June 24, 2021

Common Sense: At Martha Stewart Living, Martha May Be the Problem

Among America’s corporate leaders, there are surely few whose interests are more closely aligned with their shareholders’ than the homemaking icon Martha Stewart. She owns 26 million shares and controls nearly 90 percent of the voting rights of Martha Stewart Living Omnimedia. She’s the company’s nonexecutive chairwoman and serves on the board. Martha Stewart, the company, is inseparable from Martha Stewart, the person.

Her net worth is inextricably tied to the value of the shares. That would seem obvious to everyone except, perhaps, Ms. Stewart herself. She continues to collect lavish multimillion-dollar compensation and perks while her company teeters under the weight of huge losses, its shares trading for a fraction of their former value. The paradox is that if the stock had risen even $1 a share in recent years, Martha Stewart would be wealthier now than if she had taken only nominal compensation from the company.

“You’d think there’d be very little need for board oversight because of the strong alignment of the company’s interests with her personal wealth,” Paul Hodgson, a compensation expert and senior research associate at GMI Ratings, told me this week. “Everything should be pushing her to make sure the company succeeds. For some reason, that’s not happening.”

Last week, Ms. Stewart’s company reported a $50.7 million quarterly loss, a staggering amount considering it exceeded total revenue, which was just $43.5 million. That was a 17 percent drop from revenue in the same quarter last year. Although the loss included a $44.3 million noncash write-down related to the shrinking value of two of its magazines, the company until recently has been bleeding cash, which dropped from $38.5 million to just $17.4 million in the quarter. The company said it would lay off about 70 employees, 12 percent of its work force, and discontinue its stand-alone print version of the magazine Everyday Food.

None of this bad news has made much of a dent on Ms. Stewart’s own compensation. Her base annual pay rose from $1.7 million in 2009 to $2 million in 2010 and 2011, and she received a $3 million retention bonus when she signed her new contract in 2009. She gets an additional minimum of $2 million a year under an “intangible assets license agreement,” which gives the company the rights to “Martha Stewart’s lifestyle and the public perception of Martha Stewart’s lifestyle,” including such details as how she arranges her outdoor furniture.

Her corporate perks are well known, and she has long blurred the line between business and personal expenses. She submitted as a business expense the $17,000 cost of her now-infamous holiday trip to the Mexican luxury resort Las Ventanas al Paraiso. She arrived at the resort the day she dumped her shares in the biotechnology company ImClone upon learning, en route, that the company’s chief executive was trying to sell his shares ahead of a negative Food and Drug Administration decision on the company’s principal drug. (She settled charges of insider trading brought by the Securities and Exchange Commission after being convicted of making criminal false statements to cover up the reason for the sale.) Then she had her accountant tell her companion on the trip that she’d have to pay her “fair share” of the costs, according to testimony in her 2004 trial.

The company doesn’t break out Ms. Stewart’s reimbursed expenses, but general and administrative expenses amounted to a lofty $11 million in the last quarter. That number, of course, includes many expenses besides Ms. Stewart’s, like other executives’ salaries.

The company does reveal what it calls other compensation for Ms. Stewart, which in 2011 included a personal trainer and other expenses for personal fitness; a weekend driver; security services; fees for on-air appearances; unspecified personnel costs not otherwise reimbursed by the company; insurance premiums; and an unidentified charitable contribution, which added up to over $1 million.

Ms. Stewart also receives stock options, nearly $1.8 million worth in 2009 through 2011, though she has not received any options so far this year. Still, as Mr. Hodgson put it, “Why is she even getting stock options? Her interests are already thoroughly aligned with the company, given her ownership stake.” Moreover, the intangible license agreement “is very unusual,” Mr. Hodgson said.

All told, Ms. Stewart’s compensation was $9.8 million in 2009, $5.9 million in 2010 and $5.5 million in 2011, or $21.2 million over the last three years, even as the company was in a downward spiral. Just before Ms. Stewart got out of prison in 2005, her shares were trading at over $34 and she was a billionaire. After plunging during the financial crisis, they were above $8 a share in September 2009. They traded this week at about $2.80.

Asked about the issues raised in this column, a spokesman for Martha Stewart Living Omnimedia declined to comment and said Ms. Stewart had no comment.

Article source: http://www.nytimes.com/2012/11/10/business/at-martha-stewart-living-martha-may-be-the-problem.html?partner=rss&emc=rss

Martha Stewart’s Halloween Magazine Brings Fan a Surprise

She had seen the haunted house-styled confection before, she thought, in a previous issue of a Martha Stewart publication. So Ms. Findley, an avid follower of all things Martha who regularly buys the special Halloween magazines, checked the October 2008 issue of Martha Stewart Living and found the same image.

“That shocked me,” said Ms. Findley, an associate professor of humanities at Vermont Technical College in Randolph Center. “I’ve been an editor, I’ve been a reporter. You just don’t do that.”

The similarities didn’t end at the cake stand. Ms. Findley said she spent the next two and half hours scouring the issues looking for examples of duplicated content and found “another one, and another one and another one.”

“By the time I got to five, I was floored,” she said.

What Ms. Findley stumbled upon was the common publishing practice of repurposing content, something that legions of magazines and newspapers — including The New York Times — do for special issues or sections. But those issues usually state clearly that they contain previously published material.

Finding no such label on this year’s Halloween issue — in which Ms. Stewart says that her food editors are “at it again, dreaming up truly original drinks, snacks and desserts that only look gruesome” — Ms. Findley took to cataloging the similarities.

Victor S. Navasky, a journalism professor, the director of the Delacorte Center for Magazine Journalism at Columbia University and the chairman of the Columbia Journalism Review, said it was not unusual for magazines to reprint images or even articles. The problem, Mr. Navasky said, is if the publication does not tell the reader that is has done so.

“At some point, it becomes unfair to the reader because the consumer is buying for a second time what he thought was original material,” Mr. Navasky said. “The problem isn’t the repurposing, the problem is the lack of notice for the reader.”

In an e-mail, a spokeswoman for Martha Stewart Living Omnimedia said the company stood by its work and how it was delivered to readers. Martha Stewart Living Omnimedia publishes two to four special issues a year, which each carry about 60 percent original material and 40 percent repurposed material, a company spokesman said. In the 2011 Halloween issue, about 70 percent of the content was original.

Ms. Findley said she had sent multiple e-mails and made a handful of phone calls to the company asking for a response to her complaint about the use of repurposed content. After a reporter inquired, the company issued an apology to Ms. Findley stating: “We appreciate Ms. Findley’s passion for our content and apologize for falling short in the way we communicated with her on this matter.”

The day after the company released that statement, Ms. Findley received an e-mail from Ms. Stewart and the two women then spoke on the phone for about 30 minutes that Saturday afternoon. Ms. Findley described Ms. Stewart as “incredibly apologetic,” and “a very nice lady,” but was still disappointed to find out that the special issues contain republished material.

“I told her, ‘You’re Martha Stewart, you don’t follow that standard, you set it,’ ” Ms. Findley said.

Article source: http://feeds.nytimes.com/click.phdo?i=1975b94c0aa5a5fe1c03412982344dca