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Rebel shareholders in Gildan Activewear Inc. GIL-T have won a ringing endorsement from two proxy advisory firms as the battle for control of the company speeds towards a conclusion in the coming days

Glass Lewis on Saturday recommended investors back U.S. fund manager Browning West in its bid to reinstate Glenn Chamandy as chief executive officer of the T-shirt maker. In a separate report Friday, Institutional Shareholder Services Inc. made the same recommendation.

Glass Lewis and ISS both concluded that Gildan’s board made a mistake last December when it dismissed Mr. Chamandy, Gildan’s co-founder and CEO, in a dispute tied to the timing of his eventual departure. The board appointed an outside executive, Vince Tyra, to replace him, after what it said was a rigorous and credible succession process.

Untangling the thread: Ex-CEO Glenn Chamandy finds his record scrutinized as Gildan’s shareholders mull leadership change

The purported depth of that process doesn’t excuse what appears to have been “a poorly reasoned decision to remove a sitting CEO with a favourable track record, particularly in favour of a replacement we, and many long-term shareholders, consider offers inferior experience and expertise,” Glass Lewis said in its report, adding that the decision by several Gildan directors to resign before investors could hold them accountable is “troubling.”

Both advisory services enjoy an influential voice with index fund managers that own a significant stake in Gildan. They said investors should vote for Browning West’s entire slate of directors at the Montreal-based company’s annual meeting on May 28, a move that would see Mr. Chamandy return to the job he held for the past 20 years. The firms recommended investors withhold their votes for the existing Gildan board, including Mr. Tyra.

It is unusual for advisers such as Glass Lewis and ISS to wholly endorse a dissident campaign, as they did at Gildan. Incumbent boards are typically granted wide latitude. In proxy battles, advisory services often recommend compromise solutions, such as blending an incumbent board with the dissident’s candidates.

In December, Gildan shocked investors by cutting ties with Mr. Chamandy, who co-founded what is now an $8-billion company in 1984. The decision kicked off a boardroom battle with Los Angeles-based Browning West and a number of other institutions which collectively own roughly 35 per cent of the company, and wanted Mr. Chamandy back in the saddle.

“Chamandy’s track record over several decades appears far less complicated than the rationale to push him out,” ISS said in a report on Friday. “It is also clear the board arrived at a choice that did not incorporate the views of a sizable contingent of shareholders which elected them, a sign that priorities may have been misaligned.”

What’s happening at Gildan? A primer for the months-long CEO corporate battle

Glass Lewis echoed that view. “We do not see sufficient evidence of value destruction at Gildan to have warranted the removal of Mr. Chamandy by the board in December 2023, which in and of itself illustrates concerns we have with the incumbent board’s views on succession planning,” the firm’s report said. As a result, and given the overwhelming opposition to the change by several top shareholders, Browning West has provided “a more compelling path forward” for the company, the report said.

Meanwhile, several executives of the clothing maker wrote a letter addressed to Gildan shareholders saying they believe that reinstating Mr. Chamandy as CEO is “critical” for Gildan’s success. “The collective voice of the majority of executives supporting his reinstatement underscores our confidence in his abilities,” the executives said in the letter, which was also sent to certain media outlets.

The group claimed to speak for a majority of the 49 executives at the vice-president level or higher. The Globe and Mail could not independently verify that claim.

Gildan is one of the world’s largest manufacturers of T-shirts, fleece, underwear and socks, with annual sales of $3-billion, industry-leading profit margins and factories in the Caribbean basin and Bangladesh. Since going public in 1998, Gildan has been one of the top performers on the Toronto Stock Exchange.

“Under Chamandy’s leadership, Gildan’s total shareholder return outperformed peers across short-, medium-, and long-term time frames, weakening the case for change,” ISS said in the report. “The justification provided for his removal is weak and inconsistent.”

In endorsing Browning West’s slate, ISS said the fund manager recruited directors “with extensive experience in succession planning, and perhaps equally importantly, experience working with long-time founders.”

“We are pleased ISS has recommended shareholders elect our entire slate of director candidates, including Gildan co-founder and proven value creator Glenn Chamandy,” said Browning West co-founders Usman Nabi and Peter Lee in a news release on Friday. “The report from ISS is a resounding indictment of the incumbent Board, including directors new and old, which threw Gildan into chaos by terminating Mr. Chamandy late last year.”

Mr. Tyra held senior roles at two clothing companies prior to being recruited by Gildan, Fruit of the Loom Inc. and Broder Bros. Co., which he left in 2005. ISS said: “Newly appointed CEO Vince Tyra does not present a recent track record as an operator in the industry and Tyra’s operating performance at Broder fails to establish him as a clearly superior option.”

Last month, Gildan announced sweeping changes to its board, with seven of its 12 directors leaving and five new directors joining the company, including chairman Tim Hodgson, a veteran of several proxy battles. ISS flagged the turnover as an issue for investors voting at this month’s annual meeting.

“Perhaps the biggest indication that something went awry on the legacy board rests in the resignations and announced departures on April 22,” ISS said. “While some refreshment surrounding a proxy contest is not unusual per se, the degree at this contest is atypical.”

While a number of new directors joined Gildan last month, ISS highlighted the reconstituted board’s continued commitment to Mr. Tyra, and refusal to revisit succession, as an issue for investors. In describing the overhaul of the board, ISS said: “This sleight of hand has created a situation in Gildan’s board room going into the annual meeting that is difficult to discern from the one that existed on April 21, 2024, under the legacy board.”

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