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American Apparel sacks Dov Charney as chairman and suspends him as CEO American Apparel sacks Dov Charney as chairman and suspends him as CEO
(about 4 hours later)
American Apparel has sacked its maverick founder, Dov Charney, as chairman and declared its intention to oust him as chief executive of the fashion company after repeated allegations of misconduct against him. As bosses go, Dov Charney, the founder of US fashion brand American Apparel, had an unusual attitude to suitable office attire and acceptable executive behaviour. He once hosted a meeting wearing nothing but a single sock – not on his foot – and he has been cited in numerous sexual harassment lawsuits brought by former employees.
The company, known for risque advertising and making all its clothes in the US, said its board had voted to replace Charney as chairman and suspend him as chief executive. On Thursday, however, after 25 years steering the firm famous for its Made in America T-shirts and Y-fronts, he was heading for the exit as his fellow directors fired him as chairman and declared an intention to oust him as chief executive after repeated allegations of misconduct against him.
The board expects to fire him once a 30-day grace period in his contract expires, American Apparel said in a statement last night. Charney has made no secret of his louche tastes. The 45-year-old, who has described himself as "a dirty guy", strolled his factory floor wearing only his underpants and has been accused of using adverts that verge on pornography – including one featuring himself and two women captioned: "in bed with the boss". There have been allegations of homophobic remarks. One lawsuit claimed he had called one employee a "wannabe Jew" and then tried to strangle him. It was notoriously alleged that he had had oral sex with an employee while conducting an interview with a journalist.
Charney built American Apparel to be one of the world's most admired fashion brands but the company's fortunes have declined as his racy lifestyle has caused more and more problems. On Wednesday night, the company ousted its maverick boss and made it clear the decision "was not the result of any problems with the company's operations". Instead it said the decision to axe Charney "grew out of an ongoing investigation into alleged misconduct."
Allan Mayer, who has been on the board since 2007 and takes over as co-chairman, said: "We take no joy in this, but the board felt it was the right thing to do. 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."Allan Mayer, who has been on the board since 2007 and takes over as co-chairman, said: "We take no joy in this, but the board felt it was the right thing to do. 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."
Charney has made no secret of his louche tastes. His exhibitionism has included having oral sex with an employee in front of a journalist and wearing only his underwear with two women in an ad captioned "in bed with the boss". Charney built the American Apparel label into one of the world's most admired fashion brands. He won plaudits for his "Made in America" policy, which shunned the sweatshops of Asia to support US manufacturing, paying double the minimum wage to his mainly immigrant workforce, providing health insurance and free international telephone calls. Charney once boasted that he had the best paid clothing workers in the world.
But he has been repeatedly cited in sexual harassment lawsuits by former employees. Charney has publicly dismissed such claims against him as "sexual shame tactics". The business still operates from a huge factory in downtown Los Angeles, and employs 10,000 staff, but its fortunes have declined as its founder's racy lifestyle has caused more and more problems, even though Charney has publicly dismissed the harassment claims made against him as "sexual shame tactics".
In 2011, Irene Morales accused Charney of "extreme psychological abuse and torment" from when she started working as a shop assistant aged 17 in 2007. At the time, American Apparel said Morales had broken the terms of her leaving agreement. In 2011, Irene Morales accused Charney of "extreme psychological abuse and torment" from when she started working as a shop assistant aged 17 in 2007, although a judge later dismissed her $260m claim after it emerged she had sent her former boss explicit pictures and messages.
Charney, who is 45, is Canadian but felt a draw to the dynamism of the US from childhood. He founded American Apparel's predecessor companies in 1989 and has been in charge since 2007, when the company listed on the stock market. Charney, who is Canadian but says he felt a draw to the dynamism of the US from childhood, founded American Apparel as a wholesaling business in 1991 with a $10,000 loan from his father. A decade later he started opening shops and the business now has some 250 outlets in 20 countries.
American Apparel was a sensation in the 2000s as Charney built the brand based on hipster chic and an image based on the sexual mores of the 1970s. The Guardian named American Apparel label of the year in 2008 and the following year Charney was a finalist for Time magazine's 100 most influential people of the world. The label was a sensation in the 2000s as Charney built the brand based on hipster chic and an image based on the sexual mores of the 1970s. The Guardian named American Apparel label of the year in 2008 and the following year Charney was a finalist for Time magazine's 100 most influential people of the world.
Charney also won plaudits for his "made in America" policy, which shunned the sweatshops of Asia to support US manufacturing. The company said it would stick with the policy after Charney leaves. But as the harassment claims against Charney mounted, the brand's appeal began to fade.
As the harassment claims against Charney mounted, his brand's appeal began to fade. Changing fashion trends and the severe recession of the late 2000s made young shoppers less keen to pay £30 for one of Charney's plain T-shirts. Sales plunged and debts mounted. Changing fashion trends and the severe recession of the late 2000s made young shoppers less keen to pay £30 for one of Charney's plain T-shirts. Sales plunged and debts mounted.
In February, the company hired restructuring advisers after its debt hit $240m (£141m), taking it close to breaking loan agreements with its banks. First-quarter results announced last month showed sales falling and a pre-tax loss of $5m. In February, the company hired restructuring advisers after its debt hit $240m (£141m), taking it close to breaking loan agreements with its banks. First-quarter results announced last month showed sales falling and a loss of $5m. Last year it lost more than $100m. The company's share price has plunged from around $14 in 2008 to close last night at just $0.64, down by two thirds in the past year.
The company's share price has plunged from around $14 in 2008 to close last night at just 64 cents, down by two thirds in the past year. John Luttrell, the chief financial officer, will act as chief executive while American Apparel looks for a permanent replacement for Charney.
John Luttrell, the chief financial officer, will act as chief executive while American Apparel looks for a permanent replacement for Charney. The company said the management changes may have triggered a default under loan agreements with its banks. But the controversial boss may not be going quietly. A report in the Chicago Tribune said that Charney had been shocked by his removal, and a source told the paper that he intended to "fight like hell" to be reinstated.