October 2, 2014
Former CEO not letting go of American Apparel
You might think that after being dismissed by the board of directors for allegedly violating the company’s sexual harassment policy and misusing corporate funds, that American Apparel founder and former CEO Dov Charney would not have a role with the business going forward. But the bizarre case of Mr. Charney and the struggling clothing brand/retailer continues to play out like some weird made for TV movie.
To recap, American Apparel’s board announced in June that Mr. Charney was terminated for cause for unspecified conduct. At the time, press reports contained allegations that Mr. Charney had used American Apparel’s funds to pay for relatives’ travel expenses. He was also alleged to have played a role in the release of naked photos of a former employee who was suing him for having lied during a legal deposition. For years, prior to these more recent events, Mr. Charney had been accused of sexual impropriety in the workplace and was said to have on at least one occasion danced around the company’s office in his underwear.
Mr. Charney called the board’s action an "unlawful" and "coercive" attempt to force him to resign. He reached a deal in July to turn over his voting rights in the company to Standard General in exchange for a loan to buy more shares. With roughly 43 percent of American Apparel’s shares, Standard General negotiated a deal to remove three members of the company’s board and replace it with directors of its choosing. It also has retained Mr. Charney as a "strategic consultant" to the company in the interim.
Speaking of interim, the board added another plot twist this week when it announced that it had named a turnaround expert, Scott Brubaker, to replace John Luttrell, American Apparel’s CFO as its temporary CEO. It also brought in Hasan Natha, who previously worked at Fisher Communications, Jones Soda and Nike, as its new CFO.
While the betting odds are probably against Mr. Charney being renamed as the permanent CEO at American Apparel, it does appear more likely based on the machinations of a board that will continue to have significant input into company direction going forward.
According to a Bloomberg News report, American Apparel has lost $290 million since 2010. The company’s retail comparable store sales decreased six percent in its second quarter, offsetting an increase of nine percent in its wholesale business.
- American Apparel Said to Be Open to Keeping Charney – Bloomberg News
- American Apparel Names New Interim Chief Executive – Bloomberg News
- American Apparel, Inc. Reports Second Quarter Financial Results – American Apparel, Inc.
- Dov Charney may be back at American Apparel – RetailWire
- American Apparel CEO to fight firing – RetailWire
BrainTrust
Recent Discussions
Discussion Questions
What role do you see Dov Charney having with American Apparel going forward? Should he have a role in the management of American Apparel if any of the charges that caused him to be terminated are true?
Poll
Supposedly there’s a fine line between genius and madness. Charney seems to have a weird blend of both. He did start the company after all so he is capable of seeing possibilities others don’t see, which is the core quality of entrepreneurial brilliance. There’s something there that the board is hesitant to lose.
Then there’s the dark side of harassment and underwear dancing. What the board has to do is make a courageous decision as to which weighs more when it comes to the future success of the company.
I’ve got to say, the board doesn’t sound all that bright. Giving Charney money so he can increase his influence in the company while they’re trying to reduce his influence is like putting your feet on the brake and accelerator at the same time. As George says: “A bizarre case.”
If the charges are true, he should not have a role in the management. If they are not true, and until they are proven to be true or false, why should he be kept from being involved (unless he’s there by unlawful manipulation and maneuvering)? The most important question is what effect, if at all, does all this have on management of the company? If it’s losing money, then that would be justification for removal. If it’s the other things, who knows what influence that will have/should have.
Assuming the charges are true, and I always worry where there’s smoke there’s fire, Dov needs to go away. Today’s leaders need to create within their companies a culture of shared values and moral reasoning—strong cultures with a set of high ethical standards. Dov has demonstrated very immature moral reasoning and little ethical judgement. A culture starts at the top so he seems incredibly unqualified to be in any sort of leadership role.
I believe Charney will continue playing the role he seems to be best at—”The Spoiler” with a an over-generous serving of “The Trickster” sprinkled on for good measure.
The answer to the second question is an emphatic no, although at this rate the question may soon well be moot.
Irrationality is good fuel for the press engines but it’s not an effective way to steer out of financial trouble. He should just go away.
Mr. Charney should once and for all be separated from American Apparel if the charges against him are valid. Meanwhile the board sounds like it needs a reminder about the fine line between governance and micromanagement.
Apparently he will have whatever role he can manipulate the board into giving him. Whether or not he should stay in control is not that important in today’s market. If a social media campaign is lodged against him if he is found guilty, then consumers will drop the brand like a hot potato and he will not have a company to manage.
“DANGER, WILL ROBINSON!”
Mr. Charney has proven himself to be unpredictable, controversial and offensive. American Apparel would be best served if he turned his attentions to his future.
He is a brilliant and accomplished man despite his shortcomings. Bill Clinton used to sneak Richard Nixon in the White House after hours to get advice and guidance. I’m sure American Apparel needs Mr. Charney’s knowledge to go forward; they should just keep it secret.
CNO (Chief Nuisance Officer).
It’s a pretty sad state of affairs for corporate America when overwhelming evidence of being a ******** is no longer sufficient to warrant dismissal; apparently a legal certainty is now required, as well. I’m going to break precedent on this one and not wish well to anyone connected with this farce.
More Discussions
How Timely Is the Planned Lowe’s Website Renovation Focusing on Personalization?
Is Lowe’s being timely with its website reno, and is it right to be placed as…Should Costco Be Opening Members-Only Gas Stations?
Is this the right move for the warehouse club?As Boomers ‘Age Out of Peak Purchasing,’ How Can National Brands Retain Interest With Gen Z?
According to a recent First Insight study titled “Is Gen Z Still Choosing Your Brand,” while…
Supposedly there’s a fine line between genius and madness. Charney seems to have a weird blend of both. He did start the company after all so he is capable of seeing possibilities others don’t see, which is the core quality of entrepreneurial brilliance. There’s something there that the board is hesitant to lose.
Then there’s the dark side of harassment and underwear dancing. What the board has to do is make a courageous decision as to which weighs more when it comes to the future success of the company.
I’ve got to say, the board doesn’t sound all that bright. Giving Charney money so he can increase his influence in the company while they’re trying to reduce his influence is like putting your feet on the brake and accelerator at the same time. As George says: “A bizarre case.”
If the charges are true, he should not have a role in the management. If they are not true, and until they are proven to be true or false, why should he be kept from being involved (unless he’s there by unlawful manipulation and maneuvering)? The most important question is what effect, if at all, does all this have on management of the company? If it’s losing money, then that would be justification for removal. If it’s the other things, who knows what influence that will have/should have.
Assuming the charges are true, and I always worry where there’s smoke there’s fire, Dov needs to go away. Today’s leaders need to create within their companies a culture of shared values and moral reasoning—strong cultures with a set of high ethical standards. Dov has demonstrated very immature moral reasoning and little ethical judgement. A culture starts at the top so he seems incredibly unqualified to be in any sort of leadership role.
I believe Charney will continue playing the role he seems to be best at—”The Spoiler” with a an over-generous serving of “The Trickster” sprinkled on for good measure.
The answer to the second question is an emphatic no, although at this rate the question may soon well be moot.
Irrationality is good fuel for the press engines but it’s not an effective way to steer out of financial trouble. He should just go away.
Mr. Charney should once and for all be separated from American Apparel if the charges against him are valid. Meanwhile the board sounds like it needs a reminder about the fine line between governance and micromanagement.
Apparently he will have whatever role he can manipulate the board into giving him. Whether or not he should stay in control is not that important in today’s market. If a social media campaign is lodged against him if he is found guilty, then consumers will drop the brand like a hot potato and he will not have a company to manage.
“DANGER, WILL ROBINSON!”
Mr. Charney has proven himself to be unpredictable, controversial and offensive. American Apparel would be best served if he turned his attentions to his future.
He is a brilliant and accomplished man despite his shortcomings. Bill Clinton used to sneak Richard Nixon in the White House after hours to get advice and guidance. I’m sure American Apparel needs Mr. Charney’s knowledge to go forward; they should just keep it secret.
CNO (Chief Nuisance Officer).
It’s a pretty sad state of affairs for corporate America when overwhelming evidence of being a ******** is no longer sufficient to warrant dismissal; apparently a legal certainty is now required, as well. I’m going to break precedent on this one and not wish well to anyone connected with this farce.