You have to hand it to management at Martha Stewart Living Omnimedia (NYSE:MSO). They're staying in the box and taking their cuts at the ball despite some pretty horrific trends in advertising.

Following the resignation of the first post-Martha principal -- Sharon Patrick -- the firm announced a new president and CEO, Susan Lyne, a new-ish board member and refugee from the president's office at Disney's (NYSE:DIS) ABC. She got the ax earlier this year because of that network's perceived malaise, although the headlines of late have been savoring the irony that Lost, and Desperate Housewives, two shows she helped bring on the air, have become major hits.

Lyne's background in TV and publishing -- which includes nearly a decade at Premier and, at the other end of the media spectrum, tenure at The Village Voice -- gives her experience that should come in handy in trying to move Martha's corporate cult of personality onto better financial footing.

But that won't be an easy job. Recent financial results have been less than savory, with sales down across the board, but especially at Kmart (NASDAQ:KMRT). Let's face it, Martha's wares are no better than what can be obtained at any Target (NYSE:TGT) or Home Depot (NYSE:HD). As for the media biz, sanguine predictions of a turnaround for early next year came just as the firm seemed to be stacking the deck.

Then, earlier this week, Martha herself committed yet another idiotic faux pas, the kind of thing that makes you wonder if she really understands public relations. Basically, the jailed billionaire wants the company to pay $3.7 million of her legal bills. Let's not even quibble about whether stockholders (or insurance, whatever) ought to be on the hook for defending the former CEO against troubles brought about by her own private misdeeds.

What's appalling is that this kind of scratch is, in reality, nothing to Martha. If she had any sense, she'd just pony up the dough. But she doesn't seem to get it. The future of her company depends on protecting her image from, well, the unfortunate realities of her personality. The news wires are only too happy to point out that this petty request puts her into the august company of Bernie Ebbers, ex-czar at WorldCom -- now MCI (NASDAQ:MCIP) -- and the fine Rigas family of Adelphia fame.

Of course, most of Martha's biographers -- the ones who aren't under contract to write things her way -- would point out that she didn't become a billionaire by paying her own bills. And that, in a nutshell, is the biggest problem for shareholders: Martha's bad PR is a continual drag. Does anyone really think the non-Martha-owned media are going to stop playing "gotcha" and simply recast her in her previous role as inspirational lifestyle guru? Will Martha ever stop being damaged goods? More importantly, will she remain relevant enough to make her company a winner?

I wouldn't bet on it.

For related Foolishness:

Seth Jayson is continually amazed by Martha. At the time of publication, he had positions in no company mentioned. View his stock holdings and Fool profile here. Fool rules are here.