Fund wants Guess founders off board amid sexual misconduct allegations

2/2© Reuters. FILE PHOTO: Armand (L) Paul (C) and Download Hehe Futures appMaurice Marciano, founders of the GUESS?clothing line pose as they arrive at their company's 20th anniversaryparty in Los Angeles May 9, 2002. The brothers, originally from France,started the company in Los Angeles t2/2

BOSTON (Reuters) - An activist investment firm wants Guess? Inc to remove the two brothers who co-founded the retailer, arguing allegations of sexual misconduct against one of them are holding the company back, a source familiar with the matter said on Monday.

Legion Partners, which owns 2.5% of Guess (NYSE:GES), believes co-founders Paul and Maurice Marciano's ongoing involvement with the company casts a shadow over the company's activities, including recent positive steps by CEO Carlos Alberini, the person said.

Paul Marciano was sued last year by a model who accused him of having sexually assaulted her and model Kate Upton publicly accused him of sexual harassment in 2018. He resigned his position as executive chairman of Guess' board in June 2018 and was replaced by his brother, Maurice.

At the time Guess and Paul Marciano signed non-confidential settlement agreements for $500,000 with five people who had accused him of inappropriate conduct, according to a regulatory filing.

Both men are now directors on Guess' eight member board and Paul also holds the title chief creative officer. Legion argues both must go; Paul because of his alleged behavior and Maurice for having ignored it, according to the person.

The Wall Street Journal first reported the story on Monday.

A representative for Guess, which is valued at $1.4 billion, did not immediately respond to a request for comment.

The brothers founded the company in 1981 and own 38%, according to data from Refinitiv. In the last year, the company's stock price has dropped about 12%.

The company hired Carlos Alberini three years ago and Legion likes the changes he has made, including cutting costs, said the source, who is not permitted to speak publicly about the private matter.

Legion has previously pushed for changes at retailers Kohl's (NYSE:KSS) and Bed Bath & Beyond (NASDAQ:BBBY) and places a heavy emphasis on corporate governance. In 2021, Legion returned 35%, according to investors in the fund.

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