Directors of Gildan Activewear Inc. GIL-T are pushing back against investors who say they acted improperly in sacking former chief executive officer Glenn Chamandy as the fight intensifies over the future of the Canadian clothing maker.
In an open letter to Gildan shareholders released Wednesday, chairman Donald Berg and three other directors shed new light on the thinking that drove their decision to terminate Mr. Chamandy. They say they gradually lost faith in his ability to deliver future growth and that he sought to entrench himself as CEO while the board worked to implement a “planned, deliberate and professionally run” succession process.
“Over the last two years, the board’s trust and confidence in Mr. Chamandy eroded gradually as we worked to hold him accountable for delivering the next chapter of the company’s long-term growth strategy as well as the development of his people,” the Gildan directors said. “The business has grown in scale and complexity and the challenges and opportunities that lie ahead call for a new leader with new ideas and different skills.”
Several Gildan shareholders remain unconvinced by that narrative and are pushing for Mr. Chamandy’s reinstatement. They include Toronto-based investment management firm Turtle Creek Asset Management and Los Angeles-based hedge fund Browning West, who both sent letters to Gildan directors Wednesday that suggest a proxy battle is in the offing.
“We are so disturbed by the board’s actions and its conduct that we now believe a significant reconstitution of the board is essential,” Turtle Creek said in its letter. “This is an example of a succession strategy that was haphazardly implemented and blindly pushed along.”
Montreal-based Gildan, a maker of T-shirts and fleece clothing perhaps best known for its American Apparel brand, shocked investors when it announced Dec. 11 that it had dismissed Mr. Chamandy after a 40-year tenure at the company, the past 20 years as CEO. It named former Fruit of the Loom executive Vince Tyra as his replacement.
The move has created a power struggle between big investors who believe the move was unwarranted and the board, which insists it was. Directors face a difficult task in winning support for their position, however, particularly from shareholders who’ve made significant returns with a Chamandy-led Gildan in recent years.
In their letter, Gildan directors credit Mr. Chamandy for building the company into a successful clothing maker. But they say he has struggled more recently to find additional pathways for revenue and profit, and concluded it was time to search for a leader who could better handle these responsibilities for the future. The company hired a headhunting firm in January, 2022, to start looking for a new CEO, considering internal and external candidates, according to the letter.
The directors said Mr. Chamandy agreed to a formal three-year succession plan in December, 2021, meaning he would leave by the end of 2024. Later, however, he “worked to entrench himself as CEO,” the board said in its letter. He proposed the company pursue, within weeks, “high-risk and highly dilutive multibillion-dollar acquisitions that would shift Gildan away from its core area of manufacturing experience,” the board said.
Mr. Chamandy asked to stay on as CEO for several more years to see the deals through. If the board refused his timing, he said, he would leave the company and sell all of his shares, according to the letter.
The proposal was problematic but the former CEO didn’t engage with the board to work out his plan for the takeovers or talk any more about succession, Gildan director Luc Jobin said an interview Sunday. “At the end of the day, he walked away,” the director said. “In my view, he was never really in good faith in terms of wanting to work this out with the board.”
Mr. Chamandy, 62, has denied he issued any such ultimatum. He was not reachable for comment Wednesday but previously told The Globe and Mail in an interview that he never gave any hints that he was interested in retiring from the company. “I always told the board that I’m here forever.”
Eight shareholders collectively owning more than 33 per cent of Gildan’s shares have now publicly voiced their support for Mr. Chamandy, according to Browning West. That’s a swell of opposition the company’s board can no longer ignore, it said.
“With each passing day, the board’s apparent arrogance and indifference validate that substantial change is urgently needed in Gildan’s boardroom,” Browning co-founders Usman Nabi and Peter Lee said in their letter.
Nicolas Van Praet