Essay: Controlling Martha Stewart Enterprises

The key document that lays down the principles of controlling in Martha Stewart Enterprises is titled ‘Corporate Governance Guidelines’. It establishes roles and responsibilities of the Board of Directors, which is the ultimate decision making body elected by the shareholders. It also specifies how the Chairman of the Board and CEO are elected as well as their functions and competences.

All three standing committees of the Board (an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee) are actively involved in controlling. Audit Committee is the central body responsible for the control over financial matters of the corporation. The position of Chief Financial Officer has been introduced to achieve more effectiveness and transparency in corporate finance.

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Corporate Governance Guidelines also establish the procedure of management succession and development as well as annual performance evaluations. The Corporation itself is organized into four business segments: Publishing, Broadcasting, Merchandising, and Internet.

Martha Stewart Enterprises has developed a highly effective Code of Business Conduct and Ethics. All directors, officers and employees are obliged to comply with these guidelines. As Financial Executive (2003) recommends, an effective Code of Conduct should have three elements: proper definition, effective communication and appropriate warning signals. Martha Stewart Enterprises has included all the aforementioned elements in its Code of Business Conduct and Ethics. Monitoring and enforcement are carried out by Human Resources and Legal Departments. The basic principles of the Code of Business Conduct and Ethics include: the requirement to obey the law, both in letter and in spirit; prohibition of conflict of interest (a situation when a person’s personal or private interest interferes in any way with the interests of the company); prohibition of insider trading and personal use of corporate opportunities; zero tolerance towards discrimination and harassment; protecting employees’ health, safety and confidentiality. As Laura Bogomolny (2006) argues, ethical conduct of employees is crucial for company’s overall success.

Assessing the effectiveness of the system of controls in Martha Stewart Enterprises, it’s necessary to acknowledge that it’s well-designed and functioning properly. There are several symptoms of ‘loosing control’ over an organization, which can be attributed to poorly designed processes or questionable ethics. It happens when the organization has multiple charts of account, accounting procedures are not documented, accountability for each general ledger account is unclear, reconciliations are not automated, standards are not documented, processing staff work a lot of overtime, the organization has a large number of special-purpose entities etc (Bickley, 2004). None of these symptoms has been documented in Martha Stewart Enterprises.

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