A proxy marketing campaign to drive Guess co-founders Paul 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 help for the reappointments of administrators Paul Marciano, who has been accused of sexual harassment and assault, and his brother Maurice, who's accused of turning a blind eye to the allegations. A few of the allegations return a number of a long time, 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 help of the 2 main shareholder advisory corporations, which stated the corporate’s continued affiliation with the Marciano brothers posed a threat for the model. That help got here though the marketing campaign had nearly no probability of succeeding for the reason that 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 based mostly on preliminary vote outcomes, the Marciano brothers and two different board members had been reelected.
“We are going to proceed to have interaction with our shareholders, and we stay steadfast in our dedication to performing in the most effective 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 selections based mostly on factual findings,” Guess stated in an announcement.
Legion issued its personal vote tally saying that solely 17% of non-insider shareholders voted to help Paul Marciano.
“Paul Marciano might have eked out a win at at the moment’s Annual Assembly, however he can't cover from the persistent reputational and valuation dangers we consider his continued presence poses to Guess,” the assertion stated.
Earlier, Ted White, managing director at Legion, informed The Instances that the hedge fund didn’t plan to stroll away from the combat. “We really feel strongly that there are some points of this case which might be acceptable for us to proceed to pursue through potential litigation centered on board fiduciary points,” he stated.
Paul Marciano is considered one of 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 and marketing campaigns led by him that featured superstar fashions 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.
In the previous couple of years, Legion has waged profitable campaigns to vary 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 through 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 girls 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 inserting himself in conditions wherein believable allegations of improper conduct may, and did, come up,” the submitting stated.
The corporate entered into settlement agreements with 5 girls that totaled $500,000. Marciano stepped down as government chairman in 2018 and was to transition out of his function as chief inventive officer. Nevertheless, the following 12 months Guess did an about-face and introduced he would keep on within the inventive officer place.
In January 2021, a lawsuit was filed in Los Angeles County Superior Courtroom by an unidentified mannequin that reignited the scandal.
She alleged that Paul Marciano sexually harassed her after she started working for Guess in 2017. Then, after taking a hiatus to offer start, the girl alleged, she met him at a West Hollywood tackle in February 2020 for what she thought can be a dialogue of recent picture shoots. Nevertheless, the house turned out to be an empty residence 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 says 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 take a look at 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 combat started, Legion early this 12 months demanded that the Guess board start investigations into its oversight of Paul Marciano and into any staff, officers and administrators whose conduct might need brought about 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 threat to the agency’s turnaround efforts. Guess responded by publicly defending administration and its current 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 renominate 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 title him as a defendant.
Outstanding Los Angeles lawyer Lisa Bloom, whose agency dealt with the three new lawsuits, held a information convention that week throughout which all three fashions and different accusers spoke.
The mannequin who alleged Marciano compelled oral intercourse from her recognized herself as Amanda Rodriguez and tearfully learn an announcement saying the incident has brought about “flashbacks, panic assaults, nightmares, debilitating melancholy and suicidal ideas.”
Her lawsuit is now in arbitration.
After the information convention, the mannequin who made the federal intercourse trafficking allegations modified attorneys and dropped her lawsuit. Her new lawyer didn't return a request for remark.
In an announcement, Marciano’s lawyer, Gary Jay Kaufman, stated the “lawsuit was baseless like others filed by Ms. Bloom and, in these circumstances too, we're extraordinarily assured that we'll prevail in a court docket of regulation the place information matter.”
Legion established a web site for its marketing campaign referred to as A Higher Guess and revealed 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 courting way back to 1994.
Whereas Legion has praised the turnaround beneath 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 past 12 months regardless of positive factors by the Customary & Poor’s 500 and have been down about 4% at $22.94 on the shut of buying and selling Friday, after the vote outcomes have 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 exterior legalcounsel to examine the post-2018 allegations towards Paul Marciano.
Guess stood by its place of renominating the Marciano brothers to the board and stated Legion’s marketing campaign is “based mostly on data from the media and from misinformed and uncorroborated sources.”
Institutional Shareholder Companies, one of many two shareholder advisory corporations, sided with Legion, concluding that though the 2 brothers made “outsized contributions” to the corporate’s success over the past 40 years, that was “irrelevant” to the present state of affairs. It added that “elimination of the Marcianos seems to be the one course obtainable 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 Marcianos’ Guess stake in all probability doomed Legion’s marketing campaign however stated the corporate would profit by “shifting on” from the Marcianos as administrators and the board ought to evaluation Paul Marciano’s employment given “the in depth checklist of allegations of sexual misconduct and settlements and his rapid affect on the tradition of the enterprise.”
Throughout the agency’s heyday the Marciano brothers made the Forbes 400 checklist of richest Individuals however haven't completed so in years. Guess’ market cap as of late is $1.4 billion, properly 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 worth is lagging however stated the model has skilled a resurgence beneath 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 enjoying within the firm’s efficiency.
“Clearly they constructed an important model,” she stated. “It’s laborious to say if they're making a major influence on the model proper now.”
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