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ISS weighs in against Guess' Marciano brothers

Richard Collings
Guess co-founders and brother Maurice and Paul Marciano, dressed in black, pose together for the camera at a party in Los Angeles.

Maurice and Paul Marciano, from left to right, attend a party in Los Angeles. Photo: Tommaso Boddi/Getty Images for Guess

Institutional Shareholder Services is advising Guess' shareholders to withhold their votes for the re-election of Paul and Maurice Marciano, brothers and co-founders, to the denim brand's board.

  • It also recommended that shareholders may want to withhold their votes for fellow board member Anthony Chidoni.

Why it matters: ISS, the most influential of the proxy advisers, holds a lot of sway with institutional shareholders. ISS recommendations (along with No. 2 proxy adviser Glass Lewis) often make the difference in a shareholder campaign. But not always.

Details: The proxy advisory firm focused mainly on Paul Marciano and the sexual misconduct allegations made against him.

  • ISS wrote that "there is a credible risk to the Guess brand posed by Paul Marciano's continued involvement with the company," per a press release.
  • ISS went on to note the board's inability "to separate him from the company despite a growing chorus of public allegations of sexual misconduct."
  • "Removal of the Marcianos appears to be the only course available to begin a clean break in this long and sordid thread in the company's history," it added.

The other side: Guess said it is disappointed in ISS' recommendation "prior to the completion of the independent investigation and prior to the resulting recommendations of the demand review committee."

  • Regarding the sexual conduct allegations, "the company has strongly refuted these claims and is contesting them vigorously," according to a previous statement.

Between the lines: Paul Marciano faces multiple allegations of sexual misconduct. ISS criticized Guess' 2018 investigation into one of the allegations for its "lack of transparency."

  • It also said it's "hard to understand why the board did not consider gender among its criteria for membership on the special committee."
  • Despite the investigation, more lawsuits emerged in 2021, ISS pointed out.

The bottom line: This will still be a tough fight for Legion Partners, the activist agitating for change because the Marciano brothers hold a large stake in the company. But ISS just gave the activist a major boost.

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