Activist investment firm Legion Partners is calling on shareholders to vote to remove Guess executives Paul Marciano and Maurice Marciano from the denim brand’s board of directors during its annual meeting on April 22. Though typically held in June, Guess moved the meeting to an earlier date after the most recent wave of accusations against Paul Marciano were publicized. While Legion Partners claims the move was an attempt to “freeze current share ownership positions,” Guess states that the rescheduling gives shareholders the earliest opportunity to vote and helps “minimize the disruption and management distraction being caused by Legion’s campaign.”
On April 8, the denim brand shared an investor presentation and filed definitive proxy materials, which is a standard process for companies preparing to solicit shareholder votes. The materials documented the brand’s recent success—its fourth quarter and fiscal year 2022 financial results were “the best of the last decade,” with an 11.8 percent operating margin and a 26 percent return on invested capital—which it partially attributed to guidance from both Marciano brothers. It noted that it investigated allegations against Paul Marciano in 2018, and is currently conducting another inquiry regarding concerns brought up by Legion Partners. It went on to state that the investment firm is “pursuing a campaign that could jeopardize the company’s plan to drive profitable growth and value creation.”
The firm responded to Guess’ materials with a public letter on April 11 calling on board members to withhold their vote on the re-election of the brothers based on the brand’s failure to “address reality.” According to the firm, the materials were nothing more than a “marketing pitch” outlining the Marciano brothers’ accomplishments and that the brand failed to deny allegations of sexual harassment and assault against Paul Marciano or Maurice Marciano’s perceived enablement.
“Legion believes [the presentation and recent filing] ignore the reality of the situation the company is facing and insult the intelligence of its shareholders,” it said in the letter.
Paul Marciano has faced a series of sexual harassment accusations dating back to 1983. The most recent allegation was made public earlier this year, when a model referred to anonymously as “Jane Doe 3” alleged that he raped her without a condom in February 2013 while she was visiting the U.S. The allegation was the driving force behind the investment firm’s call for removal.
In its letter, Legion Partners questioned whether the company would have launched its second investigation had it not been pressured, and added that “it is difficult to take the board at its word that they are taking the allegations seriously now.” It also called attention to the special committee that Guess organized to investigate accusations in 2018, stating that it was comprised of two male, long-tenured board members who continue to serve as directors, insinuating that the individuals were not independent like the denim brand had implied. Guess remains firm with its statement that the two members have no direct or indirect material relationship with the company, adding that the committee was also advised by independent legal counsel.
Though Guess claimed that it tried to work with Legion Partners on developing solutions, the investment firm said none of the solutions involved any reduction in role for the Marciano brothers, “and thus did not fundamentally address the core issues we have been seeking to remedy.”
Shareholders will cast their vote later this month with either a white proxy card indicating they would like to re-elect all four directors, Anthony Chidoni, Cynthia Livingston, Maurice Marciano and Paul Marciano, or a blue proxy card indicating they would like to withhold their vote on the re-election of Paul and Maurice Marciano.