Guess founder Paul Marciano defeats proxy vote over board seat

A proxy advertising and marketing marketing campaign to drive Guess co-founders Paul Marciano and Maurice Marciano off the company’s board over a sexual assault scandal failed to draw adequate votes Friday on the L.A. apparel company’s annual meeting — nonetheless the activist hedge fund behind the difficulty has vowed to proceed its battle.

Legion Companions, an L.A. fund that has acquired a 2.5% stake in Guess, had requested shareholders to withhold help for the reappointments of directors Paul Marciano and his brother Maurice, who’s accused of turning a blind eye to sexual harassment and assault allegations in opposition to Paul. A number of of the allegations return a variety of a very long time, others surfaced in lawsuits filed this 12 months.

Paul Marciano, 70, and his attorneys have denied any wrongdoing.

Legion’s proxy advertising and marketing marketing campaign drew the help of the two important shareholder advisory corporations, which said the company’s continued affiliation with the Marciano brothers posed a menace for the mannequin. That help acquired right here even supposing the advertising and marketing marketing campaign had nearly no probability of succeeding as a result of the brothers preserve about 41% of wonderful shares.

The fund didn’t nominate its private slate of directors. It relied on a corporation protection that requires any director in an uncontested election who receives the next number of votes “withheld” than votes “for” ought to submit a resignation letter for consideration by a board committee. Legion didn’t attain that threshold.

The company launched that based totally on preliminary vote outcomes, the Marciano brothers and two totally different board members had been reelected.

“We’ll proceed to work together with our shareholders, and we keep steadfast in our dedication to showing within the good curiosity of the Agency and all Guess shareholders. The Board of Directors takes its fiduciary duties very considerably, believes sooner or later of and might proceed to make its selections based totally on factual findings,” Guess said in an announcement.

Legion issued its private vote tally saying that solely 17% of non-insider shareholders voted to help Paul Marciano.

“Paul Marciano might need eked out a win at proper now’s Annual Meeting, nonetheless he can’t disguise from the persistent reputational and valuation risks we take into account his continued presence poses to Guess,” the assertion said.

Earlier, Ted White, managing director at Legion, instructed The Cases that the hedge fund didn’t plan to walk away from the wrestle. “We actually really feel strongly that there are some factors of this case that are relevant for us to proceed to pursue by means of potential litigation focused on board fiduciary factors,” he said.

Paul Marciano is one among 4 brothers who moved to Los Angeles from France and in 1981 primarily based the company. It grew proper right into a worldwide apparel and tools retailer, with promoting campaigns led by Paul that featured film star fashions resembling Anna Nicole Smith, Kate Upton and others. Two totally different brothers left the company years up to now.

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Guess operates larger than 1,000 outlets worldwide and earned $171 million on $2.6 billion in product sales in its last fiscal 12 months, though it’s not the trendy mannequin it as quickly as was. The hedge fund argues that the allegations have depressed the company’s stock no matter a turnaround led by Chief Govt Carlos Alberini.

In the previous couple of years, Legion has waged worthwhile campaigns to change the boards at retailers Mattress, Tub & Previous and Kohl’s. It began investing in Guess in October after meeting with the company and deciding that the turnaround was being held once more by the brothers’ continued affiliation with the company, in step with a regulatory submitting.

Amid the burgeoning #MeToo movement in 2018, Sports activities actions Illustrated swimsuit model Kate Upton gave an interview alleging Paul Marciano had groped and kissed her in the midst of the shoot for a 2010 advert advertising and marketing marketing campaign when she was 18 — and when she rebuffed him, he later generally known as her “disgusting” and a “fat pig.”

He generally known as the allegations “preposterous,” nonetheless totally different ladies acquired right here forward accusing him of inappropriate suggestions and texts and undesirable advances along with kissing and groping, in step with a corporation regulatory submitting.

That prompted a board investigation that concluded “on certain occasions, Mr. Marciano exercised poor judgment in his communications with fashions and photographers and in inserting himself in circumstances throughout which plausible allegations of improper conduct could, and did, come up,” the submitting said.

The company entered into settlement agreements with 5 ladies that totaled $500,000. Marciano stepped down as govt chairman in 2018 and was to transition out of his operate as chief inventive officer. However, the next 12 months Guess did an about-face and launched he would carry on inside the inventive officer place.

In January 2021, a lawsuit was filed in Los Angeles Superior Courtroom by an unidentified model that reignited the scandal.

She alleged that Paul Marciano had sexually harassed her after she began working for Guess in 2017. Then, after taking a hiatus to supply supply, the woman alleged she met him at a West Hollywood deal with in February 2020 for what she thought generally is a dialogue of latest image shoots. However, the home turned out to be an empty condominium the place she alleged Marciano compelled her to hold out oral intercourse.

That allegation was adopted by a federal intercourse trafficking lawsuit launched in October by an aspiring Guess model who claims Paul Marciano raped her in 2013 in a Beverly Hills resort room, the place she had met him anticipating to debate working for the company. The unidentified model said she later did verify footage for Guess nonetheless was not at all given any work.

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Marciano’s attorneys have generally known as the most recent allegations “baseless.”

Sooner than the proxy wrestle began, Legion early this 12 months demanded that the Guess board begin investigations into its oversight of Paul Marciano and into any employees, officers and directors whose conduct may have introduced on harm to the company. It moreover sought particulars concerning the nicely being of Maurice, 73, who suffered excessive accidents in a 2020 bicycle accident from which he’s nonetheless recovering.

Legion moreover despatched a letter to the board that it launched demanding the elimination of the Marciano brothers, arguing they launched a material menace to the company’s turnaround efforts. Guess responded by publicly defending administration and its newest financial outcomes. It said it “strongly refuted” the most recent claims of sexual wrongdoing in opposition to Paul Marciano and was “contesting them vigorously.”

Legion began its proxy advertising and marketing marketing campaign March 16 after Guess indicated it consider to renominate the brothers to board seats. That week, a third lawsuit was filed accusing the board of aiding and abetting sexual harassment by allowing Paul Marciano to stay on the agency.

The go nicely with detailed allegations by a third unidentified model who said she labored extensively for Guess and had been sexually harassed by Paul Marciano all through a July 2020 image shoot at Lake Como in Italy. The lawsuit doesn’t title him as a defendant.

Excellent Los Angeles lawyer Lisa Bloom, whose company handled the three new lawsuits, held a data conference that week all through which all three fashions and totally different accusers spoke.

The model who alleged Marciano compelled oral intercourse on her acknowledged herself as Amanda Rodriguez and tearfully study an announcement saying the incident had introduced on “flashbacks, panic assaults, nightmares, debilitating melancholy and suicidal concepts.”

Her lawsuit is now in arbitration.

Following the data conference, the model who made the federal intercourse trafficking allegations modified attorneys and dropped her lawsuit. Her new lawyer didn’t return a request for comment.

In an announcement, Marciano’s lawyer, Gary Jay Kaufman, said the “dismissed lawsuit was baseless like others filed by Ms. Bloom and, in these situations too, we’re terribly assured that we’re going to prevail in a courtroom of laws the place data matter.”

Legion established an web website for its advertising and marketing marketing campaign generally known as A Higher Guess and printed an investor presentation tallying totally different sexual harassment and assault allegations in opposition to Paul Marciano. The presentation said the company has paid $920,000 in settlements since 2018 related to allegations in opposition to Paul Marciano and contained hyperlinks to lawsuits courting method again to 1994.

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Whereas Legion has praised the turnaround beneath Alberini, who was appointed after the 2018 intercourse scandal, it has traded jabs with the company over the effectivity of the stock. Shares are down over the earlier 12 months no matter constructive elements by the Regular & Poor’s 500 and had been down about 4% at $22.94 on the shut of shopping for and promoting Friday, after the vote outcomes had been launched. Last month, Guess launched a $175-million accelerated share buyback program.

The company said it had tried to achieve a “mutually agreeable path forward” with Legion, along with a model new environmental, social and governance committee and the share buybacks, nonetheless was rejected. It moreover launched the formation of a board committee of neutral directors assisted by exterior approved counsel to look at the post-2018 allegations in opposition to Paul Marciano.

Guess stood by its place of renominating the Marciano brothers to the board and said Legion’s advertising and marketing marketing campaign is “based totally on information from the media and from misinformed and uncorroborated sources.”

ISS, considered one of many two shareholder advisory corporations, sided with Legion, concluding that whereas the two brothers made “outsized contributions” to the company’s success over the earlier 40 years, that was “irrelevant” to the current state of affairs. It added that “elimination of the Marcianos appears to be the one course obtainable to start out a transparent break on this prolonged and sordid thread inside the agency’s historic previous.”

Glass Lewis, the alternative advisory company, acknowledged the Marcianos’ Guess stake attainable doomed Legion’s advertising and marketing marketing campaign nonetheless said the company would revenue by “transferring on” from the Marcianos as directors whereas the board must evaluation Paul Marciano’s employment given “the in depth report of allegations of sexual misconduct and settlements and his prompt have an effect on on the custom of the enterprise.”

All through the company’s heyday the Marciano brothers made the Forbes 400 report of richest People nonetheless haven’t executed so in years. Guess’ market cap as of late is $1.4 billion, correctly underneath the place it was at its apex some 15 years up to now when the stock was spherical $50 a share.

Susan Anderson, a retail analyst at B. Riley, agreed the stock value is lagging nonetheless said the mannequin has expert a resurgence beneath its chief govt and Paul Marciano’s son Nicolai Marciano, who has had a hand in creating fashions for the company’s youthful prospects.

She said it was unclear at this stage what operate the Marciano brothers are having fun with inside the agency’s effectivity.

“Clearly they constructed a implausible mannequin,” she said. “It’s exhausting to say in the event that they’re making a significant have an effect on on the mannequin correct now.”