Martha Stewart Ethics

Group 3 – Martha Stewart: Inside Trader

There are many critical ethical issues that exist in the case involving Martha Stewart, Sam Waksal and family, and Peter Bacanovic. If these unethical concerns were to be numerically ranked, with number one being the most severe, the list would be the following:

1. Sam Waskal selling his family’s shares and attempting to sell his own shares of ImClone before the news of Erbitux had been publically released, in an attempt to save their money without any concerns for how it will impact the shareholders of the company.
2. Bacanovic tipping Stewart with non-public information received from Waksal knowing fully it is illegal and ethically wrong.
3. Martha Stewart engaging in insider trading with her knowledge that it was illegal and ethically wrong.
4. Martha Stewart and Bacanovic lying to the SEC investigation about the insider trading.
5. Bacanovic altering the worksheets in the SEC investigation in an attempt to mislead.

Sam Waksal’s decision is on top of the list because he was the individual who made the first unethical move and consequently created a domino effect. By attempting to sell his and his family’s shares of the company knowing he had non-public information, Waksal started a chain of immoral decisions which led to Bacanovic and Stewart’s actions.

Sam Waksal

Once Sam Waskal, the Founder, President and CEO of ImClone, had knowledge that the FDA would turn down their application, he began a series of maneuvers with the intention of selling his and his family’s shares of the company. These actions, including attempting to sell his own shares through his daughter, are considered illegal and unethical because Waskal had possession of relevant material that was not available to the public at the time. Ethically, as the founder, president and CEO of ImClone, it was his fiduciary duty to the company and shareholders, to not trade his shares or provide insider information while in possession of non-public information. Waksal was morally obligated to carry the burden of any negative impact that the FDA decision could bring to him and any other shareholders. Nevertheless, he broke the rules looking solely for his and his family’s interest.

Sam Waksal had a fiduciary duty as the CEO to the company and its shareholders. He should not have provided non-public information to his family and should not have attempted to sell his shares. Even when faced with certain financial loss, he should have performed his duties and kept the information confidential. That is an ethical decision that a decent amount of people would likely not had made just like Waksal, due to the amount of money at stake. However, Waksal should have made the moral decision. By doing what he did, Waksal lied and committed fraud, negatively impacting many of those investing in his business, and their confidence and trust in the market.