Dov Charney (born January 31, 1969) is a Canadian businessman. He is best known for founding American Apparel, where he served as the CEO from 1989 until 2014. He later founded Los Angeles Apparel, a vertically-integrated apparel manufacturer. He is also a vocal advocate for immigration reform in the United States through the Legalize LA campaign, which was championed by American Apparel.
Video Dov Charney
Early and personal life
Charney was born in Montreal, Quebec. His father, Morris Charney, is an architect, and his mother, Sylvia Safdie, an artist. Charney is a nephew of architect Moshe Safdie. He attended Choate Rosemary Hall, a private boarding school in Connecticut and St. George's School of Montreal. Charney grew up with, and was influenced heavily by, the culture of Montreal and his Jewish heritage. As a teenager, Charney was an admirer of American-made products. As a teen, he became disillusioned with Quebec nationalism, which he felt was widespread during the 1980s.
Charney's teenage infatuation with the United States inspired the aesthetics and name of the apparel company he later founded. His first ventures in fashion began in high school, when he started importing Hanes and Fruit of the Loom t-shirts across the border to Canadian friends. At Choate, he claims to have shipped as many as 10,000 shirts at a time, using a rented U-Haul truck to transport the goods.
In 1987, he enrolled at Tufts University. While at Tufts, he continued to operate his business, but dropped out by 1990 to pursue the apparel business full-time. He borrowed $10,000 from his father and moved to South Carolina to transition from importing T-shirts to manufacturing them. In 1996, Charney's company restructured when it was unable to cover its debt and filed for bankruptcy reorganization under Chapter 11. On July 4, 1997, he went to Los Angeles. By 2003, Charney had opened his first retail store and employed over 1,300 people.
Maps Dov Charney
American Apparel
Building the brand
In 1991, Charney began making basic T-shirts under the American Apparel brand. The initial T-shirts were made of simple 18-single jersey and were positioned to compete with the Hanes Beefy-T. The primary objective was to sell garments to screen printers and wholesale clothiers in the United States and Canada. In 1997, as his design, the 'Classic Girl', built momentum, Charney moved manufacturing to Los Angeles. In 2000, American Apparel moved into an 800,000 sq ft (74,000 m2) factory located in downtown Los Angeles. The company knit, dyed, cut, sewed, photographed, marketed, distributed, and designed garments there, and eventually met the capacity to produce over 1 million t-shirts per week. He also opened over 180 retail locations in a total of 13 countries: United States, Canada, England, France, Germany, Israel, Italy, Japan, Korea, Mexico, the Netherlands, Sweden and Switzerland. There were also full distribution facilities in Montreal, Quebec, Canada, and Düsseldorf, Germany. For two years in a row American Apparel was recognized in Inc. Magazine's "Top 500" issue as one of the fasting-growing private companies.
It was his aim in building American Apparel that it "live beyond [his] lifetime." According to Charney: "We'll be a heritage brand. It's like liberty, property, pursuit of happiness for every man worldwide. That's my America." American Apparel eventually became the largest single garment factory in the US, employing over 6,700 people worldwide. The core demographic of young adults, which emerged as the largest market in five decades, helped lead to more than 180 stores in 13 countries, with a potential to grow to 800 locations.
All of American Apparel stores were owned and operated by the companies occupying very few mall locations. Under-penetrated in most markets, American Apparel concepts were still able to carry a broad geographic appeal. American Apparel selectively entered into new markets both domestically and internationally, with the goal of expanding through accelerated store openings.
Charney successfully created a leading basics brand for young adults. With cutting-edge advertising and product branding, Charney was able to build American Apparel's "Made in Downtown LA" operation up to "cult" like status worldwide. This cutting edge strategy offered the potential for significant expansion.
Role as manufacturer/retailer/CEO
Charney is founder and former CEO of American Apparel, but formally went by the title of "Senior Partner". He infused his personal progressive politics into the company brand paying factory workers between $13-18 USD/hr, offering low-cost, full-family healthcare for employees and taking a company position on immigration reform. American Apparel's "vertical integration" eliminated the use of sewing sub-contractors and offshore labor. In 2006, Media Magazine recognized American Apparel in its "Top 10 Socially Responsible Companies." Charney claims to not have done this for moral reasons but because it was a better business strategy. Charney is considered a retail and manufacturing visionary.
Under Charney, American Apparel implemented "team manufacturing" as opposed to the progressive bundle system of apparel manufacturing. After its implementation, garment production tripled and required a less than 20% staff increase. He formed the company as a domestic vertically-integrated manufacturer, making him the largest manufacturer still producing garments in America. Because of its vertically integrated and domestic manufacturing model, American Apparel's gross margins are actually significantly higher than other basic apparel brands. By utilizing a vertically integrated business model (based on speed-to market), Charney was able to focus merchandise for year-round styles, minimizing risk and providing consistent operating results. According to the company, its blended margins are roughly 70% (while GAP averages about 30% and luxury brands like Prada are between 65 and 70%). American Apparel controlled a significant portion of the value chain to ensure quality, speed to market, and a consistent brand positioning. In December 2007 the company purchased an additional dye house to add to production capacity.
American Apparel had the opportunity to enhance information systems to improve planning, purchasing, and allocation for wholesale and retail. The Enterprise Resource Planning (ERP) system included two phases. Phase 1, completed by the end of the first quarter in 2008, reduced raw materials inventory, increased responsiveness to demand, provided better customer forecasting, and improved supply chain visibility. Phase II included order entry and warehouse and fulfillment logistics. The company also implemented a data warehouse, which led to enhanced analytics and KPIs. Other technology included in-house pilot projects, which improved out of stock positions at retail, enhanced floor replenishment, and improved supply chains.
Initially, American Apparel was a wholesale brand that sold into the imprintable market, but in 2003 it expanded into the retail market. Its first stores were in Montreal, New York City and Los Angeles. By 2005, the company had over $200M in revenue. Retail operations have grown to include 260+ retail stores. In 2008, Charney was named Retailer of the Year at the Michael Awards, a fashion industry mainstay. The award has previously gone to Calvin Klein and Oscar de la Renta. By 2007, the total revenue of the company was valued $276 billion. At that point there were 182 retail stores worldwide.
In December 2006, American Apparel entered into a reverse merger agreement valued at $360 million with the special purpose acquisition company (SPAC) Endeavor Acquisition as a way of taking the company public. As a result of the agreement, Charney was named President and Chief Executive Officer of the publicly-traded company known as American Apparel, Inc. He remained the majority shareholder, and employees of American Apparel were given stock in the company valued at $39 million.
Charney won a variety of awards because of his business efforts with American Apparel. GQ honored him in their "Men of the Year" issue in 2003. In 2004, he was awarded the prestigious "Entrepreneur of the Year" award by Ernst & Young. In 2006, he was included in Los Angeles Times Magazine's list of the "100 Most Powerful People in Southern California." He was also included in Details Magazine's "50 Most Powerful People."
Fashion and lifestyle
Charney is known for his fashion sense, which is geared towards "young metropolitan adults." The "fit" of a shirt is something he often stresses. He was named Man of the Year by both the Fashion Industry Guild and Apparel Magazine for his design work. In 2008, The Guardian named American Apparel "Label of the Year".
From the onset, Charney was known for producing clothing that is both logo- and brand-free, which is considered important to younger consumers who are wary of corporate branding.
Charney lives in the Garbutt House, a historic mansion atop a hill in Silverlake designed by Frank Garbutt, an early movie pioneer and industrialist. The home is made entirely out of concrete due to Garbutt's deathly fear of fire. During his time at American Apparel Charney was consumed with work, often sleeping in his office at the company's factory, leaving little separation between his personal and work life. The house often functions as a dormitory for out-of-town workers doing business at the company headquarters.
Advertising and brand management
Until his recent ouster by American Apparel's board of directors, Charney was directly involved in his company's design, branding, and advertising. His print campaigns are award-winning and among the most followed in the garment industry. Charney has promoted a branding strategy that spotlighted his treatment of workers as a selling point for the company's merchandise, promoting American Apparel's goods as "sweatshop free". A banner on top of the downtown factory states "American Apparel is an Industrial Revolution".
The company is also known for its simple and provocative ads featuring women, including employees. The subjects are often not, but sometimes are, professional models, and often chosen personally by Charney from local hangouts and stores. He shoots many of the advertisements himself. His advertising has been criticized for featuring young, even teenage, models in sexually provocative poses. However, it has also been lauded for honesty and lack of airbrushing. In 2005, Charney won the "Marketing Excellence Award" in the LA Fashion Awards.
Charney received praise for his daring approach to selective advertising. Simon Dumenco for AdAge states, "...just about the only print ads I've consistently engaged with lately are for American Apparel... His ads are not only hot (they show his sexy employees modeling the merch) and briskly reinforce the brand message (which is about well-constructed, no-frills, eminently wearable, sweatshop-free clothing), but are refreshingly not celebrity-obsessed."
Dismissal
During its routine meetings in March 2014, American Apparel's board learned that an arbitrator hearing one of the sexual harassment cases against Charney and the company had reached a decision in the case. While ruling that the main harassment claim had not been proven, the arbitrator found against the company and Charney on a defamation claim, awarding $700,000 for that to Irene Morales, saying that Charney had failed to prevent a subordinate from posting naked pictures of her online. Up until then, the board had steadfastly maintained that all the allegations against Charney, most of which were likewise settled in confidential arbitration proceedings, were not factually sufficient to constitute misconduct requiring disciplinary action.
They also had strong financial reasons for replacing him. AA had posted losses in all but one of the previous 17 quarters, including $106 million during the preceding year, and the company had become a penny stock. Its financial options were limited--Charney's own portion of the company had been diluted from 45% to 27% during one effort to raise cash, which made it easier for the board to take him on. Some lenders refused to deal with the company at all while Charney was in charge, and those that did charged dearly; the interest rate on one of its major loans was 20%.
With this now "established legal fact" in hand, the board began to quietly investigate Charney and prepare for the possibility of firing him, a move they anticipated he would resist vigorously. They worked closely with the company's law firm, Jones Day, to interview employees without Charney finding out. When they were done in June, the majority of the board confronted Charney with a throffer: either he quietly resigned as CEO and took a multimillion-dollar long-term position as a consultant, or they would fire him and make public why. He chose the latter.
American Apparel publicly suspended Charney on June 18, 2014, stating that they would terminate him for cause in 30 days. The company's board claimed at the time that it had "new information" which led it to finally fire Charney. New co-chairman Allan Mayer said: "We have heard for years allegations and rumors in newspaper stories that were not sufficient to take action. But what came to our attention was not allegations and rumors but established fact." He declined to elaborate at that time. The board had just begun an investigation into how Charney responded to a 2011 lawsuit by a former employee who claimed he had held her against her will as a "sex slave", a suit settled in arbitration.
Two days later, a company insider posted a "confession" to the social network Whisper asserting that the reasons for Charney's dismissal were "purely financial ... Everything else is bullshit. The board has nothing new." BuzzFeed got in touch with the poster through Whisper and was able to obtain the board's dismissal letter to Charney. It repeated the board's earlier allegation that he had allowed a subordinate to pose as Morales on a blog and make sexually provocative posts to him, which had apparently led to major punitive damages awarded to Morales by the arbitrator, calling this a breach of his fiduciary duty. Further in that vein, the board said, it had learned of an attempt to possibly suborn perjury in a "pending litigation matter". The letter also charged Charney with misusing corporate assets for personal gain, such as paying lucrative severance packages, bonuses and salary increases in exchange for silence from putative accusers as well as using corporate apartments himself and buying travel for family members with company funds, violating company policy by refusing to attend mandatory sexual harassment training sessions and disrupting them when others attended.
As a result of Charney's behavior, the board claimed, the company's costs had increased unacceptably. "The company's employment practices liability insurance retention has grown to $1 million from $350,000 ... the premiums for this insurance are well outside of industry standards." His reputation had also hurt American Apparel's financing, as "many financing sources have refused to become involved with American Apparel as long as you remain involved with the company" and those that did had imposed "a significant premium for that financing in significant part because of your conduct." It gave him the 30-day suspension to "effect a cure" for these issues. Charney demanded the board reinstate him, threatening to sue for age discrimination.
In December 2014, Charney was terminated as a Chief Executive Officer after months of suspension. He was replaced by Paula Schneider, president of ESP Group Ltd, company of brands like English Laundry, on January 5, 2015. In December 2014, Charney told Bloomberg Businessweek he was down to his last $100,000 and that he was sleeping on a friend's couch in Manhattan. Following his suspension as CEO in the summer of 2014, Charney teamed up with the Standard General hedge fund to buy stocks of the company to attempt a takeover.
In 2016, American Apparel board dismissed a $300 million offer from Hagan Group that pushed for Charney's comeback.
Lawsuits
Charney has filed a number of lawsuits against American Apparel and Standard General in connection with his claim that he was fired illegally and disenfranchised a shareholder of the company. On March 25, Charney's lawyer Keith Fink affirmed that Charney was suing American Apparel in private arbitration for $40 million in damages stemming from a breach of his employment contract.
Additionally, on May 7, 2015, Charney sued Standard General (the hedge fund that took control of American Apparel following his 2014 ouster) for $30 million, claiming that Standard General's public statements that the investigation of Charney was "independent and carried out by a third party" was allegedly untrue, and as such was defamatory and an intentional interference with economic relations and prospective economic relations. In the same lawsuit, Charney claims the investigation of himself was a "sham" and he said American Apparel's board, controlled by Standard General, sacked him because he would not drop his fight to regain control of the retailer and accept the settlement that was offered to him (an alleged multimillion-dollar consulting--employment contract) and because he refused to release his claims as a shareholder against both the company and the investment firm.
On May 12, 2015, Charney sued American Apparel and Colleen Brown for a 20 million dollar defamation claim relating to a written statement Brown make to employees whereby she stated Charney had signed a contract whereby he agreed in writing that "he would never come back to American Apparel", which Charney claims he never signed.
On May 18, 2015, American Apparel sued Charney, accusing him of running a "scorched earth campaign" as he tried to regain control of the company. Connected to that same litigation, on June 1, 2015, the company obtained a temporary restraining order in Delaware Chancery Court preventing Charney from criticizing the company or seeking the removal of board members through July 16, 2015, the date of American Apparel's 2015 annual shareholder's meeting.
On June 19, 2015, Charney sued American Apparel and a former board member, David Danziger, alleging that Danziger interfered with Charney's economic interests when in late June 2014, he spoke to the company's second largest shareholder in an alleged attempt to block Charney's effort to gain shareholder support so he could take back control of his company. When the board realized that Charney was collaborating with the company's second largest shareholder, Five T to take control of the company and the board itself, Charney claims board member, David Danziger contacted Five T and told them that Charney was involved in acts which were criminal in nature, thereby preventing Charney from obtaining Roth's support.
On June 24, 2015, Charney sued American Apparel, the former CFO, John Luttrell, former board members David Danzinger, Robert Greene, Marvin Igelman, William Mauer and Allan Mayer. Among other things, Charney claimed the various defendants participated in a scheme to trick Charney into diluting his ownership stake in the company in early 2014 in an effort to sell the company in spite of his objections.
Activism
Under Charney's stewardship, American Apparel took a leading role in the promotion of a number of prominent social causes.
Legalize LA
Legalize LA was an immigration reform campaign conceived by Charney and promoted by American Apparel beginning in 2004. The campaign featured billboards and full-page ads in national publications as well as t-shirts sold in retail locations emblazoned with the words "Legalize LA." Proceeds from the sale of the shirts were donated to immigration reform advocacy groups. The campaign called for the overhaul of immigration laws so as to create a legal path for undocumented workers to gain citizenship in the United States.
Legalize Gay
In November 2008, after the passing of Proposition 8, which banned same-sex marriages in California, Dov Charney and American Apparel created "Legalize Gay" T-shirts to hand out to protesters at rallies. The positive reaction led American Apparel to sell the same shirts in stores and online.
Ethical views
In an interview with Vice.tv, Charney spoke out against the poor treatment of fashion workers in developing countries and refers to the practices as "slave labor" and "death trap manufacturing". Charney proposed a "Global Garment Workers Minimum Wage" and discussed in detail many of the inner workings of the modern fast fashion industry practices that creates dangerous factory conditions and disasters like the 2013 Savar building collapse on May 13, which had the death toll of 1,127 and 2,500 injured people who were rescued from the building alive.
Controversy
Charney has been the subject of several sexual harassment lawsuits, at least five since the mid-2000s, all of which were settled, dismissed, or remanded to private arbitration. A 2008 sexual harassment case against Charney ended with the victim being awarded USD 1.3 million and agreeing to an arbitration with a pre-determined result favorable to Charney and American Apparel.
Charney maintained his innocence, telling CNBC that "allegations that I acted improperly at any time are completely a fiction." The company and independent media outlets publicly accused lawyers in the lawsuits against American Apparel of extortion and of "shaking the company down."
In 2004, Claudine Ko of Jane magazine published an essay narrating multiple sexual exchanges that occurred between them while spending time with Charney. The article's publication brought extensive press to the company and Charney, who later responded that he believed that the acts had been done consensually, in private and outside the article's bounds.
References
External links
- Official American Apparel website
- Dov Charney website
- Dov Charney Photo Gallery
- Collection of Dov Charney Quotes
- Dov Charney's Rise to and Fall from (and Rise to) Grace Jossip.com
Source of the article : Wikipedia
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