Some Say Stewart’s Response Not a Good Thing

Her detractors say there are better cooks, more creative party planners, greater gardeners and warmer hostesses. But what Martha Stewart has on all of them is a formidable combination of talents: a brilliant understanding of modern consumers and an almost unparalleled ability to sell herself to them.

But in what is shaping up to be the biggest crisis of her career--allegations of insider stock trading and obstruction of justice regarding her sale of ImClone Systems Inc. stock--the domestic grande dame is decidedly off her game.

In the past, Stewart has been able to deflect criticism and unflattering portraits with an aggressive response or with humor. When all else failed, she let the sheer volume of Martha Stewart TV shows, magazines, books and products do the talking for her.

This time around, however, Stewart has been defiant, defensive and mostly unavailable.

That strategy could backfire on someone as public as Stewart, especially if the inquiry is prolonged and Stewart is seen by Wall Street as distracted or by the public as having something to hide.

“One of the consequences of being a product of the media [is that] the media can be negative as well as positive, and it can be difficult to manage,” said David Stewart, a consumer psychologist and professor of marketing at USC’s Marshall School of Business. (He is not related to Martha Stewart.)

“This isn’t just a gossip column item, this is national news, and it’s much more difficult to manage the spin on that.”

It is a level of scrutiny unfamiliar to Stewart, who is battle-tested but more accustomed to fighting tell-all books and media reports suggesting that her real-life behavior is not as gracious as her public persona.

In those cases--including allegations of bad blood with her Connecticut neighbors and shabby treatment of previous business partners--Stewart has jabbed back, rallying her many female fans with the contention that she is more scrutinized and held to a different standard than male business leaders, who are given credit for making aggressive business moves and demanding quality work from employees.

In response to caricatures depicting outlandishly difficult and trivial craft projects, Stewart responded with an appearance in an American Express commercial, in which she retiled a swimming pool with cut-up pieces of old credit cards.

But in the current crisis, Stewart is more hampered, business experts say.

Part of her reticence to speak about the issue probably comes from her lawyers, because most legal experts advise clients to avoid commenting on pending investigations.

Compounding the problem, the allegations center on exactly those parts of her life that Stewart downplays with fans of her domestic skills--her financial acumen as a former stockbroker, the leader of a public company and a board member of the New York Stock Exchange.

Still, say experts in crisis communications, Stewart could be doing more to reassure the public about her integrity, especially at a time of unprecedented scrutiny of business leaders.

“It looks like a classic case of not believing it’s as bad as it is,” said Dan McGinn of the McGinn Group, which handles crisis public relations.

“She needs much more open communication, a much more understanding tone of why people are asking right now [and] a full engagement of the issue.”

Since news of Stewart’s ImClone stock sale broke last month, she has issued one formal statement describing how she came to sell her ImClone holdings and, during a few public appearances, reiterated that she did nothing wrong.

One of Stewart’s few public comments about the ImClone scandal came last week during her regular spot on CBS’ “Early Show,” when she brushed off questions while vigorously chopping a cabbage, calling the issue “ridiculousness.”

Since news of the investigation broke last month, shares in Martha Stewart Living Omnimedia Inc. have fallen by as much as half, though they have recovered a bit. Shares rose 3 cents to $11.50 on the New York Stock Exchange.

Although the public has had little reaction to the news, investors have worried about backlash as the scandal continues to swirl in high-profile venues. Stewart appeared on the cover of Newsweek last week under the title “Martha’s Mess.”

What’s more, Wall Street has long worried what would happen to Stewart’s company--which is so tied up with the public image and name of one person--when the day came when she was no longer able to run it.

But that concern usually involved Stewart’s health, not her glistening image, and the thought was that eventually the company would use Stewart’s image to move beyond Stewart herself. Some are questioning that notion more now.

“If she dies or can’t run the company, you still have the name, but in this case you could have a tarnished name,” said Michael Kamins, an associate professor of marketing at USC’s business school and an expert in celebrity marketing.

“People are buying an image when they buy Martha Stewart products or publications, a beautiful, light and airy image of good taste. It sure is in bad taste if this is true.”