Dov Charney and American Apparel Analysis

Dov Charney is a Canadian businessman known for founding American Apparel in 1989. He served as the CEO of the company for over two decades (1989 – 2014) but was forced out of American Apparel by its board amid allegations of sexual harassment and mismanagement of employees. He later started a vertically-integrated apparel manufacturer in Los Angeles Apparel in 2016.

American Apparel is Textile Company working to manufacturer, design, distribute, market and former retailer based in Los Angeles, California. The company shut down all the physical stores as of April 2017 and only operates as an online-only retailer. American Apparel once had its factory in Los Angeles, California with its manufacturing took place in a seven-story 800,000-square-foot facility where it produces more than 55,000 different products and garments (Wells, 2012).

Dov Charney involved himself in almost every part of the business functioning including task from designing to production to the marketing of the products they manufacture. He had a vision and aspiration to be remembered as one of the greatest CEO and a pioneer in the textile industry. The company once hit its peak and was one of the largest clothing manufacturing company of the USA. However, Charney was unable to maintain his values and ethics and getting accused of sexual harassment and ill treatment of the employees worsen the situation. He was unable to maintain the values and ethics in line with the organizational core values.

Charney was subject to several sexual harassment lawsuits at least five since the mid-2000s, all of which were settled, dismissed, or remanded to private arbitration. In similar case in 2008, the victim was awarded 1.3 million dollars and agreeing to a settlement with a pre-determined result favorable to Charney and American Apparel (Casey, 2008). All those along with other workplace discrimination and misuse of company’s assist started to flood against Dov resulting in the company reputation falling fast and the sales being reduced in the same proportion resulting in Charney being forced out of the business that he himself started.

Charney, founder and former CEO of American Apparel used to be known by the title of Senior Partner instead. He infused his personal values into the company brand by providing factory workers a low-cost, full-family health care option and a generous $13 - 18 USD per hour allowance. He also took a company position on immigration reform. American Apparel’s idea of using vertical integration removed the need of offshore labour and made use of the working in the nation itself. For the same reason, Media Magazine in the year 2006 recognized American Apparel as Top 10 Socially Responsible Companies. Charney claims that all of those that he did was part of a business strategy rather than he being generous and doing it for moral reason. That is why he’s also known as a retail and manufacturing visionary.

No matter how good one does, if the one repeats the mistakes on a regular basis, it often clouds the good one does. And, the same happened with Charney as he was accused with several sexual harassment cases where the company had to pay millions to settle it. Furthermore, disregarding the strong hiring system, the company appeared to have hired more than a thousand of workers who had a fake social security number and actually illegal immigrants. He was also accused of misusing company funds.

The company labelled all their products to have made locally in the United States of America and used extensive marketing to promote it but later on it was discovered that the claim had no grounds to stand as more than 70% of their total manufacturing was done by third party and they had no creative control of where the product were manufactured in. The CEO reputation due to multiple accusation had been very low and so was the company being hit hard by activist and general people causing steep loss.

To be in line for a shared value, Charney had to bring change in himself to stay composed that he once was and not get into any further controversies however, that wasn’t the case and he kept on repeating the wrong that he was doing, failing to set a good positive example to everyone following him. That worsen people’s view towards him and his credibility as a leader. American Apparel desperately needed a change but Charney failed to do so. As a leader, he was leading by a wrong example and passing it forward as a value of himself and the organization. That made the American apparel lose its organizational value. With several accusations, and association with Charney, people stopped using the products manufactured by American Apparel which made the business shut down all its physical store in early 2017.

Shared values are the values that are developed by the leader of the organization in relation to the organizational values. This shared values are then passed on by the leader to the employees or other members related to the organization. These values if properly used benefit the organization and individual in several ways increasing the competitiveness of the company as well (Posner&Kouzes,2012). For example, it helps to reduce the operational cost, educational status and health problem within the organizational stature by identifying and addressing the social problems that are associated with the organization.

If the values of the organization and the person matches, it motivates one to give his/her heart and soul for the organization. For example, as a citizen I always wanted to make a difference in the lives of people positively so I jumped in when I got the opportunity to work with an organization knowing that their values of helping people in need and uplifting their standard is what they value as well. That was a common ground for me and value that me as an individual and the organization shared motivating me to jump into the ship fully motivated to deliver.

References

Casey, N. (2008). Court Criticizes Arbitration Pact in American Apparel Harassment Case . The Wall Street Journal . Retrieved 20 March 2018, from wsj.com/articles/SB122575572996695011

Posner, B. Z., & Kouzes, J. M. (2012). The Leadership Challenge (5 ed.) . U.S.A: John Wiley & Sons.

Wells, J. (2012). American Apparel CEO: Tattered, but Not Torn. CNBC. Retrieved 20 March 2018, from web.archive.org/web/20140120150020...

Dov Charney was a Canadian born business man who started his career at an early age importing t shirts from the United States and selling them to his friends. His fascination with American made products such as t shirts led him to move to the United States and with the support of his father started manufacturing in South Carolina in 1990s.

By 2003 Charney had opened his first retail shop and employed over 1300 people.

“Charney is producing clothes that kids want to wear, that shops want to stock, and that have begun to change the imprintables business. Macklem, K. (2003, Apr 14)”

Fashion the Observer mentioned American Apparals as the Lable of the Year. It published in The Guardian writing, “Our winner is the brand that turned a sexy T-shirt/spandex leggings or skinny jean combo into the uniform of Britain’s twentysomethings in 2008, (Vernon, 2008)”

His products we the benchmark at the time. Everyone wanted to buy them.

American Apparel has been named one of the top 15 suppliers for the United States Department of Defense. The manufacturing company, who makes and supplies uniforms for the military, was given the Gold Star Award by the Defense Logistics Agency. (Desazo, 2015) His company even manufactured clothes for the army.

But even with his huge success, Don Charney faced problems. He was charged multiple times with sexual misconduct and his image started declining in the organization as well as the general public. Through September 2014, the company incurred $8.2 million in insured litigation costs and $1.2 million in uninsured costs due to Charney’s sexual liaisons, court papers said (REUTERS, American Apparel details allegations of sexual misconduct by ousted CEO, 2015). This along with his move to expand his retails aggressively made the company lose a lot and reach liquidation. According to FORTUNE magazine American Apparel filed for its second bankruptcy protection in just over a year, weighed down by intense competitive pressures facing U.S. teen retailers and a rocky relationship with its founder. (Reuters, 2016)

Forbes magazine explains about a Canadian company purchasing American Apparel in its article titled “American Apparel Sells To Canadian Firm And Will Close all Stores. (Bisnow, 2017)”

Another article in FORTUNE says, “American Apparel spokeswoman Arielle Patrick said the company was laying off about 2,400 workers in Southern California. The company had 2,166 employees at its headquarters in Los Angeles, and 959 employees at the nearby South Gate manufacturing facility. (REUTERS, 2017)”

This case shows how important it is for the leader to have values as people follow you not only for your success but for the values you believe in and practice. When other companies were outsourcing manufacturing for cheaper labour, he started a business right in his town and made huge profit giving job opportunities to a lot of people. Don Charney’s even though was famous, innovative, modelled the way by challenging the process in the manufacturing business had a bitter fall.

Company investigators also discovered Charney had kept videos of these sex acts on a company server, the papers said. The company said he also sent employees emails with pornographic videos and photos, and accused him of using ethnic slurs against certain employees. (REUTERS, American Apparel details allegations of sexual misconduct by ousted CEO, 2015) A leader needs to have respect towards his employees regardless of their gender and race. A leader without these values will not have followers and without followers the leader will cease to become a leader and this is exactly what happened to Don Charney.

Shared values help structure an unseen guidance for the people in the organization. For example people understand that fraudulent activity such as theft or bribery is wrong. This become an ethical rule for all and thus is a shared value. Similarly sexual harassment with employees is morally wrong. This is another shared value. Without shared values the ethical structure in an organization crumbles resulting in grievances and will even affect the growth and sustainability of the organization. “…when you are the leader, other folks’ values need to be considered if they are going to be committed. Because we know from our research that commitment flows from a strong sense that personal values are clear and shared, it’s important to discuss values at the beginning of a project. (Kouzes & Posner, 2003)”

References

Macklem, K. (2003, Apr 14). Doing the rag trade right. Maclean’s, 116, 40. Retrieved from search.proquest.com/docview/218566...

Bisnow. (2017, January 17). American Apparel Sells To Canadian Firm And Will Close All Stores. Forbes .

Desazo, B. (2015, January 13). American Apparal earns Gold Star Award. THE Selma Times - Journal .

Kouzes, J., & Posner, B. (2003). THE LEADERSHIP CHALLENGE Workbook. San Francisco: Jossey-Bass.

REUTERS. (2015). American Apparel details allegations of sexual misconduct by ousted CEO. CNBC. Retrieved from cnbc.com/2015/06/24/american-appar...

Reuters. (2016, November 14). American Apparel Just Filed for Bankruptcy Protection Again. FORTUNE . Retrieved from fortune.com/2016/11/14/american-ap...

REUTERS. (2017, January 17). Bankrupt Retailer American Apparel Begins Laying Off Thousands of Workers. FORTUNE . Retrieved from fortune.com/2017/01/16/bankrupt-am...

Vernon, P. (2008, Nov 30). Laabel of the Year: American Apparal. The Guardian International Edition . Retrieved from theguardian.com/lifeandstyle/2008/...

Mr. Dov Charney, was fired from American Apparel, the company he founded after allegations of sexual harassment and misuse of corporate funds were lodged against him. He was the CEO of American Apparel when he was suspended for 30 days. He was later terminated after months of suspension. He was replaced by Paula Schneider (Dastin, 2014).

Organizational values are the guidelines of any company. It is these very values that help employees in their day to day activities. And its founders are the ones who establish these values in the organization. It is therefore safe to say that, the initial values of any company are the values that the founders and early employees believe in. Dov Charney’s core values neither matched with his organization nor his employees. His failure to lead the company and set an example has cost dearly to the company that once enjoyed a gross margin of around seventy percent in its retail sales. The company’s gross margin was around seventy percent while luxury brands Prada’s blended around sixty five percent (Groth & Bhasin, 2012).

Dov Charney started with to manufacture t-shirts instead of importing them. He started early at an age of 20 years with a debt of $10000 from his father. He was involved in nearly every aspect of the business: design, manufacturing and marketing. The primary objective was to sell garments to screen printers and wholesale clothiers in the United States and Canada (Daren Fonda, 2001). In early 2000’s American Apparel employed over 4,500 employees and generated $250 million per annum (Watamanuk, 2016)

American Apparel’d downfall started when an article was published in claudineko.com. Dov Charney had masturbated twice in front of the young female journalist. She also mentioned that Dov Charney telling her that he was seduced because she told him that she liked dirty shoes (Jane, 2004). Lawsuits were filed against him for sexual harassment. These cases tarnished the reputation of the company. And now, after the termination of Dov Charney, and the downfall of a company that once peaked more than $ Six hundred millions in sales, have filed for bankruptcy for the second time endangering jobs of four thousand seven hundred employees across a hundred and ten stores (Bloomberg News, 2017).

Dov Charney failed to live up to his own company’s core value. American Apparel accused him of violating policies on harassment and retaliation against former employees after he was terminated. His employees filed multiple sexual allegations against him. His actions have led to the downfall of the company. Dev Charney sued American Apparel for defamation after he was fired (Matt Townsend, 2015).

References
Jane. (2004, June/July). Jane. Meet Your New Boss .

Jenkins, A. (2017, July 12). American Apparel Founder Dov Charney Gives Odd Answer to Question About Having Sex With Employees . Retrieved from Fortune: fortune.com/2017/07/12/american-ap...

Watamanuk, T. (2016, February 23). The Rise and Eventual Downfall of American Apparel . Retrieved from Highsnobiety: highsnobiety.com/2016/02/17/americ...

American Apparel is a clothing manufacture, designing, distributor, marketer and retailer based in Los Angel. Mr. Dov Charney was fired from American Apparel, the company he founded after allegations of sexual harassment and misuse of corporate funds were lodged against him. He was the CEO of American Apparel when he was suspended for 30 days. He was later terminated after months of suspension. He was replaced by Paula Schneider (Moor & Littler, 2014).

If organizational and personal goals would align each other, then people will be more committed towards the work and the organizations. If my personal goals are aligned towards the organizational goals I will be motivated to work and then it will be betterment for the whole organization. But, for American Apparel, Dov Charney’s core values neither matched with his organization nor his employees. His failure to lead the company and set an example has cost dearly to the company that once enjoyed a gross margin of around seventy percent in its retail sales. The company’s gross margin was around seventy percent while luxury brands Prada’s blended around sixty five percent. It is therefore safe to say that, the initial values of any company are the values that the founders and early employees believe in.

American Apparel’d downfall started when an article was published in claudineko.com. Dov Charney had masturbated twice in front of the young female journalist. She also mentioned that Dov Charney telling her that he was seduced because she told him that she liked dirty shoes. Lawsuits were filed against him for sexual harassment (Ko, 2004). These cases tarnished the reputation of the company. And now, after the termination of Dov Charney, and the downfall of a company that once peaked more than $ Six hundred millions in sales, have filed for bankruptcy for the second time endangering jobs of four thousand seven hundred employees across a hundred and ten stores (Watamanuk, 2016).

As the leaders so the followers, if the leader is so ineffective, the leader was up to his self-interest only which led the followers to do the same. A leader can only model the way but cannot do everything on its own, as Dov Charney was a dictatorial leader; he didn’t give any authority to his employees and took all the pressure which led the company to failure and huge loss. He failed to live up to his own company’s core value. American Apparel accused him of violating policies on harassment and retaliation against former employees after he was terminated. His employees filed multiple sexual allegations against him. His actions have led to the downfall of the company.

References

Ko, C. (2004). Meet your new boss. Jane, June/July, pp. 136Á141 .

Moor, L., & Littler, J. (2014). Fourth worlds and neo-Fordism: American apparel and the cultural economy of consumer anxiety. In Cultural Studies and Anti-Consumerism (pp. 192-215). Routledge.

Watamanuk, T. (2016). The Rise and Eventual Downfall of American Apparel . Retrieved from highsnobiety.com/2016/02/17/americ...

Mr. Dov Charney is a Canadian businessman who found American Apparel and served as CEO of the company from 1989 to 2014. Charley is known for his fashion sense. His first venture in fashion began in 1991, when he started making t-shirts under American Apparel. American Apparel is a North American clothing manufacturer, designer, distributor, marketer and former retailer based in Los Angeles. American Apparel was initially a wholesale brand but it expanded to retail market in 2003 and became the largest single garment factory in The United States. The mission and vision of American Apparel consists of: committed to high quality product, art, design and technology, employee care and limitations in the industry. In American Apparel, hiring was done on the basis of sense of culture and fashion not based on the resume.

Charney was fired from the company he founded in December 2014 after suspension for six months for allegedly misusing funds and for allowing the posting of nude pictures of a former employee who has accused him for sexual harassment on the internet (2014). He was charged to seven public sexual harassment lawsuit and sued by four models for sexual harassment. This act of him not only spoiled the brand name but also costs millions to the company. After he was fired from the company, he sued American Apparel for defamation. The legal battle resulted in filing for bankruptcy and laying off 2,400 Southern Californian workers. After that, American Apparel started shutting down factories and stores.

As a founder and leader, Charney was supposed to set an example for all the employees by aligning the actions with the shared values but he failed to do so. He could not align himself with the core values of the company he himself has founded. In other words he shattered the shared values of the organization affecting the goodwill of the organization and incurring monetary loss to the company. He sets an example for how the failure to live the shared values can cost you and your company.

Shared values are developed by the organization’s leaders and adopted by other members. They form the core values of an organization which everyone believes in. These values provide ethical guidelines for the operation of the organization. Shared values provide business aspirations. The shared values are important for clear communication, aligning decisions, establishing proactive corporate culture and maintaining collaboration and balance (MacFarland, 2013).

References

(2014, December 17). Retrieved from https:/entrepreneur.com/article/246872

MacFarland, S. (2013, November 6). Huffpose. Why Should Company and Employees have Shared Values?