There are very few corporate leaders whose interests are more closely aligned with their shareholders’ than the homemaking icon, Martha Stewart. She owns 26 million shares and controls nearly 90 percent of the voting rights of her company Martha Stewart Living Omnimedia. While the company lost $50.7 million dollars in the most recent quarter, this bad news has not impacted Ms. Stewart’s own compensation. In fact, her corporate perks are well known, and she has long blurred the line between business and personal expenses.
Questions
1. The article mentions that Ms. Stewart gets an additional minimum of $2 million a year under an “intangible assets license agreement.” Explain what this is and how the company would record this in its financial statements.
2. The article mentions that the company saw a $44.3 million noncash write-down related to the shrinking value of two of its magazines. Make the journal entry for this and discuss how it would be presented in the financial statements.
3. Just before Ms. Stewart got out of prison in 2005, her shares were trading at over $34 and she was a billionaire. After plunging during the financial crisis, they were above $8 a share in September 2009. They traded this week at about $2.80. What percentage drop have the shares seen since 2005?
4. What is the main point of the article? Why would licensing the brand be better for the shareholders, as the article suggests?
Source:
Stewart, J.B. (2012). A Brand Icon in Need of Some Oversight. The New York Times, Nov. 8 (Retrievable online at http://www.nytimes.com/2012/11/10/business/at-martha-stewart-living-martha-may-be-the-problem.html?pagewanted=1&ref=marthastewartlivingomnimediainc)