Martha Stewart Out as CEO and Chairwoman

The SEC is seeking to bar Stewart from serving as a director of Martha Stewart Living or any other public company. And the agency is seeking to limit what she can do at the company as well.

But the SEC chose not to try to bar Stewart from serving as an officer because of the role she plays at her company, said Barry Rashkover, associate director of the SEC's northeast regional office. That left open the possibility that Stewart could remain an officer of Martha Stewart Living even if she's found guilty of the civil and criminal charges.

"We're seeking a remedy that is appropriate for these particular facts," Rashkover said.

By making that distinction, regulators may have been trying to sidestep the kind of reaction they got for a perceived heavy-handed approach against Arthur Andersen.

Critics charged that the Justice Department's decision to file a criminal indictment against the whole company was essentially a death warrant. Indeed, following the indictment and its later conviction on the charges, Arthur Andersen lost nearly all of it clients and laid off all but a token staff.

Stewart's decision to step aside as the leader of Martha Stewart Living while still staying involved with the company coincides with the thinking of some marketing experts. Those experts said that the company had little choice in the short term but to back Stewart, because so much of Martha Stewart Living's value is wrapped up in Stewart's persona and public image. But some suggested that the company may need to find a way to distance itself from her.

While Stewart's move may satisfy critics for now, it doesn't address what might happen if she's found guilty of the charges against her. Even if she could legally remain an officer of the company after that, the company may not want her to do so, said Ron Geffner, a former enforcement official with the SEC and a securities attorney with Sadis & Goldberg in New York.

In fact, assuming that the company could find a way to force her out -- a big assumption considering Stewart controls nearly 94% of the voting stock of Martha Stewart Living -- it's unlikely she could find a job anywhere as an officer or even a consultant if she's convicted, Geffner said.