Good Riddance Dov Charney—You Were Never the Edgy CEO You Thought You Were
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"You really couldn't judge Steve Jobs the day he was thrown out of the office, you know?" retailer Dov Charney told a reporter this past spring.
Charney, the founder, CEO and chairman of American Apparel, was himself thrown out of the office late Wednesday night. His firing was "for cause", according to the tersely worded statement from the company's board. The vote was unanimous, and the termination "grew out of an ongoing investigation into alleged misconduct".
Charney always thought of himself as different: a "cool" CEO, irreplaceable and implacable, even as his board grew more restive – but, as his record and ouster shows, he wasn't an outlaw or an outlier. He was sadly typical, as was his behavior and many of his practices.
The Los Angeles Times reported that the misconduct the board is investigating "involved his personal conduct with women". This could hardly have come as a surprise to anyone familiar with the history of Charney himself, American Apparel as a brand, or the industry in which they collided.
Charney's business practices gained attention almost from the moment the Tufts University drop-out founded his company in 1997. While competitors manufactured in Haiti and Bangladesh, where garment workers earn around 30 cents an hour and preventable industrial accidents still kill many each year, American Apparel produced all its clothes at its Los Angeles headquarters. Its garment workers earned higher starting wages than its retail employees, plus health insurance and benefits – and Charney enjoyed the image of fairness this conveyed.
He played up the all-American image in the company's advertising, even as he said things like "I don't believe in Made in USA". Among the hipster-skinny models and porn stars featured in his company's ads, one could also find the occasional garment worker, shot documentary-style in the factory. Not that the image necessarily matched up with the reality: American Apparel fought any union that attempted to organize its labor force, and a worker interviewed by Elizabeth M Cline for her 2012 book Overdressed called American Apparel's facilities only "less worse" than other factories.
The financial problems at Charney's company, too, date back years. In 2009, when American Apparel sales first started to fall, it was forced by US Immigration and Customs Enforcement to fire 1,800 workers. (He announced that he was complying in a company letter.) In 2010, its auditor resigned, citing weaknesses in the company's financial controls, which triggered subpoenas from investigators including the Securities and Exchange Commission. (The SEC ended its investigation without enforcement.) In 2011 and again this spring, Charney's company came within a serger-thread of bankruptcy when an interest payment came due that exceeded its cash on hand. The stock has been valued above $1 for all of two seconds this year, and as a result the company has received repeated de-listing warnings from the exchange on which it trades. The company racked up losses – over $270m since 2009 – and creditors jacked up their rates. As of 2011, American Apparel was paying a whopping 18% interest to its primary lender. The company is now seeking a waiver, but I get a better rate on my AmEx.
There were also lawsuits. By my count in covering his reign at the retailer, Charney has faced at least seven sexual-harassment suits from former employees. (The New York Times reported eight on Friday. Most of them remain in binding arbitration, though at least one was settled without liability to the company and one appeal is pending.) Women have alleged variously that the former CEO held business meetings at his home while dressed only in something described as a "cock sock", that he sent them unsolicited sexually explicit photographs, and that he coerced one, on her 18th birthday, into giving him a blow job. (The latter lawsuit in New York was dismissed after judges in New York and California ruled the case was subject to binding arbitration; it was still pending earlier this year.) The Equal Employment Opportunity Commission found that American Apparel discriminated against "women, as a class, on the basis of their female gender, by subjecting them to sexual harassment".