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  Mostly Martha: The Impact of Personal Brands

by Cliff Kurtzman
Chief Executive Officer, ADASTRO Incorporated.
 
 

July 2, 2003

Martha Stewart.
Michael Flatley.
Sammy Sosa.

I would imagine that most of our readers will instantly know the first and last names, and if you don't recognize the middle name immediately, it will probably only require a slight tap to jog your memory.

Each of these three individuals owns a personal brand. Personal brands are extremely valuable because they allow people to transfer their reputations to every venture to which they lend their name. Someone's personal brand can give everything they do or that is done in association with their name an instant presumption of credibility as well as immediate access to media visibility. This kind of transfer of reputation extends beyond individuals that are media celebrities to those that have achieved past successes in their business and professional careers.

All three individuals have something in common--they have each faced recent crises and allegations regarding their actions which have threatened to destroy their brand and its associated value. The stakes are huge. How they deal with these crises and communicate with the public will have serious long term repercussions for the value of their brand.

Martha Stewart is an obsessive perfectionist and former stock broker that created an empire centered around her ability to show people how to live, dress, cook, and decorate with style. She is a paragon of homemaking. Ms. Stewart not only faces allegations of insider stock trading, but even more seriously, she faces allegations of lying to government investigators and taking actions to cover up and obfuscate her wrong doings. Ms. Stewart denies the allegations.

Before we discuss Ms. Stewart in further detail, lets take a look at Mr. Flatley and Mr. Sosa. Mr. Flatley is the Irish toe tapping dance star who initially gained fame through the Riverdance production. A woman, and (notably) her plaintiff's attorney, have alleged that Mr. Flatley raped her at a hotel in Las Vegas. Mr. Flatley denies the allegations, while admitting to having had consensual sexual relations with the woman at the hotel.

Two months after the woman and Mr. Flatley spent the night together, the woman's plaintiff's lawyer reportedly contacted Mr. Flatley's attorney, saying she would tell the public Mr. Flatley had raped her if he did not pay her. Mr. Flatley declined to pay off the woman, and contacted the FBI to conduct an investigation. The woman then filed a $35 million lawsuit against Flatley, and he responded by filing a $100 million lawsuit against the woman (presumably for defamation and attempted extortion). According to an Associated Press story (http://www.cbsnews.com/stories/2003/
03/07/entertainment/main543094.shtml
) "We filed the lawsuit because what this lady did was outrageous," said [Flatley's] lawyer, Burt Fields. "It will do tremendous damage to Mr. Flatley. Even when he wins the case, some people will still believe the accusations."

Of course, I have no way of knowing what really happened between Mr. Flatley and the woman making the allegations. The woman may be telling the truth, or she may be intentionally committing fraud, or she may be mentally ill (and therefore possibly believe that she is telling the truth when in fact she is not). But regardless of the veracity of the allegations, every aspect of how the plaintiff's attorney has acted, and how Mr. Flatley has conducted himself in response, lends credibility to Mr. Flatley's assertion that he has been falsely accused and defamed.

If the allegations are false, then it would be equitable to see Mr. Flatley recover significant damages from the woman who is making the accusations. It would discourage others from attempting extortion based on false claims. If it can be shown that the woman's attorney is knowingly assisting her in making a fraudulent claim, then it would also be fitting for her attorney to pay damages as well as face disbarment. There are, unfortunately, more than a few unethical plaintiff's attorneys that will not hesitate to inflict harm and distress on others in the name of helping their "injured client." An attorney that goes beyond "zealous representation" to knowingly assist and encourage a client in pursuing a fraud is indulging in pure greed aimed at stealing from and injuring others.

My sense is that Mr. Flatley has dealt with the situation in a manner that should minimize the damage to his brand. Yet it remains a risky proposition for Mr. Flatley--in a civil lawsuit such as this one, the jury needs only reach a decision by a "preponderance of the evidence" rather than by evidence "beyond a reasonable doubt." When facing allegations of a sexual nature, people often tend to mentally presume one is guilty until proven innocent (and sometimes even after one is proven innocent). The jury can make errors in deciding who is really telling the truth. This is why, in addition to the embarrassing publicity and the time commitments, many celebrities choose to settle nuisance lawsuits rather than allow them to go to court. It takes a lot of courage on behalf of the accused to stand up for their rights and try to prove their innocence, especially when the allegations are so horrific.

[Note added February 2005: Mr. Flatley's suit against his accuser's attorney alleged that the attorney had committed extortion, intentional infliction of emotional distress, defamation, fraud, and wrongful interference with business relations. While the rape suit against Flatley by his accuser was thrown out of court, a motion to dismiss the suit by Flatley against his accuser's attorney was denied, and the suit has been allow to proceed to trial. This article in The Reporter noted that the court held that lawyers may be subject not only to civil action, but to criminal liability for extortion if they make aggressive pre-litigation settlement demands that simply state the obvious.

The recent high profile case regarding allegations of sexual harassment made against FOX newsman Bill O'Reilly raised similar issues to the Michael Flatley case. O'Reilly also sued his accuser and her attorney for attempted extortion. This detailed analysis of the case by Jonna M. Spilbor came to the conclusion that even if the allegations made against Mr. O'Reilly were true, they likely did not constitute sexual harassment. Meanwhile, Mr. O'Reilly's suit against his accuser and her attorney for attempted extortion appeared to be very strong. Nonetheless, Spilbor recommended that O'Reilly pay off his accuser and settle the case, because continuing to litigate would hurt Mr. O'Reilly's brand more than the cost of paying the woman off. O'Reilly did end up settling the case, and speculation in the press estimated it cost him millions of dollars to do so. It is hard for one to view such a transfer of wealth as anything but a result of meretricious greed and a grossly wrongful failing of our legal system.]

Next we come to Sammy Sosa, baseball's Chicago Cubs slugger whose claim to fame rests on his home run hitting records. Mr. Sosa was caught using an illegal "corked" baseball bat which potentially gave him a slight hitting advantage and threatened to taint his entire career accomplishments.

Mr. Sosa immediately admitted to his wrongdoing. A subsequent investigation found nothing to disprove his contention that it was a one time mistake. Because he was up front about admitting his wrongfulness to the public, Mr. Sosa will likely weather this particular storm without too much long term damage to his personal brand. Baseball fans seem to be rather forgiving--some have noted that Mr. Sosa's brand has seemingly endured a number of hits over the years. The story at: http://www.bayarea.com/mld/mercurynews/
sports/6028757.htm
(free registration required to access this article) examines the resiliency of Sosa's image and also makes comparisons with none other than Martha Stewart, who we now take a look at in further detail.

Ms. Stewart is now facing serious charges including insider stock trading, falsification of evidence, defrauding investors, and obstruction of a federal investigation. And, importantly, these charges are being made by the United States government, not a plaintiff's attorney. She is clearly in a difficult situation without any attractive options. She faces felony convictions, up to 30 years in jail and fines of up to $2 million. A good discussion of the facts of the Martha Stewart matter along with a clear analysis of the seriousness of the charges is outlined in the article "The Spin She's In" at: http://www.publicbroadcasting.net/kuhf/
news.newsmain?action=article&
ARTICLE_ID=507815

My sense is that at this point the potential fines are not Ms. Stewart's greatest concern, given the strength of her finances. And by agreeing to a plea settlement before she was indicted, Ms. Stewart could likely have significantly reduced any potential jail time to the point where it would probably not have been intolerable (and one can hardly resist the temptation to think about Martha using her time served to show us all how to decorate a jail cell with style). But it is unlikely that a plea agreement would have eliminated the felony conviction, and with it, associated restrictions that would have prohibited Ms. Stewart from serving as an officer or director of a public company (including, of course, her namesake company, Martha Stewart Living Omnimedia). Ms. Stewart may have felt that it was worth the risk of a longer jail term to fight for the possibility of coming away from the battle with her ability to protect her brand and run her company intact.

The government is highly motivated to go after Ms. Stewart to set an example. It is not the alleged insider stock trading that likely has the prosecutors really angry--it is the alleged obstruction of the investigation. If the government is able to win a high-profile conviction, it sends a message loud and clear that no one is able to lie to a government investigator and get away with it. (If you are an American but not familiar with 18 US Code 1001, Material Misrepresentation to the Federal Government, you should familiarize yourself with the law--take a look at: http://profs.lp.findlaw.com/
collar/collar_8.html
and http://www4.law.cornell.edu/
uscode/18/1001.html
.)

[Note added February 2005: Ms. Stewart ended up being convicted of the charges against her and serving a prison term while appealing the conviction.]

So, what can we learn about personal branding from a marketing perspective? Michael Jordan and other highly respected public figures have proven that personal names can become valuable business assets. But unwanted repercussions are also possible. I discussed this with Will Reynolds, who offers venture design and strategic branding services through the Venrise Corporation. When customers think about converting their personal name into a company brand, he recommends caution and helps them look far into the future. "It's important to explore the potential positive or negative consequences of branding decisions and craft strategic responses for many different developmental scenarios," he said. "Organizational designers should think like space engineers who attempt to avoid single points of failure; Martha Stewart and her investors probably didn't imagine that personal problems could so adversely affect the company."

With the exception of legal firms or some other business categories that are customarily named after the founders, it is generally a poor idea to use personal names. Reynolds notes that company brands named after people may not be easy to protect as intellectual property and Internet domain names are rarely available. He warns customers about a local mom and pop perception that is often associated with the use of personal names. And he said something else about organizational structure and the design of corporate cultures. "A company that is built with growth as an objective should shift power and responsibility away from the top to competent members of the management team. Many people who approach a company that is named after the founder will not deal with anyone else even if delegation is preferred."

More positively, Will Reynolds encourages company founders to envision exit strategies and think about corporate life cycles. "It's hard for some people to imagine the consequences of their success when a company is being built. An established brand can be a valuable factor in future acquisition or merger negotiations." And he suggests that future acquirers may not want to retain a corporate identity named after the founder when he or she has left the company. He also asks founders how they would feel if a new owner decides to keep the name. "Wise entrepreneurs avoid emotional attachments that might inhibit successful exit strategies and it is hard to walk away from a company that carries your own name." How will Martha Stewart be affected if circumstances force her out of the company and someone else makes decisions that so explicitly relate to her personal reputation? Or will a decision be made to change the name and lose brand value that was growing before Martha became a corporate public relations problem?

Choosing a company name is a critical decision that may significantly impact an organization's chances for success. When ego or capriciousness are used to select a name, rather than driving decisions through use of a thorough strategic process, the costs associated with unwanted or unexpected repercussions are often significant.

Business IS Rocket Science. If you meticulously plan and strategize key decisions just like a rocket scientist would, you will maximize your opportunities and shape the best possible future for your organization.

 
 
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