UPDATED: Following Shut Down Announcement, Deciem CEO Ousted by Court

Image: Deciem

Law

UPDATED: Following Shut Down Announcement, Deciem CEO Ousted by Court

Deciem is done? That is what Brandon Truaxe – the founder of the 5-year old Toronto-based brand that has garnered cult status with its high quality-yet-affordable beauty products – revealed on social media on Monday. “Almost everyone at Deciem has been involved in a major ...

October 12, 2018 - By TFL

UPDATED: Following Shut Down Announcement, Deciem CEO Ousted by Court

Image : Deciem

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UPDATED: Following Shut Down Announcement, Deciem CEO Ousted by Court

Deciem is done? That is what Brandon Truaxe – the founder of the 5-year old Toronto-based brand that has garnered cult status with its high quality-yet-affordable beauty products – revealed on social media on Monday. “Almost everyone at Deciem has been involved in a major criminal activity, which includes financial crimes,” he stated in an Instagram video.  As a result, Truaxe says that the company will “shut down all operations until further notice, which will be about two months.”

The unusual post from Deciem’s CEO – complete with a lengthy caption that calls out everyone from Deciem employees to Brad Pitt, Tom Ford, Mark Zuckerberg, and Donald Trump, among others (and raises merited questions about Mr. Truaxe’s mental state) – comes just over a year after the company sold off a minority stake to New York-based beauty giant Estée Lauder Companies Inc.

The terms of the investment were not disclosed in June 2017 when news of the deal broke (although, Truaxe has since revealed that Estée Lauder maintains a 28 percent stake in Deciem), but Estée Lauder did reveal in a statement that its partnership decision was driven by the “fast-growing, vertically integrated multi-brand” nature of the Deciem company, which maintains “a consumer-centric focus that is already impacting the world of beauty.”

Another one of the key forces behind the deal was, of course, the demographics of the average Deciem shopper: millennials and even Gen-Z consumers, both of which are giving rise to a boom in cosmetics and beauty sales. This is a consumer group for which Estée Lauder faces swift competition thanks to the likes of Instagram-friendly brands like Fenty Beauty, Kylie Cosmetics, and Glossier, just to name a few. After making a series of recent investments in the makeup segment, “It was time for Estée Lauder to also boost its skincare segment’s appeal,” Forbes noted at the time.

The Rouge CEO

Truaxe’s recent declaration-by-Instagram follows from a pattern of “erratic” social media behavior, and he is not the only chief executive acting out on social media. Late last month, Tesla CEO Elon Musk agreed to settle a lawsuit initiated by the U.S. Securities and Exchange Commission (“SEC”) after he informed his 22 million Twitter followers in a string of tweets that he was “considering taking [publicly-listed] Tesla private at $420. Funding secured,” which, according to the SEC, contained “false and misleading statements.”

At least one of Truaxe’s bizarre social media exploits has resulted in legal action. In February, the CEO officially cut ties with UK-based plastic surgeon, Dr. Tijion Esho, with whom Deciem maintained a collaborative line of lip products. Dr. Esho revealed that he had not been privy to the discontinuation of the collab, and thereafter, initiated legal action against Truaxe and Deciem, alleging that he was not paid for the partnership, including the 5 percent of monthly gross revenues that he was owed.

Dr. Esho also pointed to tarnishment to his name as a result of Deciem’s handling of the collaboration. “The formulas were rushed. And almost everyone hated them … Our lovely customers who bought ESHO and hated it,” he told Racked last year. The two are believed to have settled the budding legal matter amongst themselves and out of court.

Both Musk and Truaxe’s unfiltered and seemingly unmonitored social media behavior gives rise to a larger lesson for businesses across the board. While the SEC has held that publicly-traded companies may, in fact, legally use social media platforms to announce key information in compliance with Regulation Fair Disclosure (as long as investors have been alerted about which social media will be used to disseminate such information, at is), rogue executives should be cautioned about their use.

As Jeffrey A. Sonnenfeld, a professor at the Yale School of Management, told the New York Times this summer in connection with Musk, “Companies shouldn’t be encouraging the use of Twitter for their executives. They should forbid it.” The same should also likely go for Instagram, as well.

UPDATED (October 12, 2018): Following an intervention by the Superior Court of Justice in Ontario as initiated on Wednesday by Deciem minority investor, Estée Lauder Cos. Inc., Truaxe has been removed from the company’s board and from his role as chief executive officer. Deciem’s co-CEO Nicola Kilner is expected to maintain the CEO role and operations are expected to resume as soon as this coming week.

“We can confirm that we have commenced legal action in this matter,” Estée Lauder said in a statement on Wednesday. “[But] we cannot comment further on this pending litigation at this time.”

In a filing dated Wednesday, October 10th, Estée Lauder stated that “Deciem and/or Brandon Truaxe has not complied with the unanimous shareholders’ agreement … [by engaging in behavior] that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of Estée Lauder.” As a result, the beauty giant asked the court to immediately (and potentially, permanently) award it injunctive relief, thereby, removing Truaxe from his roles in the business he founded.

Moreover, Estée Lauder asked the court to “prohibit Truaxe from taking or purporting to take any actions in relation to the operation of Deciem’s business, including but not limited to employing or terminating the employment of any employees and/or officers of Deciem, communicating with Deciem’s employees, suppliers, or other business partners or current or prospective landlords; issuing statements or circulating media on any of Deciem’s social media accounts; or holding himself out as a director, officer, or employee of Deciem.”

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