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American Apparel moves to protect shareholders

American Apparel creates special committee to counteract moves by founder Dov Charney

The leadership struggles at the highest levels of American Apparel (AA) continue, as its board of directors has decided to take action to protect the company’s shareholders.

The company’s founder and CEO, Dov Charney, has been let go by AA’s board of directors due to allegations of misconduct. Charney was nonplussed by this turn of events, and decided to contest his termination.

All of this drama, it seems, is prelude to a bigger fight, and now American Apparel’s board has decided to take some action on behalf of its shareholders. The board has created a committee that will implement a one-year right plan. 

"The special committee believes this plan is an important tool to ensure that all American Apparel stockholders are treated fairly," the company said in a statement.




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According to the statement, the plan will limit Charney’s ability to seize control of the company without compensating all stockholders. The board saw the need to implement such a plan after Charney and his lawyer expressed his intent to take control of the company. Charney, who still owns 27.2 percent of the company, filed documents with the Securities and Exchange Commission stating this intent, and he has been vocal about rallying his supporters and attempting to regain control of the business he founded. 

This maelstrom of drama, of course, underscores the need for companies to take the concept of succession planning seriously. Each and every core leader of a company, from the CEO to the GC and everyone else in a position of power, should have an eye on succession planning. The board of American Apparel has settled on an interim CEO for now in the form of John Luttrell, executive vice president and chief financial officer, but the cataclysmic nature of this fight for control of the company is certainly bad for business and, as evinced by the rights plan, a potential minefield for stakeholders.






Senior Editor and Community Manager

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Rich Steeves

Richard P. Steeves is Senior Editor and Community Manager of InsideCounsel magazine, where he covers the intellectual property and compliance beats. Rich earned a B.A....

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