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Stewart Losing Support In Board Voting

Aug 16, 2002 | Newsday Martha Stewart isn't a politician, but every year she faces re-election to her company's board of directors. And the trend-line is enough to worry a seasoned pol.

The number of investors in Martha Stewart Living Omnimedia Inc. that withheld their support for Stewart continuing to serve on the board has steadily increased since she took the company public in 1999.

During the most recent balloting, 324,537 votes were withheld from Stewart, or more than four times the number withheld from each of the other candidates, according to tallies recently filed with the U.S. Securities and Exchange Commission.

Stewart, however, is in no danger of being ousted from the company she built around her homemaking talents.

The chief executive and board chairwoman controls 94 percent of the eligible votes at the annual meeting of shareholders because she owns 62 percent of the stock. Each of her Class B shares equals 10 votes compared with Class A shares that are sold to the public and carry one vote per share.

More than 320.4 million votes were cast in the May election.

"At some level, then, it makes no difference what the other shareholders vote," said Dan R. Dalton, dean of Indiana University's Kelley School of Business. "But if you discount Ms. Stewart's and management's votes [presumably they voted positively], then some 25 percent of the remaining votes were withheld or abstained by the remaining shareholders. This is unprecedented in my experience," given Stewart's importance to the company, he said.

This year's election results also are less favorable to Stewart than those from previous years, though the May vote occurred before publicity about allegations that she engaged in insider trading of her stock in drugmaker ImClone Systems Inc. The number of votes withheld from her candidacy increased by 91,423 from last year's election and 256,676 compared with the 2000 results.

Steve Lipin, a spokesman for Martha Stewart Living Omnimedia, said the company had no comment.

Shareholders also are attacking Stewart in court over the ImClone controversy's devastating impact on the price of Martha Stewart Living Omnimedia shares. A second lawsuit was filed last week in U.S. District Court in Manhattan. Investor Todd Semon alleges Stewart lied about her ImClone stock transaction in advance of news that government regulators had rejected the company's cancer drug.

A spokeswoman for Stewart's business responded to the suit saying, "The company believes it has substantial defenses to the claim and intends to contest it vigorously."

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