Cinefamily founders Dan and Sammy Harkham were not the first to use corporate governance shenanigans to avoid responsibility for professional misdeeds. (Indeed, the ubiquity is a depressing theme of this web site.) Could Dan (born 1982) and Sammy (born 1980) have taken some of their lessons from a couple of iconic 1980s brands?
Both GUESS and WWE wrestling (WWF at the time of course) made news recently owing to questionable actions taken (or not taken) by their respective boards of directors when founders’ misdeeds came to light.
Cinefamily Accountability has written previously about the similarities between two sets of brothers: Dan and Sammy Harkham and GUESS’s Paul and Maurice Marciano. Both sets of brothers used their nonprofit status to set up personal pet arts projects which were reportedly run less than professionally. When staff pushed back against abuse — in both cases — the brothers abruptly shut down operations. In both cases, headlines alleged sexual harassment and assault.
But what about the board members who allowed it all to happen? A lawsuit filed in Delaware last fall seeks accountability from the “enabler” board members who tolerated "sustained, despicable, and abusive sexual misconduct" by GUESS co-founder Paul Marciano. The investors who filed the lawsuit charged board members breached their fiduciary duties and that the Marcianos had "stock[ed] the board with longtime relationships that would not challenge their whims."
The investor lawsuit against GUESS board members appears to be open and moving forward.
Usually, boards of directors address these problems — abuses of power, sexual assault, workplace violence — because addressing problems is their job, and because they have various legal responsibilities to address problems. But sometimes an organization is structured to prevent meaningful oversight, legal responsibilities be damned.
Consider Vince McMahon, the former CEO of World Wrestling Entertainment. McMahon resigned last year after the Wall Street Journal reported on payouts related to his sexual misconduct. But guess what: he’s back! Did the board want McMahon back? No! So McMahon went and got himself a new board. (More lawsuits presumably incoming.) Matt Levine explains:
There are some public companies where the chief executive officer (and, usually, founder) is also the controlling shareholder. This creates a weird dynamic for those companies’ boards. What if the CEO does something bad, and the board concludes that he should no longer run the company? Ordinarily, in that scenario, the board would fire the CEO. But here the CEO is the controlling shareholder, and he can fire the board.
Board oversight shouldn’t mean less because a founder – like McMahon, the Marcianos, or Dan Harkham – has the power to replace the board. But often it does.