As Coon Dog predicted, Martha Stewart was found guilty on all counts.
“Maybe it’s a victory for the little guys who lose money in the market because of these kinds of transactions,” said juror Chappell Hartridge.
Now, unless I’m misunderstanding something, that’s one of the dumbest quotes I’ve read in some time. Explain to me how Martha Stewart having sold her stock cost a bunch of “little guys” lots of money? When the news actually came out that Imclone didn’t get approval for their cancer drug, wasn’t that when all the little guys lost their money? Would they have lost less money if Martha hadn’t sold?
It sounds to me like typical bitterness towards rich people. “Why did she get to sell and the little guy didn’t?” “Why does she have a million dollars and I don’t?” Seems to me this whole trial is a waste of time. I’m not wholly convinced that insider trading is an activity worth making illegal. I’ve heard that it is in fact a legal activity in Japanese markets.
I don’t know what that particular juror was thinking, but “investor confidence” seems to be a pretty big deal to the stock market. This is why when Enrons go down, they bring the market down with them (shares of Enron are not the only stocks that plummet). I don’t know if Waskal and Stewart’s behavior was significant enough to threaten stocks other than IM Clone, but I guess it could happen.
The market fluctuates for many reasons, and there are no guarantees that you won’t lose all of your money when you invest (anyone with a broker is familliar with the pages of paperwork you have to fill out attesting to the fact that you understand that).
The Enrons and WorldComm’s with corrupt leaders deserve to have their stocks tank, and that makes them a bad investment. Corporations that leak information may also be considered a bad investment. The honesty and integrity of the leaders should always be a consideration when putting your money into a company.
Enron’s scandal didn’t help the stock market as a whole, but it certainly didn’t cause the entire market to “plummet.” It caused itself to plummet. It caused many people to worry about corporate fraud, and those worries reflected themselves in a down market *temporarily*. If anything it caused people (and the press) to keep a sharper eye on these leaders over the long term.
Martha, on the other hand, having been convicted will likely mean nothing but bad things for her company (Martha, Inc) and it’s 500+ employees.
Maybe that’s okay. Maybe how Martha handled her personal finances is an indication that she’d commit unscrupulous activity with company finances. It’s tough to tell. I’m not aware of any allegations against her company, or it’s employees.
What about the “little guys” whose benefits/retirement packages are comprised of stock in the company?
As for whether or not insider trading should even be illegal – that is indeed an interesting question. Presumably, having “inside” information would be one of the perks of taking an executive position, therefore creating a new form of compensation. But it seems that this has potential to drastically alter investments, as distribution of knowledge upon which shares are traded would become grossly disproportionate.
In the Enron case, my understanding is that their benefits packages were heavily geared towards stock… though I don’t know the full details.
At many/most companies, there are various forms of benefits which commonly include a 401(k) which allows you to invest in various funds (not related to your company). Stock options and stock purchase discounts are also nice perks.
The trick with all of this is -straight out of investing 101- diverisifcation. Having 80% of your assets invested in one company is utterly foolish. Selling stock in your company on a regular basis and re-investing it elsewhere (IRAs, etc) is a much safer way to go. If you get greedy and hold on to one stock thinking it will make you a millionaire, you can certainly find yourself without any retirement at all.
I’m not sure what the vesting period was with Enron’s compensation plan but if they’re in line with most of the rest of the industry, people would have had plenty of opportunities to sell and diversify before getting burned so badly.
But with Enron, didn’t the company execs keep telling their employees that Enron was growing so rapidly, the stock was great, they’d all be rich, etc etc, and at the same time the execs were bleeding the company dry, dumping stock, and snorting cocaine off the breasts of hookers?
Just goes to show it doesn’t always pay to listen to inside information.
There was a great article in last week’s Newsweek by Allen Sloan (I think), about why he didn’t think that Martha was guilty of a crime.
I pretty firmly believed that Martha should be doing time, and I suppose that hasn’t quite changed because she’s just as guilty of this crime as anyone else (with less money and non-white skin) but I was very much persuaded by Sloan’s argument.
I’m too damned lazy to go find the article but I encourage you to look it up.
That is all.