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Thu June 19, 2014
American Apparel Ousts Its Controversial Founder, Dov Charney
Originally published on Thu June 19, 2014 9:38 am
The board of clothing chain American Apparel voted Wednesday to replace founder Dov Charney in the wake of allegations of misconduct against him.
In a statement on its website, the board said that it notified Charney of its intent to terminate his employment as president and CEO. He is expected to be fired following a 30-day period, the statement added.
John Luttrell, the company's executive vice president and chief financial officer, will step in as interim CEO. The board named Allan Mayer and David Danziger as co-chairmen to replace Charney as chairman of the board.
"We take no joy in this, but the Board felt it was the right thing to do," Mayer said in a statement. "Dov Charney created American Apparel, but the Company has grown much larger than any one individual and we are confident that its greatest days are still ahead."
In a 2006 profile of the company, NPR's Mandalit del Barco reported:
"American Apparel is something of a maverick in the industry when it comes to employee health and benefits. And the work environment is radically different, too. Every afternoon, workers take a 10-minute break for synchronized stretching exercises, and a team of massage therapists roams the factory floor to offer free neck rubs all day.
"Earning twice the California minimum wage, employees get subsidized lunches, subsidized health insurance, free on-site English classes and free bus tokens — even company bicycles to get to and from work. Charney likes to boast that American Apparel is 'sweatshop free.' "
Still, the company was often criticized for its ads featuring young, scantily clad models.
The board did not provide details of the allegations against Charney. He has been subject to lawsuits alleging sexual misconduct. As we reported in 2008, in one of those cases, a female employee alleged "Charney created a hostile work environment by using sexually explicit language and walking around the office dressed only in his underwear or less." He did not deny the allegations, but said that was the norm in the fashion industry.
And in 2008, Reuters reports, a former employee accused him of keeping her as a teenage sex slave. She also sued the company for failing to stop Charney.
Here's more from Reuters:
"The company, which is struggling with weak sales and heavy debt, said the management changes may have triggered a default under its credit agreements, adding that it will be in discussions with its lenders for a waiver of the default. In February the company had tapped restructuring advisers after it had reached $240 million in debt and had come close to breaching loan covenants, debt terms designed to protect its lenders, according to a media report. The company's shares, which have lost more than two-thirds of their value over the past year, closed at 64 cents on the American Stock Exchange on Wednesday."