Investment firms want Guess founders fired amid sexual misconduct allegations

Guess? Inc (GES.N) is under pressure from an activist investment firm to fire the two brothers who co-founded the store, alleging that allegations of sexual misconduct against one of them are holding the company back, according to a source familiar with the situation on Wednesday.

Legion Partners, which owns a 2.5 percent stake in Guess, believes that co-founders Paul and Maurice Marciano’s continued involvement with the company casts a shadow over the company’s activities, including recent positive steps taken by CEO Carlos Alberini, according to a source familiar with the matter.

The fashion designer Paul Marciano was sued by a model last year who claimed he had sexually assaulted her, and the model Kate Upton publicly accused him of sexual harassment in 2018. In June 2018, he resigned from his post as executive chairman of the Guess board of directors, and he was succeeded by his brother, Maurice.

According to a regulatory filing, at the time, Guess and Paul Marciano entered non-confidential settlement agreements for $500,000 with five people who had accused him of inappropriate conduct, totaling $500,000 in all.

Both men are now directors on Guess’ eight-member board of directors, with Paul additionally serving as the company’s chief creative officer (CCO). According to the source, Legion believes that both Paul and Maurice should be fired; Paul because of his alleged actions, and Maurice because he chose to overlook it.

A spokeswoman for Guess, which has a market capitalization of $1.4 billion, did not immediately respond to a message seeking comment.

According to Refinitiv statistics, the brothers launched the company in 1981 and currently own 38 percent of the corporation. The stock price of the corporation has declined by around 12 percent during the last year.

The company hired Carlos Alberini three years ago, and Legion is pleased with the reforms he has implemented, including cost-cutting measures, according to a source who was not authorised to speak publicly about a private business transaction.

Previously, Legion has advocated for improvements at stores Kohl’s and Bed Bath & Beyond, and the organisation lays a strong emphasis on corporate governance. According to investors in the fund, Legion would generate a 35 percent return in 2021.

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