Martha Stewart Living Omnimedia ( MSO) may have little choice but to stick with its namesake, despite the likelihood that civil and criminal charges will be filed against her. The company's brand is so wrapped up in Martha Stewart's identity that it can't really distance itself from her, marketing experts say. A court trial may hurt the company and a conviction could kill it, but the company may be just as bad off without Stewart, they say. "You don't really have a choice; she is the franchise," said Chris Atkins, a partner in Ketchum, a public relations firm. "There're still a lot of people that are Martha fans. If the company walks away from that, they risk more by alienating their customer base than they would gain by distancing themselves." Federal prosecutors are planning to seek a criminal indictment against Stewart, the company announced on Tuesday. The Securities and Exchange Commission plans to file a civil complaint against her as well, the company said. The potential charges relate to Stewart's sale of stock in ImClone Systems ( IMCLE) in December 2001, immediately before the pharmaceutical company reported bad news on one of its leading drugs. Stewart, who was friends with ImClone's then-CEO Sam Waksal, is likely to face charges of insider trading or obstruction of justice.
For now, the company's management appears to be standing behind Stewart. At a shareholder meeting and in a statement issued on Tuesday, company directors defended Stewart and denied rumors that she would step down as chairman and CEO. Of course, any talk of Stewart exiting the company may be academic. Stewart owns 61.2% of the company's Class A shares and controls nearly 94% of Martha Stewart Living's voting shares, meaning there's little chance that the board or shareholders can force her out. Meanwhile, she has no legal obligation to leave the company if she's indicted, said Stephen Hibbard, chairman of securities and corporate governance litigation at law firm Bingham McCutchen. But even if shareholders could force her out, they might not want to.