real money in the sense that she could not simply sell all her shares at the market price, even if she wanted.  Much has been made about what her case "means" in America, and I don't think it means much.  Her face appears on the cover of Newsweek in a composite photograph that apparently fooled some into thinking it was real -- does anyone really think that a photo shoot would be allowed in Federal Correctional Institution? Do the changes in the value of Stewart's company, and the effect on her net worth, mean anything about the criminal justice system or the effect of punishment? No.  Stewart's conviction had nothing to do with MSO directly, and to the extent anyone tries to draw a lesson about the state of corporate America from a criminal case, the prosecutions of Bernie Ebbers, Richard Scrushy, and the senior Enron executives will tell you more -- although not much more, I think.  Is the fact that Stewart seems to be unrepentant worth considering? Perhaps, but she served her term of imprisonment (for a conviction that could still be reversed), and how she views herself and her conduct does not change the fact that lying is still wrong, a point that I doubt she would dispute. (ph)

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