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American Apparel moves to fire controversial CEO

American Apparel’s board of directors has voted to remove Dov Charney as chairman and fire him as president and CEO.

It is expected that the termination will be effective following a 30-day cure period required under the terms of Charney’s employment agreement.

For the time being, Charney is suspended from his positions as president and CEO, effective immediately, pending the expiration of the cure period. The board has appointed John Luttrell as interim CEO.

Luttrell, who has been with American Apparel since February 2011 and currently serves as EVP and CFO, will continue in those positions as well. Prior to joining American Apparel, he served as EVP and CFO of Old Navy, The Wet Seal and Cost Plus.

The board has also appointed Allan Mayer and David Danziger as co-chairmen to replace Charney’s spot. In accordance with the terms of his employment agreement, the board intends to request Charney’s resignation as a member of the board concurrently with the effective time of his termination.

Mayer, who has been a member of the board since the company went public in 2007 and has served as its lead independent director for the past three years, said the board’s decision to replace Charney grew out of an ongoing investigation into alleged misconduct — including, according to numerous reports, several cases of sexual harassment.

“We take no joy in this, but the board felt it was the right thing to do,” Mayer said. “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.”

“The board is working with a search firm to identify candidates for the job of permanent CEO and, based on our initial discussions with the search firm, we expect the list of possible successors will be impressive,” added Danziger, who has chaired the board’s audit committee since 2011.

“We have one of the best known and most relevant brands in the world, with employees who are second to none; I believe we have a very exciting future,” said Luttrell. “Our core business — designing, manufacturing, and selling American-made branded apparel — is strong and continues to demonstrate great potential for growth, both in the U.S. and abroad. This new chapter in the American Apparel story will be the most exciting one yet.”

Luttrell added that American Apparel would remain committed to its sweatshop-free, Made in USA manufacturing philosophy.

As a result of the management changes, the company may have been deemed to have triggered an event of default under its credit agreements and will be in discussions with its lenders for a waiver of the default.

 

 

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