Shares of American Apparel Inc. (APP) surged more than 7% in midday trading after the retailer’s board of directors ousted founder and Chief Executive Dov Charney.
The company’s board voted unanimously late Wednesday to replace Charney as chairman and “terminate his employment as president and CEO for cause,” a press release stated, which also noted that the action “grew out of an ongoing investigation into alleged misconduct.”
Charney, who founded American Apparel in 1998, has been the subject of a series of sexual harassment lawsuits from employees in recent years. The Wall Street Journal described him as an executive who could sometimes be seen, “wandering around his factory in his underpants.”
In an interview with Marketplace published in January, Charney identifıed himself as a source of trouble, telling the publication:
“My biggest weakness is me. I mean, lock me up already! It’s obvious! Put me in a cage, I’ll be fine,” he said. “I’m my own worst enemy. But what can you do? I was born strange.”
Allan Mayer, the company’s newly-appointed co-chairman, said in a statement obtained by LA Times: “This is not easy, but we felt the need to do what we did for the sake of the company. Our decision to do what we did was not the result of any problems with the company’s operations.”
Under the terms of Charney’s contract, he will be given 30 days before his termination is finalized. Interim CEO will be Chief Financial Officer John Luttrell.
Board members said they plan to find a new permanent CEO to replace 45-year-old Charney.
APP soared more than 16% in pre-market hours following the news. But at 78 cents, the company is still a pink stock. American Apparel topped $15 p/sh as recently as 2007.