American Apparel Founder Raises Stake, Ups Battle

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July 1 (Bloomberg) -- Harvard University Professor Robert Kaplan and Gilt Group CEO Michelle Peluso weigh in on the battle between American Apparel’s board and former CEO Dov Charney on “Bloomberg Surveillance.” (Source: Bloomberg)

Have founder ceo's who still own a substantial portion of the company's shares, 27% in both cases.

Or other shareholders treated as fairly when you have got a founder/ceo with such a big stake?

They put in the pill to make sure he cannot accumulate, he or related parties -- doug turney here.


The second thing they did was they changed the bylaws.

For a sample, one of the changes they made is you cannot remove a director or it is for cause, and less all shareholders vote.

They did some things that were smart, but this is the issue, normally companies are very carefully but there is a big inside holder to treat other shareholders fairly.

The board had to act over the weekend to make sure that happened.

And full disclosure, you were chairman of an investment firm that has a financial position in american apparel.


To founder/ceo's noknow better?

They should, but the issue is they have to play by the same rules as everyone else and if they act inappropriately, if they do not act in the best interest of all shareholders, if they -- in this case, doug charney, if the act inappropriately with employees and other things, which is really outrageous, the board has got to act and discipline him like any other ceo's. just a correction, doug charney has increased his holding to 43%. it was 27%. what does that mean for american apparel?

The tricky part now is they put in a pill to make sure -- i think he has 27% and two other related parties have another 10% and 12%. he by their bylaws could actually remove directors, could have moved the directors if he had 51%. they are trying to prevent that, but this is close, and they may have waited too long to put the pill and.

This looks like it was in a filing that was released late yesterday when a lot of people had not noticed.

He acquired 27 point formally and shares on june 27. -- 27.4 million shares on june 27. they have got to stop him, but they need time to do that, and they cannot allow him to take control of the company.

Michelle peluso, you run gilt groupe, a private company so you do not have to deal with this.

Either way, a lot of people would love to see an ipo.

Are we going to see that?

At some point, i am sure.

How do you protect minority views within the company?

First of all, the vast majority of founder/chairman situations work really well.

We had that a gilt with kevin ryan, the founder, who did a phenomenal job.

So this is a unique situation in a really tragic situation, frankly, for employees and customers.

At gilt, the board of directors is there to add counsel, advice, to challenge your assumptions, and that is dynamic when it is healthy and phenomenally good for a company and shareholders.

Is this a company that should never have gone public?

I find the egos of ceo's -- a essentially their private companies that go public to cash them but they do not want the response ability of a public company.

A lot of emerging companies need to go public so they can track capital.

They may need it for their growth.

At the moment he started acting in a way that was inappropriate, which might have been years ago if not months ago.


The board needed to act then.

It probably waited too long and let this turn into a real mess.

Doesn't is also argue, and michelle, weigh in here, for the separation of ceo from chairman of the board?

I think that is often a really good structure, but it goes beyond that.

In this situation, it feels like on the outside of course -- there were violation after violation.

I do not understand why the board did not act sooner.

What message are you sending to employees?

What message are you saying to employees at the board of directors if this is coming up over and over and no action is taken.

That is the tragedy.



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