Gildan Activewear Inc. CEO Glenn Chamandy arrives to speak to the media following the company's annual meeting on May 28.Christinne Muschi/The Canadian Press
Allan C. Hutchinson is a distinguished research professor at Osgoode Hall Law School and the author of The Companies We Keep: Corporate Governance for a Democratic Society.
Some happenings begin as drama, turn into melodrama and then descend into farce. The continuing Gildan saga is one of those happenings. And it is not yet over.
In the recent tussle for control of Gildan Activewear Inc. GIL-T, the clothing manufacturer, the initial skirmishes a few months ago were framed as part of a bigger war over shareholder democracy. A jilted chief executive officer, Glenn Chamandy, teamed up with disgruntled shareholders led by Browning West, an investment management firm that held 5 per cent of Gildan’s stock, and tried to wrest back control of Gildan.
As we now know, Browning West and Mr. Chamandy won the day. Gildan is now under Mr. Chamandy’s leadership and, with the old board ousted, the new board comprises seven directors nominated by Browning West as well as Mr. Chamandy. But recriminations abound about whose fault it all was and how much the fiasco had cost. On Thursday, the cost was revealed to be US$76.8-million – was it all worth it?
Beneath the details and the various accusations, there is a telling dynamic about what shareholder democracy is supposed to be about. Directors and shareholders were pitted against each other, as were shareholders among themselves. However, despite efforts by the participants to clothe themselves in the trappings of virtue and selflessness, the facts tell a different story.
To begin with, Mr. Chamandy seems to have taken a leaf out of the Donald Trump playbook – he is now disingenuously casting himself as the victim of corporate malfeasance and waste. Although he was one of the instigators and a beneficiary of the corporate putsch, he is complaining about the excessive costs incurred by a recalcitrant and wasteful board.
“It was an abusive amount of money being spent,” Mr. Chamandy said, and “for a small company like Gildan, it just doesn’t make a lot of sense.” That seems true, but only so far as it goes. His version of sense and abuse are themselves very problematic.
He is right about excessive severance packages of more than US$24-million for the replacement executives. These are ludicrous amounts for people who had only been in their jobs for a few months. But it is hypocritical for Mr. Chamandy to point this out, when not only did he play a part in the dismissal, but, more tellingly, Mr. Chamandy has received US$8.9-million in back pay for his time out of the CEO office.
These sums, amounting to more than US$33-million of executive compensation (and as much again for all the legal and financial enablers), speak to much deeper problems about corporate values. As Mr. Chamandy said, this is “an abusive amount.” Of course, executives should be well-paid, but these astronomical amounts are simply unacceptable on their own terms, let alone when compared with the pitiful wages of workers in Bangladesh actually making Gildan’s clothing.
Also, there is an aspect of the Gildan affair that smacks of victor’s justice: The winners in the corporate set-to have indulged in a certain historical revisionism that makes them the hard-done-by. Although Mr. Chamandy and Browning West paint the old board as obstructive and self-serving autocrats, the new leaders are not as squeaky clean as they would like people to think. They are playing fast-and-loose with the notion of corporate democracy.
Although Browning West talks as though it is the flame-carrier for democracy and all Gildan shareholders, it pulled off the complete Gildan turn-around with eight other dissident investors that held together a total of 35 per cent of Gildan’s overall shareholding. This is no small number, but it is surely not enough to give Browning West the extent of power that it now wields.
Along with Mr. Chamandy, Browning West now has total control over the board and its corporate strategy. As history shows in both politics and commerce, a democratic victory of questionable weighting does not mandate the elected people to do whatever they choose. Democracy is about much more than a winner-takes-all mentality and process.
Indeed, it is more of a travesty of democracy for Browning West to claim self-righteously that it knows what’s best not just for itself, but everyone else as well. “We look forward to the opportunity to deliver enduring value for all Gildan stakeholders,” it said on its website. Democracy demands that all those stakeholders have a continuing voice in what that value can and should be.
Whether the enormous costs of the Gildan affair are justified is something that will have to be resolved in the future. But it will require more than a blustering Mr. Chamandy and Browning West to pull that off. And more than business-as-usual.