A Conversation with Chelsea Grayson,
CEO of American Apparel  
Chelsea Grayson and Larry Taylor
Chelsea Grayson and Larry Taylor 
Event Recap
On Tuesday, February 21, 2017 NACD SoCal hosted Ms. Chelsea Grayson, CEO of American Apparel at the California Club for a lunch event.  The program format was a fireside chat moderated by our board member, Dr. Larry Taylor.  There were nearly 70 attendees, primarily corporate directors and business executives who were eager to hear about the intriguing American Apparel saga.

After acknowledgement of the Chapter sponsors and our NACD Governance Fellows by the Chapter president, David Rosenblum, Dr. Taylor introduced Ms. Grayson. He described a career path, which included time as a U.S. Bankruptcy Court law clerk, and as an M&A partner at Jones Day and  Loeb & Loeb.  She joined American Apparel in December 2014 as General Counsel, Executive Vice President and Corporate Secretary, and soon thereafter accepted the additional role of Chief Administrative Officer (overseeing the HR, Risk Management and Environmental Health & Safety Departments, in addition to the Legal Department).  Less than two years later she was promoted to be the Chief Executive Officer, charged with beautifying the company to go to market and then selling the business, in order to save the iconic brand. He emphasized that Ms. Grayson was much more than a mere apparel company executive as she had substantial experience in numerous other industries, including infrastructure/engineering & construction, building products, technology, manufacturing, aerospace & defense, oil & gas, alternative energy, healthcare, retail and entertainment.

Dr. Taylor pointed the complexity of American Apparel’s history, noting that the company went from being privately owned to publicly traded to bankruptcy to privately owned to bankruptcy to sale.  Along the way there were lawsuits, poison pills,” standstill” agreements, board composition changes, charges of misconduct and a host of other issues related to governance.  He walked the audience through the timeline of the American Apparel story prior to initialing questions for Ms. Grayson. The timeline is as follows:
  • 1989       Founded by Dov Charney (a Canadian) with manufacturing in South Carolina
  • 1977       Moved operations to Los Angeles
  • 2006       Became a publicly traded company on the American Stock Exchange via reverse

  • 2010       Deloitte & Touche resigned
  • 2011       Raised $15 million from Canadian investors
  • 2013       Raised $206 million via a private offering
  • 2014       (June) Suspended Dov Charney for alleged misconduct, pending the results of an

  • 2014       (Dec)  Chelsea Grayson starts as GC; EXP/Corporate Secretary (subsequently
                     accepts CAO role)
  • 2015       (Jan) Paula Schneider starts as CEO
  • 2015       (Oct) Filed for Bankruptcy (sales had continued to decline)
  • 2016       (Jan) The Bankruptcy Court rejects bids from investment firm that was aligned with
                     Dov Charney

  • 2016       (Feb) Emerged from Bankruptcy as a private company (sales continue to decline)
  • 2016       (Sept) Chelsea Grayson named CEO and appointed to the Board of Directors;
                     Schneider leaves the firm

  • 2016       (Nov) Filed for 2nd Bankruptcy. Announced it is looking for a buyer.  Gildan Activewear
                    offers $66M

  • 2017       (Jan) Gildan Activewear of Canada wins bid for brand, some inventory and some
                    equipment, for $103M

In response to questions Ms. Grayson explained her path to the CEO position, including her rationale for accepting the general counsel position knowing the company was going through troubled times. She discussed in detail the atmosphere, the culture, the tone-at-the-top, and the tone-at-the-bottom.  The work environment and working conditions of the 9,000+ employees were described, as well as the various codes and policies that she created, implemented and enforced in order to provide infrastructure and stability for those employees. The board composition and process for going private was described.  Most interesting were all the legal tactics employed to successfully defend the company against various lawsuits in the Federal, Delaware and California courts and against a proxy contest, as well as the two poison pills and the standstill agreement that were adopted along the way as defensive measures or settlement strategies. 

Ms Grayson explained her charge and mission when she replaced Paula Schneider as CEO in September 2016. It was to improve operations in order to attract the highest and best bids for the purchase of the business, to run a fulsome sale process and to effect a sale transaction that would maximize value to the applicable stakeholders; she also noted her desire to allow the iconic brand an opportunity to survive and to save as many jobs as possible.  She talked about the replacement of management personnel who were not a good fit for the strategy going forward and the overhaul or several key departments and processes, including in the supply chain.  She then explained how she orchestrated the management presentations and negotiations with the many bidders that participated in the process and how she served as a liaison amongst the various constituents, including the bidders, the Board, the hedge funds that own the company, the investment bankers and the unsecured creditors.    
Again in response to questions, Ms. Grayson discussed how relation with the company’s shareholders changed as it went from a publicly traded company to a privately owned company.  Separately, she discussed how she had to refocus her upper management team from what she called “parking and bobbins” (i.e., minor operating practices) to the real issues, e.g., improving the supply chain, streamlining the omni-channel ecommerce customer experience, improving retail planning and allocation and developing a successful overall marketing strategy – all in an effort to preserve the brand for the right buyer.   In the end, the American Apparel brand was purchased by Gildan Activewear.  Some of jobs were saved as some manufacturing facilities were sold to other local companies, and Gildan indicated that it would continue to manufacture certain core styles in Los Angeles.  Although the American Apparel stores will close, the brand will live on.  Dr. Taylor indicated that Ms. Grayson emerged as the heroine of the American Apparel saga.

The audience was well engaged and peppered Ms. Grayson with questions that she adroitly addressed or navigated around.  It was a very entertaining and educational program. It was well received.

Thank you to all NACD Southern California Sponsors