The Gildan logo outside their offices in Montreal, on Dec. 11, 2023.Christinne Muschi/The Canadian Press
The board of Gildan Activewear Inc. GIL-T resigned on Thursday evening, paving the way for former chief executive Glenn Chamandy to retake the helm of one of country’s largest clothing manufacturers with backing from activist fund manager Browning West.
Mr. Chamandy’s return to the Montreal-based company he co-founded in 1984 marks a surprising end to a six-month boardroom battle that began when the board dismissed the CEO in December over succession issues.
The board named former Fruit of the Loom executive Vince Tyra as the new CEO of the $8-billion company, a global leader in T-shirt, fleece, sock and underwear manufacturing. Mr. Tyra also resigned on Thursday evening.
The Gildan board’s decision to quit came after many of Gildan’s largest shareholder joined Los Angeles-based Browning West in campaigning for Mr. Chamandy’s reappointment. Nine institutional investors holding an estimated 35 per cent of Gildan’s stock consistently backed Mr. Chamandy, including typically low-profile fund managers Turtle Creek Asset Management and Bank of Nova Scotia-owned Jarislowsky Fraser.
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In the past week, shareholder advisory companies Institutional Shareholder Services Inc. and Glass Lewis recommended investors back Browning West’s bid to bring back Mr. Chamandy by voting for its slate of eight Gildan directors. Those eight directors became the new board on Thursday evening.
Gildan’s former directors resigned after it became clear they would lose a shareholder vote on the composition of the board scheduled for Gildan’s annual meeting on Tuesday. The ISS and Glass Lewis endorsements of Browning West’s slates meant index funds, which hold a significant stake in Gildan, would vote for the dissident’s slate.
The decision to leave the stage ahead of a final vote has precedent in business circles: In 2012, several members of the board at what is now railway Canadian Pacific Kansas City Ltd. CP-T and the CEO stepped down a day ahead of a vote to elect a slate of directors put forward by activist Pershing Square Capital Management.
Mr. Chamandy is expected to move forward with a strategy aimed at increasing GIldan’s international sales, along with share buybacks funded in part with increased borrowing. For the former CEO, the return to the top job cannot come soon enough.
“This is my baby,” Mr. Chamandy told The Globe and Mail in a recent interview, adding the Gildan directors who dismissed him made a “huge mistake” they’ve since ducked away from by resigning. “My job right now is to continue to execute, hopefully, when I come back, to drive this company to where it needs to be. … I think that everything is in place.”
The Gildan drama has become one of the nastiest corporate power struggles in recent years in Canada, a battle that has put Mr. Chamandy’s leadership under the spotlight while providing millions in professional fees to lawyers and other advisers. There will be lasting governance questions about how hard a board should push against a CEO-founder they no longer see eye-to-eye with – and possible lessons for other companies navigating similar succession waters.
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Over the past six months, Gildan’s board turned over, with five directors departing, including the former chair, and two not standing for re-election. Gildan’s directors consistently said Mr. Chamandy acted to entrench himself as CEO by sabotaging the succession process and forced them to terminate him by proposing several risky multibillion-dollar takeovers that he said only he could oversee.
Shareholders supporting the former CEO counter that the board botched a leadership handover they never knew was coming and hired a replacement who isn’t qualified to lead the company.
Last Friday, ISS said the board should have given Mr. Chamandy more leeway on the timing of his departure given his status as Gildan’s CEO and co-founder and other factors such as his performance, age and the possibility that many of the company’s investors and even some of its employees might have preferred a successor that he endorsed.
Glass Lewis said the decision by several Gildan directors to resign in a board refresh announced last month was “troubling” because it left investors without the means to hold them accountable for their decision to dismiss Mr. Chamandy.
“I think these seven directors running for the hills tells you the story more than any words,” Usman Nabi, co-founder of Browning West, said in a recent interview, prior to the board’s resignation. “I think it tells you where the vote is going. I think it’s an admission of the magnitude of underlying support that we have and what shareholders want,” he said.