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The Continuing Saga of Dov Charney and his Underpants: A Story of Leadership Lost

March 13, 2011

Last July I wrote a post about American Apparel founder Dov Charney’s problems. I was intrigued by how a young Montreal college student created a highly successful clothing company, only to watch it begin to disintegrateyears later as a result of his odd behavior.

Since my post American Apparel has been in and out of the news. Recently, Charney and his company were hit with a $260 million law suit for nonconsensual sex, filed by a former female employee who describes a lurid case of abuse of power. At the time Irene Morales (now 20) was just turning 18. In her suit, Morales says the demand for sexual favors went on for eight months.

Within a few days of the lawsuit being made public, a judge on March 10 ordered a temporary halt to the case, based on Charney’s lawyer’s claim that Morales had earlier signed legal papers stating that any issues she had with the company would be dealt with privately. The judge now has to decide whether the case can be heard in court.

This is bizarre – that a teenager had allegedly signed legal documents aimed at protecting American Apparel should any dispute arise in the future. This is tantamount to carte blanche for Charney, an open licence to do as he pleases with his employees.

As I said in my July 5, 2010, post:
“…when the boss inserts his own work style and sexual preferences into the workplace all hell will eventually break loose. And that’s what’s happening at American Apparel. Industry observers have begun a death watch of the company, with the latest news being its deteriorating financial performance.

This is a shame. American Apparel’s imminent demise shouldn’t be happening, but it is because of what I’ve briefly described above. When a company’s purpose (read mission) is derailed and its vision is diluted because of its CEO’s behavior (in this case also its founder), and in the context of a highly competitive, cost-driven and volatile industry, it’s virtually impossible for a firm to remain viable in the long-term, let alone medium-term.”

Have the wily Charney and his company run out of time?

Stay tuned for further developments in this very sad story of a once innovative company.


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