Guess founder, accused repeatedly of sexual misconduct, holds onto board seat in contentious vote

A proxy marketing campaign to drive Guess co-founders Paul Marciano and Maurice Marciano off the corporate’s board over a sexual assault scandal failed to attract sufficient votes Friday on the L.A. attire agency’s annual assembly — however the activist hedge fund behind the hassle 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 assist for the reappointments of administrators Paul Marciano and his brother Maurice, who’s accused of turning a blind eye to sexual harassment and assault allegations towards Paul. A few of the allegations return a number of many years, others surfaced in lawsuits filed this 12 months.

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

Legion’s proxy marketing campaign drew the assist of the 2 main shareholder advisory corporations, which stated the corporate’s continued affiliation with the Marciano brothers posed a danger for the model. That assist got here despite the fact that the marketing campaign had just about no probability of succeeding because the brothers maintain about 41% of excellent shares.

The fund didn’t nominate its personal slate of administrators. It relied on an organization coverage that requires any director in an uncontested election who receives a better variety of votes “withheld” than votes “for” should submit a resignation letter for consideration by a board committee. Legion didn’t attain that threshold.

The corporate introduced that primarily based on preliminary vote outcomes, the Marciano brothers and two different board members had been reelected.

“We’ll proceed to have interaction with our shareholders, and we stay steadfast in our dedication to performing in the very best curiosity of the Firm and all Guess shareholders. The Board of Administrators takes its fiduciary duties very severely, believes in due course of and can proceed to make its choices primarily based on factual findings,” Guess stated in a press release.

Paul Marciano is one in all 4 brothers who moved to Los Angeles from France and in 1981 based the corporate. It grew right into a worldwide attire and equipment retailer, with advertising campaigns led by Paul that featured celeb fashions comparable to Anna Nicole Smith, Kate Upton and others. Two different brothers left the corporate years in the past.

Guess operates greater than 1,000 shops worldwide and earned $171 million on $2.6 billion in gross sales in its final fiscal 12 months, although it’s now not the stylish model it as soon as was. The hedge fund argues that the allegations have depressed the corporate’s inventory regardless of a turnaround led by Chief Government Carlos Alberini.

“We really feel strongly that there are some elements of this case which can be acceptable for us to proceed to pursue through potential litigation targeted on board fiduciary points,” stated Ted White, managing director at Legion, in response to the vote.

In the previous couple of years, Legion has waged profitable campaigns to alter the boards at retailers Mattress, Bathtub & Past and Kohl’s. It started investing in Guess in October after assembly with the corporate and deciding that the turnaround was being held again by the brothers’ continued affiliation with the corporate, in response to a regulatory submitting.

Amid the burgeoning #MeToo motion in 2018, Sports activities Illustrated swimsuit mannequin Kate Upton gave an interview alleging Paul Marciano had groped and kissed her throughout the shoot for a 2010 advert marketing campaign when she was 18 — and when she rebuffed him, he later referred to as her “disgusting” and a “fats pig.”

He referred to as the allegations “preposterous,” however different ladies got here ahead accusing him of inappropriate feedback and texts and undesirable advances together with kissing and groping, in response to an organization regulatory submitting.

That prompted a board investigation that concluded “on sure events, Mr. Marciano exercised poor judgment in his communications with fashions and photographers and in putting himself in conditions by which believable allegations of improper conduct might, and did, come up,” the submitting stated.

The corporate entered into settlement agreements with 5 ladies that totaled $500,000. Marciano stepped down as government chairman in 2018 and was to transition out of his function as chief artistic officer. Nevertheless, the following 12 months Guess did an about-face and introduced he would keep on within the artistic officer place.

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

She alleged that Paul Marciano had sexually harassed her after she started working for Guess in 2017. Then, after taking a hiatus to present beginning, the girl alleged she met him at a West Hollywood deal with in February 2020 for what she thought can be a dialogue of recent picture shoots. Nevertheless, the area turned out to be an empty house the place she alleged Marciano compelled her to carry out oral intercourse.

That allegation was adopted by a federal intercourse trafficking lawsuit introduced in October by an aspiring Guess mannequin who claims Paul Marciano raped her in 2013 in a Beverly Hills lodge room, the place she had met him anticipating to debate working for the corporate. The unidentified mannequin stated she later did check pictures for Guess however was by no means given any work.

Marciano’s attorneys have referred to as the most recent allegations “baseless.”

Earlier than the proxy struggle started, Legion early this 12 months demanded that the Guess board start investigations into its oversight of Paul Marciano and into any workers, officers and administrators whose conduct may need precipitated hurt to the corporate. It additionally sought details about the well being of Maurice, 73, who suffered extreme accidents in a 2020 bicycle accident from which he’s nonetheless recovering.

Legion additionally despatched a letter to the board that it launched demanding the elimination of the Marciano brothers, arguing they offered a cloth danger to the agency’s turnaround efforts. Guess responded by publicly defending administration and its latest monetary outcomes. It stated it “strongly refuted” the most recent claims of sexual wrongdoing towards Paul Marciano and was “contesting them vigorously.”

Legion started its proxy marketing campaign March 16 after Guess indicated it deliberate to re-nominate the brothers to board seats. That week, a 3rd lawsuit was filed accusing the board of aiding and abetting sexual harassment by permitting Paul Marciano to remain on the firm.

The go well with detailed allegations by a 3rd unidentified mannequin who stated she labored extensively for Guess and had been sexually harassed by Paul Marciano throughout a July 2020 picture shoot at Lake Como in Italy. The lawsuit doesn’t identify him as a defendant.

Distinguished Los Angeles legal professional Lisa Bloom, whose agency dealt with the three new lawsuits, held a press convention that week throughout which all three fashions and different accusers spoke.

The mannequin who alleged Marciano compelled oral intercourse on her recognized herself as Amanda Rodriguez and tearfully learn a press release saying the incident had precipitated “flashbacks, panic assaults, nightmares, debilitating despair and suicidal ideas.”

Her lawsuit is now in arbitration.

Following the press convention, the mannequin who made the federal intercourse trafficking allegations modified attorneys and dropped her lawsuit. Her new legal professional didn’t return a request for remark.

In a press release, Marciano’s legal professional, Gary Jay Kaufman, stated the “dismissed lawsuit was baseless like others filed by Ms. Bloom and, in these instances too, we’re extraordinarily assured that we are going to prevail in a court docket of legislation the place details matter.”

Legion established an internet site for its marketing campaign referred to as A Higher Guess and printed an investor presentation tallying different sexual harassment and assault allegations towards Paul Marciano. The presentation stated the corporate has paid $920,000 in settlements since 2018 associated to allegations towards Paul Marciano and contained hyperlinks to lawsuits relationship way back to 1994.

Whereas Legion has praised the turnaround below Alberini, who was appointed after the 2018 intercourse scandal, it has traded jabs with the corporate over the efficiency of the inventory. Shares are down over the previous 12 months regardless of positive factors by the Customary & Poor’s 500 and had been down about 4% at $22.94 on the shut of buying and selling Friday, after the vote outcomes had been introduced. Final month, Guess introduced a $175-million accelerated share buyback program.

The corporate stated it had tried to achieve a “mutually agreeable path ahead” with Legion, together with a brand new environmental, social and governance committee and the share buybacks, however was rejected. It additionally introduced the formation of a board committee of unbiased administrators assisted by outdoors authorized counsel to probe the post-2018 allegations towards Paul Marciano.

Guess stood by its place of re-nominating the Marciano brothers to the board and stated Legion’s marketing campaign is “primarily based on info from the media and from misinformed and uncorroborated sources.”

ISS, one of many two shareholder advisory corporations, sided with Legion, concluding that whereas the 2 brothers made “outsized contributions” to the corporate’s success over the previous 40 years, that was “irrelevant” to the present scenario. It added that “elimination of the Marcianos seems to be the one course out there to start a clear break on this lengthy and sordid thread within the firm’s historical past.”

Glass Lewis, the opposite advisory agency, acknowledged the Marciano’s Guess stake doubtless doomed Legion’s marketing campaign however stated the corporate would profit by “transferring on” from the Marcianos as administrators whereas the board ought to overview Paul Marciano’s employment given “the intensive record of allegations of sexual misconduct and settlements and his speedy affect on the tradition of the enterprise.”

Through the agency’s heyday the Marciano brothers made the Forbes 400 record of richest People however haven’t accomplished so in years. Guess’ market cap nowadays is $1.4 billion, effectively beneath the place it was at its apex some 15 years in the past when the inventory was round $50 a share.

Susan Anderson, a retail analyst at B. Riley, agreed the inventory value is lagging however stated the model has skilled a resurgence below its chief government and Paul Marciano’s son Nicolai Marciano, who has had a hand in growing fashions for the corporate’s youthful prospects.

She stated it was unclear at this level what function the Marciano brothers are taking part in within the firm’s efficiency. “Clearly they constructed a fantastic model,” she stated. “It’s exhausting to say if they’re making a major influence on the model proper now.”