Monday, June 21, 2004

Martha, My Dear … How Disastrous PR Paved Martha’s Road to Hell

By Ned Barnett, APR
Fellow, ASHMPR

She's back in the news - a Secret Service agent lied under oath in her trial, and she might now get a new chance for public humiliation ... and it could have been so easily avoided.

Martha Stewart is living proof that incredible wealth, undoubted talent and real power mean exactly nothing – at least, nothing without effective public relations. She’s now facing jail time.

Even though she's not in jail - yet - she’s already been to see her parole officer. Viacom dropped her program from CBS and UPN. Her corporate board voted her right out of her own company.

And all of this could have been avoided – if she’d listened to (and acted on) solid public relations counsel.

I say “listen” because Martha is reported to have retained no less than four different high-powered PR agencies (leading to some interesting behind-closed-doors “negotiations” about what she should say to the press). Assuming that her high-priced PR counselors were competent, they had to have been giving her sound advice – wise counsel that she refused to act on.

There is, quite literally, no other rational conclusion.

But what would a competent, high-powered professional public relations counsel have advised Martha Stewart?

Let’s review the facts:

1. Martha Stewart got some information about ImClone stock. Was it “Insider” information, or just good advice from her broker? The prosecutor and the courts ducked this issue, so nobody really knows for sure. However, from a PR perspective, it really doesn’t matter. The appearance of impropriety was there, right from the beginning, and that’s what did in Martha Stewart.

2. Martha Stewart apparently acted on that information about ImClone, selling off 4,000 shares and saving the half-billionaire a whopping $50,000. Put into perspective, this savings represented .0001 of her net worth – one one-hundredth of one percent of the wealth she owned and controlled.

3. As soon as her actions became public, Martha Stewart began to take flak on her actions, and began to act the way guilty people do. First, she deleted a message (then realizing that this was destroying evidence, she restored the message); then a few days later, she apparently lied to the FBI about this message (among much else).

4. Then there’s the arrogance thing …

Let’s stop right there.

As soon as Martha Stewart realized that she had a PR problem – as soon as the media began to apply “heat” to her for what already appeared to be insider trading – she should have sought out her high-priced public relations counsel, Jack Flack, and asked for his help.

The conversation might have gone something like this:

Martha Stewart: “Jack, the media is coming down on me – hard – about this ImClone thing. What should I do?”

Jack Flack: “Before I can help you, I need you to tell me what happened. What really happened.”

Martha Stewart: “I got this call on the plane. My broker said ImClone was about to tank. All the big boys were bailing. So I sold. What else was I supposed to do?”

Jack Flack: “There’s got to be more, Martha. Tell me the rest of it.”

Martha Stewart: “Well, when I got back to my office, I found records of a phone message that – if you didn’t understand it in context – would look bad. So I had my assistant delete it. Then I realized that deleting the message might look like an admission of guilt, so I had the guys in IT jump through a few flaming hoops and get it back. No harm, no foul, right? That’s the whole story, Jack. So what do I do?”

Jack Flack: “It’s simple, Martha. We’re going to go public. You’re going to admit that you made a mistake – that you reacted on the spur of the moment, without thinking. Then, realizing how it bad that stock sell-off would look, you panicked – just for a moment – and destroyed evidence. But as soon as you calmed down, you knew that was wrong, so you restored the message.”

Martha Stewart: “You want me to admit a mistake? You want me to say that I panicked? Jack, do you know who I am?”

Jack Flack: “Yes, I know who you are, Martha, and that’s why you need to admit this. But you need to go farther. You need to say that, because you know how this all looks, you want to apologize. To America. To the stockholders of ImClone. To all the stockholders in Martha Stewart Living. To your fans, those who watch your show, and those who buy your product.”

Martha Stewart: “Apologize? But I – Jack, I did nothing wrong. At least not technically. Not if you look at it the right way.”

Jack Flack: “You’ll do more than apologize, Martha. You are going to offer – to everyone who bought any of your ImClone shares, to anyone and everyone who bought ImClone right after you issued the sell order – you’re going to offer to make them whole. You’re going to offer to buy their stocks back, at full market value – plus 10% for the trouble they went through. Ten percent – maybe fifteen.”

Martha Stewart: “Buy the stock back? Are you crazy? Why, I’d lose fifteen, maybe twenty dollars a share. Jack, I sold 4,000 shares – if I follow your advice, I could be out $50,000 – maybe even $80,000! Are you out of your mind?”

Jack Flack: “I’m not out of my mind, Martha, and that’s exactly what you’re going to do. You’re worth a half-billion dollars, maybe more. And to salvage your image, your influence and your marketability, you’re going to be out maybe one one-hundredth of your net worth. Isn’t your reputation worth that?”

Martha Stewart: “When you put it that way – I’ve already spent more than that on attorneys, Jack …”

Jack Flack: “And you’ll spend a lot more than that on lawyers if you’re not careful.”

Martha Stewart: “Well, maybe.”

Jack Flack: “One more thing, Martha.”

Martha Stewart: “Oh, good god, Jack, what else?”

Jack Flack: “You’re going to admit, publicly, that what you did was probably wrong. Maybe even illegal. And you’re going to say that you want to make amends. That you want to meet with the SEC and in that meeting you'll offer to pay any fines, or to do whatever else they ask, to make this right. You'll offer to turn state’s evidence if they need you to.”

Martha Stewart: “Why on god’s earth would I want to do that, Jack?”

Jack Flack: “Because if you admit you were wrong BEFORE the SEC can formally charge you with anything – or before they can even turn the FBI loose to begin to investigate you – they’ve go no where else to go. Instead of being a suspect, you’ll become an icon of corporate responsibility. A poster girl for doing the right thing. You’ll be a hero, and people will love you.”

Martha Stewart: “Love me? For admitting I was wrong? But I’m Martha Stewart. I’m never wrong … Jack, there must be some other way.”

Jack Flack: “There is, Martha. You can stonewall. You can proclaim your innocence. You can lie to the prosecutors, and you can tell your investors that this is all a witch hunt. You can spend $400,000 a week on attorneys – probably for years. And when it’s all done, you’ll face 12 people who’ve never made – or lost – $50,000 on a stock deal in their lives. You can flash your wealth and power in their faces. And when it’s all over with, you can wonder what the hell happened. When they find you guilty of being arrogant, then find some kind of crime to attach to that verdict, you’ll wonder if your pride is worth the price you’ve had to pay.”

Martha Stewart: “What? Nobody would do that to me!”

Jack Flack: “Martha, they’d love to do exactly that. To you. They’ll be sticking it to a corporate fat cat – a Ken Lay in a designer dress. They’ll be on Larry King and they’ll all write “as told to” books about being on the Martha Stewart Jury. They’ll be heroes, triumphant victors over the last of the Robber Barons. And when they’re done, you’ll have lost everything you have – your wealth, your company – your freedom. And like any other convicted felon, Martha, you’ll go to jail.”

Martha Stewart: “Jack, I can’t go to jail. For god’s sake, I’m Martha Stewart. I’m an icon, a diva, a goddess. They – those people – can’t do that to me.”

Jack Flack: “Can’t do that to you? They can – and they will – and they’ll love every minute of it. There is only one thing more powerful in the human psyche than the desire to bring low those who would put themselves above others. To bring down people just like you.”

Martha Stewart: “Two things? What’s the other.”

Jack Flack: “Forgiveness. The desire to embrace the prodigal, to forgive all – especially the mighty who have fallen. But forgiveness only goes to those who sincerely apologize. Martha, listen to me. If you want to keep your wealth, your power and your company – if you want to keep your butt out of jail – you’ll apologize. Sincerely. You’ll make good the losses of everybody who even might have bought one of your shares of ImClone. You’ll beg for the opportunity to pay fines and turn state’s evidence and wipe the slate clean. And in the end, you’ll be more popular, more powerful and wealthier than ever before. And you’ll be loved, Martha, loved and forgiven by the very people who’d otherwise be so eager to put you in jail.”

Martha Stewart: “You’re sure about this, Jack?”

Jack Flack: “Absolutely.”

Martha Stewart: (sigh). “OK, where do I sign. Let’s get this over with.”

That’s all she needed to do. Admit that, like everybody else, she reacted without thinking. Faced with a big stock loss, she instinctively sold her shares without considering the consequences – or the law. And, when the issue went public, she got scared – she panicked for just a minute – then she reacted in fear. Only after she’d done that did she realize what she’d done. Finally recognizing what she’d done, a repentant Martha Stewart set out to make a clean breast of things. To set things right.

If she’d done that, she would never have been charged, tried and convicted. She would never have lost her company or most of her once-vast wealth. She would never be facing prison time, her reputation forever in tatters.

That’s how PR could have saved Martha Stewart.


Of course, Martha Stewart made other PR mistakes. Given that she was going to trial where she’d face a jury of a dozen citizens who were as unfamiliar with her lifestyle as she was with theirs, she clearly did not listen to competent PR counsel. While wearing Martha Stewart-brand K-Mart clothes was not necessary, she should have worn off-the-rack from Lord & Taylor or Saks – and she should have carried a bag any woman on the jury could imagine buying for herself. Instead of bringing Rosie O’Donnell and Bill Cosby – two people who made it clear to the jury that Martha wasn’t like “other people” – she should have brought her hourly employees to support her, to show that she was in touch with everyday Americans.

Those were all PR gaffes – but they were tactical, not strategic. One of them might have been decisive – we’ll never really know. But an apology, delivered within the first week or two after the news broke, could have stopped all of the legal problems – stopped them dead in their tracks. An honest (even if in her heart she knew it was insincere) effort to make whole those who lost money by buying her stock would have made her look like a corporate hero, instead of a female Ken Lay. And a willingness to pay legal restitution and turn state’s evidence – that’s all it would have taken to make all these criminal charges go away, two years ago, and at minimal cost.

That’s what any skilled and honest PR counsel would have advised Martha Stewart. She had very high-priced PR counsel, so I have to believe that she heard something like this.

In most crises, what you do at first has far more impact than what comes later. And in any crisis – if you’re guilty (or at least not innocent) – a swift and complete apology, coupled with an offer to “make good” on any damage done, that is often all that’s needed to make the crisis go away.

That’s not only good PR, its good common sense. And as Martha Stewart proved, common sense – like clients willing to follow savvy Public Relations counsel that runs against the grain of their own human nature – is
that most uncommon of virtues.

About Ned Barnett:

Ned Barnett, the owner of Barnett Marketing Communications (, is a 32-year veteran of high-stakes crisis-management public relations, and is a frequent “source” for print and broadcast journalists. Barnett has advised many corporate and personal clients on effective crisis relations – often stopping a crisis in its tracks, even before it gets started.

Barnett has taught PR at two state universities, and has written nine published books on public relations, marketing and advertising. He’s earned PRSA’s coveted Silver Anvil, two ADDYs and four consecutive MacEacherns; in 1978, he was the youngest (to that time) person to earn accreditation from PRSA, and in 1984, he became the first person to earn a Fellowship in PR from the American Hospital Association. But mostly, Barnett provides PR counsel to a range of corporations, authors and advocacy groups.