LAST RESORT

Of course American Apparel brought in a female CEO to clean up Dov Charney’s mess

Obsession
Fashion
Obsession
Fashion

The legal sparring between American Apparel and its ousted, estranged founder, Dov Charney, is impressive. This month alone, American Apparel has gotten a restraining order against Charney; Charney has filed suits against the company alleging defamation, securities fraud, breach of fiduciary duty, misrepresentation, conspiracy, emotional distress, and more. American Apparel responded by filing documents alleging that Charney called employees “Filipino pigs,” mimed holding a gun to an employee’s head, and stored sex footage of himself with models and employees on company equipment. (Charney’s attorneys denied the claims.)

That last action from American Apparel was part of what’s known as an anti-SLAPP motion, appropriately evoking imagery of schoolyard tussles.

While lawyers for both sides battle, the company’s new CEO, Paula Schneider, is tackling the considerable tasks of streamlining the company’s finances and corporate governance, reviving sales, and rebuilding its suffering brand image.

It’s a sizable pile to step in, so to speak, and researchers—and Schneider herself—says female CEOs are more likely to do just that.

The glass cliff

Researchers Michelle Ryan and Alexander Haslam coined “the glass cliff” in a 2005 study that showed women are more likely than men to end up in jobs with a high risk of failure, and that when things are really going downhill, companies are more likely to appoint women to their boards. On “The Devil Wears Nada,” this week’s episode of Quartz’s podcast with Marketplace, Actuality, we talked about American Apparel, and why women often end up in charge of floundering companies—think Marissa Mayer at Yahoo, Virginia Rommetty at IBM, and Mary Barra at General Motors.

“I think women are more willing to take a chance, because turnarounds don’t always work,” Schneider told Quartz. “I think men are more tied into the ego of making sure that whatever they’re doing is going to absolutely work.”

The risk of failure is exacerbated by the fact that female leaders such as Schneider are usually brought in from outside the company, making the job even tougher in a place where one’s network is comparatively weak.

Scaling up

Regardless of how you feel about American Apparel, there’s no denying its strength as a brand—a direct reflection of Charney’s entrepreneurial vision.

But, as so often is the case, it seems that with Charney’s vision and tenacity came a great ego and attitude. He sounds—by many, many accounts—like an extreme case of the “jerk bosses” we discussed on this week’s podcast. That alone is bad for business, but what might be worse is an inability to share some control with proper managers as a company grows.

American Apparel opened 450 stores in its first six years, acquiring considerable debt, and eventually teetering on the brink of bankruptcy in 2010—the same year its auditors, Deloitte & Touche, resigned after concluding the company’s financial reports were unreliable.

Letting go

According to Schneider, about 60 people reported directly to Charney when she took the reins. A typical of direct reports for the CEO of a large corporation is about 10.

Had Charney stuck to what seems to have been his real talent—guiding the brand, rather than the company—and hired someone like Schneider to run the business much sooner, they might both be in better positions now. Instead, Charney is locked out of the company he founded, and Schneider is forced to try to run it without its founding genius.

Sophia Amoruso, the founder of another provocative clothing retailer that has grown at a breakneck pace, Nasty Gal, stepped aside in January to make room for a new CEO—incidentally, Sheree Waterson, who took the fall when Lululemon’s sheer yoga pants recall cost the company some $67 million in sales.

Amoruso titled her autobiographical book of business advice #Girlboss. Leaning on a CEO so she can play to her own strengths may be Amoruso’s most mature move yet—and one that creative entrepreneurs of any gender could stand to learn from.

Listen here: “The Devil Wears Nada” on Actuality, available on iTunes or Marketplace

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