A campaign to oust Guess co-founders Paul Marciano and Maurice Marciano from the company’s board over a sexual assault scandal failed to win enough votes Friday at the Los Angeles clothing firm’s annual meeting, but the fund activist cover story behind the effort vowed to continue their battle.
Legion Partners, a Los Angeles fund that took a 2.5% stake in Guess, had asked shareholders not to support the re-election of directors Paul Marciano and his brother Maurice, accused of turning a blind eye to accusations of sexual harassment and assault against Paul. . Some of the allegations date back decades, others arose in lawsuits filed this year.
Paul Marciano, 70, and his lawyers have denied any wrongdoing.
Legion’s proxy campaign garnered support from the two major shareholder advisory firms, which said the company’s continued affiliation with the Marciano brothers posed a risk to the brand. That support came despite the fact that the campaign had virtually no chance of success, as the brothers own about 41% of the outstanding shares.
The fund did not name its own list of directors. It was based on a company policy that requires any director in an uncontested election who receives a greater number of “retained” votes than “for” votes must submit a letter of resignation for consideration by a board committee. Legion did not reach that threshold.
The company announced that, based on the preliminary results of the vote, the Marciano brothers and two other board members were re-elected.
“We will continue to engage with our shareholders and remain steadfast in our commitment to act in the best interest of the Company and all Guess shareholders. The Board of Directors takes its fiduciary duties very seriously, believes in due process, and will continue to make its decisions based on factual findings,” Guess said in a statement.
Paul Marciano is one of four brothers who moved to Los Angeles from France and founded the company in 1981. He grew to become a global retailer of clothing and accessories, with marketing campaigns directed by Paul that featured famous models such as Anna Nicole Smith, Kate Upton and others. Two other brothers left the company years ago.
Guess operates more than 1,000 stores worldwide and earned $171 million on $2.6 billion in sales in its last fiscal year, though it’s no longer the fashion brand it once was. The hedge fund argues that the allegations have depressed the company’s shares despite a change led by Chief Executive Carlos Alberini.
“We strongly believe there are some aspects of this situation that are appropriate for us to continue through potential litigation centered around board fiduciary issues,” Legion CEO Ted White said in response to the vote.
In recent years, Legion has run successful campaigns to change the boards at Bed, Bath & Beyond and Kohl’s retailers. He began investing in Guess in October after meeting with the company and deciding the move was being delayed due to the brothers’ continued affiliation with the company, according to a regulatory filing.
Amid the burgeoning #MeToo movement in 2018, Sports Illustrated swimsuit model Kate Upton gave an interview alleging that Paul Marciano groped and kissed her during the filming of a 2010 ad campaign when she was 18, and when she turned him down, he later called her “disgusting” and a “fat pig”.
He called the allegations “preposterous,” but other women have come forward accusing him of inappropriate comments and text messages and unwanted advances, including kissing and groping, according to a company regulatory filing.
That prompted a board investigation that concluded that “on certain occasions, Mr. Marciano exercised poor judgment in his communications with models and photographers and by placing himself in situations where plausible allegations of misconduct could and did arise. inappropriate,” the filing says.
The company entered into settlement agreements with five women for a total of $500,000. Marciano stepped down as CEO in 2018 and was set to step down as creative director. However, the following year, Guess made a radical change and announced that he would remain as creative director.
In January 2021, an unidentified model filed a lawsuit in Los Angeles Superior Court that reignited the scandal.
She alleged that Paul Marciano had sexually harassed her after she started working for Guess in 2017. Then, after taking time off to give birth, the woman alleged that she met him at a West Hollywood address in February 2020 to what he thought would be an argument. of new photo sessions. However, the space turned out to be an empty apartment where she alleged that Marciano forced her to perform oral sex on him.
That allegation was followed by a federal sex-trafficking lawsuit filed in October by an aspiring Guess model who alleges Paul Marciano raped her in 2013 in a Beverly Hills hotel room, where she had met him hoping to talk about working for him. the company. The unidentified model said she later did test shoots for Guess, but was never given any work.
Marciano’s lawyers have called the latest allegations “baseless.”
Before the proxy fight began, Legion earlier this year demanded that Guess’s board launch investigations into its oversight of Paul Marciano and into any employees, officers and directors whose conduct might have caused harm to the company. He also sought information on the health of Maurice, 73, who suffered serious injuries in a bicycle accident in 2020 from which he is still recovering.
Legion also sent a letter to the board that it published demanding the removal of the Marciano brothers, arguing that they posed a material risk to the company’s turnaround efforts. Guess responded by publicly defending the management and its recent financial results. He said he “strongly refuted” the latest allegations of sexual abuse against Paul Marciano and “strongly disputed” them.
Legion began its representation campaign on March 16 after Guess indicated it planned to re-nominate the brothers for board seats. That week, a third lawsuit was filed accusing the board of aiding and abetting sexual harassment by allowing Paul Marciano to stay with the company.
The lawsuit details allegations by an unidentified third model who said she worked hard for Guess and was sexually harassed by Paul Marciano during a July 2020 photo shoot at Lake Como in Italy. The lawsuit does not name him as a defendant.
Prominent Los Angeles attorney Lisa Bloom, whose firm handled the three new lawsuits, held a news conference that week during which the three models and other accusers spoke.
The model who alleged Marciano forced her to have oral sex identified herself as Amanda Rodriguez and tearfully read a statement saying the incident had caused “flashbacks, panic attacks, nightmares, debilitating depression and suicidal thoughts.”
His lawsuit is now in arbitration.
After the press conference, the model who made the federal sex trafficking charges changed her attorney and dropped the lawsuit. Her new attorney did not respond to a request for comment.
In a statement, Marciano’s attorney, Gary Jay Kaufman, said the “dismissed lawsuit was baseless like others brought by Ms. Bloom and, in those cases as well, we are extremely confident that we will prevail in a court of law where Facts matter.”
Legion established a website for their campaign called A Better Guess and posted an investor presentation listing other allegations of sexual harassment and assault against Paul Marciano. The filing said the company has paid $920,000 in settlements since 2018 related to allegations against Paul Marciano and contained links to lawsuits dating back to 1994.
While Legion praised the turnaround by Alberini, who was appointed after the 2018 sex scandal, he has traded criticism with the company over stock performance. The shares have fallen over the past year despite gains on the Standard & Poor’s 500 and fell about 4% to $22.94 at the close of trading on Friday after the results of the vote were announced. Last month, Guess announced a $175 million accelerated share buyback program.
The company said it had tried to reach a “compromised path” with Legion, including a new environmental, social and governance committee and share buybacks, but was rebuffed. He also announced the formation of a board committee of independent directors assisted by outside counsel. attorney to investigate the post-2018 allegations against Paul Marciano.
Guess stood by his position on re-nominating the Marciano brothers to the board, saying Legion’s campaign is “based on information from the media and misinformed and uncorroborated sources.”
ISS, one of the two shareholder advisory firms, sided with Legion, concluding that while the two brothers made “outsized contributions” to the company’s success over the last 40 years, that was “irrelevant” to the company’s success. Current situation. He added that “the removal of the Martians appears to be the only path available to begin a clean break in this long and sordid thread in the company’s history.”
Glass Lewis, the other advisory firm, acknowledged that Marciano’s Guess involvement likely doomed Legion’s campaign, but said the company would benefit from “moving ahead” of the Marcianos as directors, while the board should review Paul’s employment. Marciano given “the extensive list of accusations of sexual abuse”. misconduct and settlements and their immediate influence on business culture.
During the company’s heyday, the Marciano brothers made the Forbes 400 list of richest Americans, but they haven’t for years. Guess’s market capitalization these days is $1.4 billion, well below its peak some 15 years ago, when the stock hovered around $50 a share.
Susan Anderson, a retail analyst at B. Riley, agreed that the stock price is lagging, but said the brand has seen a resurgence under its CEO and Paul Marciano’s son, Nicolai Marciano, who was involved in the fashion development for the company’s youngest customers.
She said it was unclear at this point what role the Marciano brothers are playing in the company’s performance. “They clearly built a great brand,” she said. “It’s hard to say if they’re having a significant impact on the brand right now.”