The London-listed stock was down as much as 15.4% in early trading on Monday, after a petition emerged over the weekend calling on the luxury clothing retailer to "end harassment" and accusing its founder of enforcing a "hugging" culture.
Hosted using the platform Organise, the petition claims to represent 200 Ted Baker staff, and alleges there are 50 recorded incidents of harassment at the company.
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Shares of Ted Baker, which operates almost 500 stores worldwide, plunged 15 percent on the London Stock Exchange to a five-year low on the news.
The company could not immediately be reached for comment, but said in a statement to the BBC that hugs are "part of Ted Baker's culture, but are absolutely not insisted upon", claiming Kelvin greets many people with hugs.
Hitting back at the allegations, the company said that the issues raised via the petition were at odds with the core values of the business and its CEO.
In an interview with Retail Week, Kelvin explained that he hugs people because his psoriatic arthritis makes it painful to shake hands, and took offence when it was suggested that people would be uncomfortable doing so.
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One complainant wrote: "I've seen the CEO ask young female members of staff to sit on his knee, cuddle him, or let him massage their ears".
"It's inappropriate and is part of a culture that allows harassment to go unchallenged", the petition reads.
Having very recently been made aware of the Petition, we are now in dialogue with Organise to understand the details and nature of the claims.
An independent committee of non-executive directors had also been appointed "to ensure that the views and concerns are recognised and carefully considered and that appropriate responses are taken forward".
The petition also claims that Ted Baker's human resources department has willfully ignored staff's complaints against the CEO in the past by saying "that's just what he's like".
"Pursuing the issue through the "proper" channels i.e".
Kelvin opened the first Ted Baker store in Glasgow, Scotland in 1988 selling men's shirts.
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