When The CEO Must Go

American Apparel fashion store on April 23, 2013 in Manchester, UK. American Apparel was founded in 1989.

The bankruptcy and attempted reorganization of American Apparel demonstrate not just that fashion is a risky business but also that, in bad times as well as good, it brings into play some unique considerations. First among those is that fashion businesses tend to arise from the unique vision of one or a very few individuals. That is true as well for tech startups, but except for a few software geniuses (such as Mark Zuckerberg), entrepreneurial masters (such as Bill Gates) and brilliant marketers (such as Steve Jobs), once a tech business gets going, skilled replacements are relatively easy to find.

That is not the case when the founder and guiding light of a fashion business is also its chief designer. As even well-established brands have demonstrated, bringing in a new designer who understands a brand’s signature looks and who can add his or her own vision while somehow keeping all that fresh (and keeping loyal customers purchasing) is not an easy feat.

The situation at American Apparel was ironically even more complicated because much of the trouble started when its founder, Dov Charney, was forcibly removed. More of a businessman than the creator of a signature style (American Apparel was all about ever-cool basics made in the USA), he dominated the company. He made a failed effort to return; and while everyone involved focused attention on that, the business lost its vision and too many of its customers, and then slid into receivership. That might have happened anyway, but the disruptions caused by the long-running Charney episode may well have been the tipping point.

It all serves as a reminder that, in fashion, getting a clear and effective legal structure into place as early as possible, with understandable methods and procedures for personnel transitions and successions, could potentially be a business-saver. True, Ralph Lauren, that grand warrior for American gentlemanly style, simply and graciously stepped aside as CEO of his company, letting the business keep running, apparently seamlessly, from there. But legal planning is not about expecting the best; it is, unfortunately, about hoping for the best while planning for the worst. And when it comes to fashion and the people in fashion, that is nearly always a prudent way to go.

Credit:  Alan Behr