Question

In what ways did Stewart’s control of shareholder voting rights disrupt the functioning of the board? How did her control of the board interfere with directors’ carrying out their fiduciary duties?

Answer 1

Martha Stewart MSO's law necessitates four committees: audit, finance, compensation, and corporate governance. Martha is not only the chairman and chief executive officer but moreover the controlling shareholder. She appointed her private advisor and friend Sharon Patrick as chief operating officer and director, and another friend, Charlotte Bills, as a member of the board of directors. After July 2004, Stuart used 94% of MSO voting shares to regain control, and added her friends Charles Koppelman and Susan Lyne to the project. The MSO director uses his power to determine the charter to declare Rick Boyko independent and to appoint him as a member of the remuneration committee. Due to the tight relationship between Stewart and Patrick, in October 2004, Patrick was fired after she reported that MSO’s losses in the third quarter tripled and the losses in the fourth quarter were worse than expected. During Stewart's prison, Kopelman and Lane visited her six times and was allowed to tell her what was happening at the MSO. After Stewart's return, the MSO brand's efforts to diversify from Martha City lost momentum