Life After Martha

Stewart’s company planned for life without her. Just not well enough.

Martha Stewart was convicted on Friday of all four counts brought against her in federal court, and since the announcement, the price of shares in her company, Martha Stewart Living Omnimedia, has plummeted. In a “Moneybox” last June, Daniel Gross pointed out that the company’s managers have long known Omnimedia’s fate would be linked to the domestic guru’s success. The company’s 1999 prospectus explained the potential risk to shareholders: “Our success depends on our brands and their value. Our business would be adversely affected if: Martha Stewart’s public image or reputation were to be tarnished. …” The company even took out “key executive” insurance policies on Stewart: $67 million in life insurance and $55 million in disability insurance. But these policies won’t do shareholders any good. As Gross notes, “Since [Martha Stewart] neither became disabled nor died, the shareholders can’t collect. And besides, the cost to the company of her damaged reputation is far more than those insurance policies.”