Thursday, June 26, 2014

American Apparel and Lululemon: Sex, Lies and Firm Value Revisited

I've written before about our paper, Sex, Lies, and Firm Value.   Sound corporate governance is immensely important in protecting and creating shareholder value.  Sound governance requires the correct tone of management at the top of the firm, and the boards insistence on this tone.   Our research examines the links between indiscretions in a manger's personal lives and the impact on the firm.  We are continuing our research on the topic, and alas, Wall Street is continuing to provide us data points.  The following quote comes from an interesting article by Matt Egan, writing for CNN Money.  

"Dov Charney, the ousted chairman of American Apparel, is known for walking around his factory in his underwear and talking openly about his sex life. The company's sales have plunged in recent years and its stock now trades for 70 cents, down 96% from its high of nearly $17.
Lululemon founder Dennis "Chip" Wilson imperiled his company's brand last year by making snide remarks about overweight customers. Wilson recently stepped down as chairman after Lululemon's share price plunged in half over the past year."

Read Matt's entire article, and his interview with one of my coauthors here.  Note the incidence of founders in our sample of indiscretions.  Also, while we are revising our research on the subject, the previous version of the paper can be downloaded here.

All the best,


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