More than 30 executives asked the board to reconsider their decision to fire former CEO and company founder Dov Charney, according to a letter obtained by Bloomberg News. Charney should be a part of the retailer’s future by helping the next CEO improve the chain because he is what “makes this thing tick,” the managers said.
Charney’s loyalists bring an additional headache to a new CEO already coping with red ink and sluggish sales. The chain has racked up more than $300 million in net losses since 2010, forcing it to raise capital to make ends meet -- most recently in July. Schneider also has to contend with image problems at a company that’s been criticized for its racy advertising and sexually charged culture.
The clothing retailer, based in Los Angeles, officially fired Charney on Tuesday, ending a six-month saga that began with the board suspending him in June for misconduct. In their
move to terminate him, the directors have cited infractions such as violating the chain’s sexual harassment policies and purchasing travel for family members with company funds. Charney’s lawyer has called the allegations “baseless.”
American Apparel Inc. officially fired company founder Dov Charney, seen here, on... Read More
‘Day-to-Day Trenches’
During his suspension, Charney served as a paid consultant and remained active at the company, people familiar with the situation said in October. His involvement included giving instructions to staff and visiting stores, they said. That led some employees to believe that Charney would remain at American Apparel in some capacity.In their message to the board on Tuesday, the managers said they weren’t consulted before the decision to fire Charney was made.
“We are the people in the day-to-day trenches that know what this company needs in order to reach its immediate and long-term potential,” the managers wrote.
Allan Mayer, co-chairman of the board, declined to comment on the letter.
The board attempted to reach a settlement with Charney instead of firing him, according to two people familiar with the situation. However, Charney didn’t accept an offer to stay at the company in an advisory role, said the people, who asked not to be identified because the discussions were private.
Controversial Ads
Though Charney built American Apparel’s reputation for made-in-America style, he drew controversy over the years. The company’s ads frequently showed half-dressed young women in alluring positions. One of the company’s New York stores even featured mannequins with pubic hair. Charney also faced multiple sexual-harassment lawsuits, all of which were dismissed or sent to private arbitration.While Charney’s employment at American Apparel has ended, his legal tussle with the company may still intensify. Charney had already filed to take his dismissal to arbitration, claiming breach of contract and defamation. A 43 percent stake gives him more leverage, though his voting rights are shared with hedge fund Standard General.
Charney remains American Apparel’s largest shareholder and said on Tuesday that he expects to have a “strong relationship” with the company in coming years.
“Naturally, I am disappointed with the circumstances and my over 25 years of deep passion and commitment for American Apparel will always be the core DNA of the company,” the 45-year-old said in the statement.
Board Allies
Schneider has to contend with Charney supporters on the board as well. Private-equity firm Lion Capital, a longtime ally of Charney that owns stock warrants in the company, exercised its right to name a director in August and picked Robert Mintz, a meat-industry executive who has known Charney since childhood. It also designated Gene Montesano, a co-founder of Lucky Brand Jeans, to the board earlier this month.Schneider, who was a top executive at such brands as Warnaco, Gores Group and BCBG Max Azria, is slated to assume the CEO role on Jan. 5. She will take over for Scott Brubaker, who has been serving as interim CEO during the turmoil surrounding Charney’s ouster.
“She has a good work ethic and is a good fashion merchant,” said Joe Gromek, the former CEO of Warnaco who worked with Schneider when she ran the company’s swimsuit unit. “They need someone who can establish a much different culture. That will be her mission in the short term, to give the company credibility again.”
Bringing in a woman with a lot of experience may help repair American Apparel’s public image, said Davia Temin, founder of Temin & Co., a New York crisis-management firm.
“From a reputation point of view, it’s a good choice,” Temin said. “It’s probably the only choice they had, doing something drastic.”
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