Exploring Corporate Governance Around the World

By Allison Garrett, Senior Vice President for Academic Affairs at Oklahoma Christian University

Monday, August 07, 2006

Martha Stewart Settles with SEC

The SEC announced earlier today that Martha Stewart has settled charges brought by the SEC. The press release is here. Here is a link to the SEC's complaint in the matter.

Ms. Stewart agreed to the following:
1. a permanent injunction against future violations of the antifraud provisions of the federal securities laws;
2. disgorgement of losses avoided of $45,673, plus pre-judgment interest;
3. a civil penalty of $137,019;
4. a five-year ban on serving as a director of a public company; and
5. a five-year limitation on serving as an officer or employee of a public company.

Bacanovic also settled with the SEC.

In view of the ban on serving as "an officer or employee" of a public company, I wonder what the future relationship between Ms. Stewart and Omnimedia will be. In Omnimedia's April 2006 proxy statement, Ms. Stewart is described as "Founder, a non-officer position." And during 2005, the company paid $177,000 for Ms. Stewart's computer and telecommuting, $99,000 for security, $100,000 as an expense account and $17,777 for personal transportation.

If she can no longer be an employee with the company, is there an agreement with the SEC that she can provide services gratis? Or perhaps as an independent contractor? Will Omnimedia's shareholders want to foot the bill for perquisites of the types disclosed in April's proxy statement?

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