How Did Dov Charney Get A $1.1 Million Bonus?

by Justin Fenner | 10:52 am, October 28th, 2010

We kinda thought that to earn their yearly bonuses, most people had to work really hard and do really great jobs. Apparently that logic doesn’t apply if you’re American Apparel CEO Dov Charney.

Charney, who’d more or less been ramming his company into the ground until earlier this month, got $1.1 million in bonuses for 2009. His total compensation for the year was $1.9 million, meaning that over half of his income for the year came in the form of a very large and delicious financial cookie.

We didn’t think a company doing as poorly as American Apparel could afford to give anyone a bonus, much less the man ultimately responsible for all the mismanagement and bad spending. Jezebel notes that among the problems the company had to deal with in 2009 were same-store sales declines, the first warning from the New York Stock Exchange (more would come later on), and paying $42,000 to Charney’s architect dad for three months worth of “architectural consulting.” Whatever that is.

So how did American Apparel manage the bonuses? BNET found that Dov’s extra cash is “linked to earnings, same-store sales and inventory levels.” While same-store sales went down, Charney can control the other factors.

“How did Charney still get a bonus? By performing on the earnings and inventory levels. Charney controls both those factors: he can order new inventory made or production halted anytime he wants; and manufacturing expenses, another major factor in AA’s earnings margin, would also go up or down as a result.”

He also loans the company a fair bit of his own money at a higher interest rate than you’d get at most banks, which the company then has to pay back. So essentially, Charney is using his company like your every day money market account, albeit a highly leveraged and really inefficiently run one.

We’d say that maybe the company’s new executive management would end some of these practices, but with as much experience as its new president Tom Casey has with bankruptcy, we think it’s a little too soon to tell whether or not he won’t leech off the company, too.

[Via Jezebel and BNET]

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