Dr Jeff Cornwall

As the trial of Martha Stewart gets underway, it might be wise to look beyond the surface a bit. Yes, this is can be viewed as a story of greed, elitism, class warfare gone mad, jealousy, or simply corporate corruption. All of these spins have already been put on Martha?s case.

But I think it is also an important cautionary tale about becoming a publicly traded company. When a company goes public all of the rules of how the company has been managed change. It is no longer a private asset. Sadly, people like Martha sometimes never quite understand what that means to a business.
As a private entrepreneur doing deals, information can be one of your main currencies. Investors are secured, smaller companies are purchased, and businesses are started all with confidential information that offers some competitive edge. When a business goes public, it becomes a public good. It is no longer the entrepreneur?s to manage as she sees fit. It is no longer her private good. She is no simply a steward for the public which can buy and sell ownership in her business. And for this system to work, information must be a relatively level playing field for all participants in the transactions.
So is this something that Martha knew when her own firm went public? Did she simply have an innocent lapse in judgment in the case of her trading of ImClone Systems shares? Well her own history is not on her side. Her own company had a class action suit filed against it based on the trading practices of insiders during her own IOP.
For Martha, this may indeed be a tale of greed and arrogance. And that is a good lesson for all of us. But it should also be a lesson to all entrepreneurs that the kind of practices that they may be used to in running their company as their company change the moment their business goes public. They must understand that what was once their company is now simply a company that the public owns and which they now run for that public.
Martha never has understood that lesson. She seems to view her company and start-ups she invests in as still her company, with the IPO just being some form of financing. Going public is so much more than a simple financing technique. It is the transformation of what was a private good into a public good. It is the transformation from being an entrepreneur into being a manager and a steward for a publicly owned business.