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Guess Co-Founder Brothers Survive Investor Attempt to Oust Them

Guess Co-Founder Brothers Survive Investor Attempt to Oust Them

The co-founder brothers of Guess? Inc. survived an attempt by shareholders to oust them over corporate-governance concerns and previously reported sexual misconduct allegations against one of them.

In a statement, Guess said that shareholders had voted to re-elect Maurice Marciano, Paul Marciano and two other directors, based on preliminary vote results from the annual shareholder meeting. 

In addition to retaining a board seat, Paul Marciano will remain as chief creative officer. The brothers have held various executive roles since they founded the company in 1981. They own 44.1% of Guess shares, according to data compiled by Bloomberg. 

Guess Co-Founder Brothers Survive Investor Attempt to Oust Them

Activist investor Legion Partners Asset Management, which has a stake of about 2.5%, had been pushing for the brothers to step down. In a statement Friday, the firm said about 83% of noninsider shareholders who voted backed Paul Marciano’s removal from the board.

“Paul Marciano may have eked out a win at today’s annual meeting, but he cannot hide from the persistent reputational and valuation risks we believe his continued presence poses to Guess,” Legion said.

In its own statement, Guess said its management team remains focused on the company’s transformation strategy. “The board of directors takes its fiduciary duties very seriously, believes in due process and will continue to make its decisions based on factual findings,” Guess said.

Advisory Firms

Earlier this month, shareholder-advisory firms Institutional Shareholder Services Inc. and Glass Lewis & Co. also recommended that investors remove the brothers, citing research by Legion finding that at least 17 women have made sexual-misconduct claims against Paul Marciano. That’s resulted in $920,000 in disclosed settlements since 2018, according to Legion. 

An investigation by Guess into Paul Marciano’s behavior concluded in 2018 that many of the allegations against him couldn’t be corroborated. Still, “we believe there is a valid argument to be made that his continued ties to the company, particularly as a director and key executive, not only poses a long-term reputational risk to the company and its brand, but could also put the company at greater litigation risk,” Glass Lewis wrote in its April 15 report to shareholders. 

Legion and the shareholder-advisory firms have argued that Maurice didn’t do enough to investigate the actions of his brother, even though he was in a position to do so. 

In a statement earlier this month in response to the ISS recommendation to vote against the Marciano brothers, Guess said that the board is conducting an investigation into Legion’s demand letter. The company said it was “very disappointed” that ISS recommended shareholders withhold their votes for the brothers before the investigation was complete. 

Guess said it strongly believes that “Legion Partners’ proposed changes to the board and management could risk the company’s transformation and growth and could jeopardize the long-term value of the company.”

Guess shares were down 3.1% in New York trading at 1:10 p.m. That puts the stock down 2.6% this year, better than the 9.4% decline of the S&P 500 index.

©2022 Bloomberg L.P.