Guess’ Paul Marciano issue shines spotlight on stage

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Before its general meeting on April 22, the board of directors of Guess Inc. urges its shareholders to re-elect Paul Marciano to their ranks. That might not seem unusual, given that Marciano is the brand’s co-founder, creative director, and sometimes chief executive — barring the ongoing lawsuits, activist investor pushback, and pullout. of his insurance company, all over the sexual misconduct allegations against him.

“[W]We believe the growing list of sexual assault and harassment allegations against Paul Marciano, and the apparent empowerment of his brother Maurice Marciano, pose an existential risk to the company’s brand, reputation and ability to create shareholder value,” said Chris Kiper, managing director of Legion Partners. and Ted White wrote in an open letter to shareholders on April 11, calling on them not to vote for the Marcianos. “We have also detailed why we believe the Guess Board of Directors’ handling of these allegations is grossly negligent at best and a breach of the fiduciary duty of independent Board members at worst.”

In response, Guess the next day called the company’s stipulations “a regurgitation of previously reported and addressed grievances,” defended his handling of allegations against Marciano over the past few years, and said he had formed another committee of the board of directors to investigate the latest complaints.

Legion’s scathing rhetoric is fairly typical of an activist investor who is fed up with corporate governance. But the Guess board also faces a more unusual situation, far from its boardroom and proxy statement: A number of Marciano accusers have now sued several of its members.

Arick Fudali, Partner and General Counsel of The Bloom Firm, the law firm representing Paul Marciano latest accusers, says the board put its clients at risk when he reinstated Marciano in 2019. The previous year, an internal investigation into “inappropriate comments and texts, and unwanted advances, including kisses and touching” revealed that “on some occasions, Mr. Marciano displayed poor judgment in his communications with models and photographers and placed himself in situations where plausible allegations of inappropriate conduct could arise and have happened.”

Following this, Marciano, already in the process of relinquishing his position as CEO, also resigned as chairman of the board, but within months, with the blessing of the board, he took on the position of director of creation. This year, two Guess models have come forward, one with serious sexual assault charges she says took place two years ago, and named several Guess directors in a lawsuit filed in March.

“Bringing him back and putting him back in a position where he had direct contact with models was, in my opinion, aiding and abetting sexual harassment,” Fudali said by phone. “A board or entity is only vulnerable if it votes to bring known sexual harassers back. If the board had stuck to its decision and not brought back Paul Marciano in his role in 2019, we most likely wouldn’t be there. And more importantly, my two clients wouldn’t have had their situation in 2020. That’s the important thing.”

Guess did not respond to multiple requests for comment for this article. Two council members declined to comment; one referred Retail Dive to a board spokesperson, who did not respond to a request for comment.

Board game changer?

In the United States, boards of directors have been an integral part of corporate governance for two centuries. But, with their roles loosely defined and lightly regulated for most of that time, they have largely escaped much attention.

The men and (increasingly) women who sit on boards are generally seen as beholden to shareholders. This seems to be commonly interpreted as, above all, the protection of a company’s share price. But in a time shaped by the #MeToo and #BlackLivesMatter movements, and amid heightened concerns about climate change, that has started to change.

Guess Board of Directors as of April 14, 2022
name Occupation Director since
Alex Yemenidjian *** CEO, Oshidori International Development 2005
Carlos Alberini CEO of Guess, Inc. 2019
Paul Marciano* Guess Founder, Creative Director 1990
Maurice Marciano* *** Guess Founder, Former Guess Executive nineteen eighty one
Antoine Chidoni* *** Financial business manager 2002
Laurie Ann Goldman** *** CEO, LA Ventures 2018
Cynthia Livingstone* Former CEO, Sequel AG, Guess Global Watch Licensee 2019
Deborah Weinswig*** Founder and CEO, Coresight Research 2018

* Re-eligible on 22/04. ** Departure from the plateau from 22/04. *** Sued as a board member, by two of Paul Marciano’s accusers, for ‘aiding and abetting sexual harassment in violation of the Fair Employment and Housing Act’.

According to Mark Lipton, professor emeritus at The New School, board advisor and author of “Mean Men: The Perversion of America’s Self-Made Man.”

“What strikes me most about the scale of change is how so many organizations are trying — not necessarily successfully, but really trying — to change their culture,” he said over the phone. “Whether it’s toxic men in the middle or leaders at the top.”

But Guess, a brand with a question mark in its logo and a founder with multiple accusations against him, seems oblivious to the need for change, Lipton also said.

“You know, the world pivoted after Harvey Weinstein,” he said. “Guess I never read the memo about it, I think.”

All aboard

As Legion notes in its shareholder communications and a website it dedicated to the matter, Guess may be risking its brand reputation by sticking with Paul Marciano.

In March, around the time the most recent allegations became public, social media discussions about the brand turned negative, according to research from the firm Brandwatch. But in general, unlike many fashion brands that are synonymous with their founders or designers, most people don’t associate Paul Marciano with Guess, Brandwatch found. (Perhaps this is good news for another brother, Georges Marciano, who on Thursday sought to set the record straight on the brand’s origins, claiming in a press release that it was him, and not Paul, who is the origin of Guess.)

“The Guess brand will be mentioned alongside its co-founder as these allegations go, but it will cause no lasting harm to the brand itself,” Brandwatch concluded in its emailed report. “The brand doesn’t share the same name as its co-founder, which is also common in fashion and luxury, and that benefits them in this case. Guess enjoys iconic status online, which means people are still discussing its products and positive advertisements, even in the wake of these accusations.”

This goes against the the board argument, that there is no “Guess” without Paul Marciano, according to Legion’s White.

“The company told us Paul Marciano is Guess and Guess is Paul Marciano, and he’s so important,” White said over the phone. “You can’t take it off. So what [Brandwatch found] would be quite contrary to that.”

However, Legion’s own research points to what the company calls a “Marciano reduction,” or damage to his valuation, which has risen from 30% to 45% in recent years as the allegations against him have piled up. Much of the blame can be placed on the board, experts say.

“I strongly believe the board is responsible,” said Lipton, who believes that suing directors over issues such as sexual harassment is likely to become more common. “In the past, you know, some boards might ignore that and say, ‘Well, that’s okay. We have insurance for directors and officers, they will cover it. But I feel like whoever insures Guess for their D&O policies is starting to back down.”

While Guess has taken out insurance in order to be able to indemnify the members of its board of directors “to the fullest extent permitted by law”, according to his proxy statement, insurance companies are getting nervous. In December, for example, Beazley Insurance Company sued Guess and Paul Marciano in U.S. District Court for the Central District of California, arguing that it is not obligated to cover Marciano’s latest legal troubles because they involve “the same wrongful act or interdependent wrongful acts”. ” from years ago, before Beazley took over Guess.

According to Anat Alon-Beck, a professor at Case Western Reserve University School of Law whose research focuses on corporate law and governance, board members should be concerned about reputational damage not only businesses they run, but also of themselves. In order to respond appropriately, any Guess board member should ensure they have full details of any internal investigation, including any investigation that may have been conducted prior to their arrival, it said. she declared.

And including Guess’ ongoing investigation into Marciano’s most recent behavior, which the Legion says should have been reason enough to postpone its annual meeting and set aside its recommendation to keep him on as director. .

“Any time you sit on a board, you always run this risk of reputational damage, especially if there’s a lawsuit and the board seems to cover management,” he said. she said over the phone. “There are things companies should be doing, and that’s, number one, taking responsibility, number two, making sure things don’t happen. And number three, boards have responsibility. Especially if a dog has bitten before, so you know they have propensities. Seriously, today with the #MeToo movement, there’s no excuse for that.”

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