It was a busy day on the front on Wednesday as the turmoil consuming the Gildan Activewear Board of Directors continued to worsen Wednesday as the first large investor that cried foul last week has increased its stake in the company and is now urging the company to take immediate action. The tally of investors opposing the recent ouster of company Founder and CEO Glenn Chamandy now equates to one-third of all shareholders, according to people close to the matter that spoke with SGB Media. Also at issue is observations by firms that Gildan executives are now selling off shares, implying a loss of confidence internally.
Browning West, LP, which beneficially now owns approximately 4.8 percent of the outstanding shares of Gildan Activewear Inc., has renewed its call for the Gildan Activewear Board of Directors to reinstate Chamandy and remove Board Chair Donald Berg. This latest letter to the Board comes after Browning West increased its stake in Gildan Activewear.
Browning West indicates in its letter that it is prepared to call a special meeting to reconstitute the Board if it continues to disregard shareholder feedback. The latest letter also notes that there has been more than $11.7 million worth of recent stock sales by Gildan senior executives, which may indicate a lack of confidence internally regarding the direction the Board has taken and their concerns about further value destruction.
Eight investors representing more than 33 percent of Gildan shareholders have now reportedly echoed Browning West’s concerns, according to people close to the matter.
Browning West sent the following letter to the company’s Board of Directors on Wednesday, December 20.
* * *
December 20, 2023
Gildan Activewear Inc.
600 Maisonneuve Blvd W #3300
Montreal, QC H3A 3J2
Attn: The Board of Directors
Members of the Board of Directors,
Browning West, LP (together with its affiliates, “Browning West” or “we”) is an investment management firm with a long-term investing horizon that owns approximately 4.8% of Gildan Activewear Inc.’s (“Gildan” or the “Company”) outstanding common shares, making us one of the Company’s largest shareholders. While we recently demonstrated our confidence in Gildan by increasing our ownership stake, the poorly-aligned Board has spent the past 10 days initiating a blatant entrenchment maneuver with a lone shareholder while showing a complete lack of regard for the broad and unprecedented shareholder opposition to the Board’s actions. Since the publication of our December 14th letter, eight shareholders, who collectively own more than 33% of the Company’s outstanding shares, have publicly echoed Browning West’s concerns. These investors are some of the Company’s longest-tenured shareholders and have a deep understanding of the business. We also have reason to believe there are many other shareholders who share our concerns but have yet to express them publicly. With each passing day, the Board’s apparent arrogance and indifference validate that substantial change is urgently needed in Gildan’s boardroom.
Today, we are writing to urge you to implement the three following concrete actions, which create the best path forward for stakeholders:
-
-
- Reinstate Glenn Chamandy as CEO;
- Remove Donald Berg as Chair, and;
- Appoint Browning West Co-Founder Peter Lee as a shareholder representative to the Board.
-
If you continue to ignore the feedback of more than 33% of shareholders, Browning West is fully prepared to requisition a Special Meeting of Shareholders to hold the Board accountable for its actions and prevent the further destruction of value.[1] Shareholders will not tolerate the Board doubling down on its poorly conceived succession and its backroom deal in exchange for an individual investor’s support.
To disregard shareholders and employees at this critical juncture would only further tarnish the Board’s reputation and demonstrate its utter lack of respect for sound corporate governance. Consider the following:
Gildan Shareholders Have Spoken by Publicly Echoing Browning West’s Concerns: A critical mass of shareholders have signaled their alignment by publicly echoing our concerns and calling for the Board to reinstate Mr. Chamandy as CEO. Following our December 14th letter to the Board, investors that include Browning West LP, Jarislowsky Fraser Ltd., Cooke & Bieler LP, Pzena Investment Management, LLC, Turtle Creek Asset Management Inc., Janus Henderson, Oakcliff Capital and Anson Funds have publicly called for the Board to reappoint Mr. Chamandy as CEO. These shareholders, who represent over 33% of Gildan’s outstanding shares, have taken it upon themselves to ensure their respective voices are heard in seeking to protect the long-term value of Gildan and the interests of all stakeholders. These voices are in addition to numerous shareholders who we understand share these concerns, but have not yet spoken publicly.
Gildan Employees Have Also Spoken by Selling Substantial Amounts of Stock: Recent substantial share sales in excess of $11.7 million by senior executives signal a lack of confidence in the Board and suggest that employees fear Vincent Tyra’s appointment may lead to the further destruction of shareholder value. These sales also increase the risk of management turnover. Over the past week, multiple senior executives have made substantial share sales: CFO Rhodri Harries sold $6.8 million in Gildan shares; President of Manufacturing Benito Masi sold $4.1 million in Gildan shares; President of Sales, Marketing and Distribution Chuck Ward sold $702,000 in Gildan shares; and SVP of Sales North America Michael Schroeder sold $104,000 in Gildan shares. Although Gildan’s senior executives cannot share their views publicly, they are clearly voting with their wallets.
The Board’s “check-the-box” outreach to us this week has been wholly unsatisfactory because it failed to address our substantive concerns on succession planning and Mr. Tyra’s extremely poor track record. It is, however, noteworthy that in all our conversations with Mr. Berg, he told us that Mr. Chamandy has the “highest integrity.” We understand that other major shareholders remain deeply troubled by the Board’s ever-evolving and illogical explanations for its botched CEO succession process.
The unprecedented nature of the public shareholder outcry and the stock sales of senior executives are evidence enough that the Board should immediately meet our three demands. We will not hesitate to hold the Board accountable for further delay in rectifying this unfortunate situation – of which the Board’s actions are the sole cause.
Sincerely,
Usman S. Nabi Peter M. Lee
* * *
In response to the numerous public and private communications from investors and shareholders, the chairman of the Board of Directors of Gildan Activewear Inc. and the Board’s Committee Chairs issued an open letter to shareholders on Wednesday, laying out in some detail their thought process, timelines and what they believe were broken agreements with the former CEO.
The letter from the Board follows:
* * *
Dear Fellow Gildan Shareholders:
We are writing to you today to clarify the record as to why the directors of Gildan recently came to the unanimous decision to remove Glenn Chamandy as chief executive officer and to outline the path forward under our new CEO Vince Tyra.
We give Mr. Chamandy all the credit he rightly deserves for co-founding Gildan Activewear and respect that he built it into a successful public company. Throughout much of his 20-year tenure as CEO he drove exceptional growth and value creation. Over the last four years, however, Mr. Chamandy has struggled to find additional avenues of long-term organic growth. 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. It is the Board’s view that it was time to explore searching for a leader who could better discharge these critical responsibilities for the future.
The Board’s decision to hire a new CEO is based on our joint responsibility to see that Gildan is well positioned for future success. 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.
The Board has had a robust succession process underway for nearly two years. It was planned, deliberate and professionally run, the exact way that a responsible public company should approach succession.
The Board and Mr. Chamandy agreed to this formal three-year CEO succession plan in December 2021. In January 2022, we hired a leading executive search firm to begin the process of conducting a search for a new CEO, including both internal and external candidates. By September 2023, the search had narrowed to a shortlist of candidates and Vince Tyra was selected by the Board as CEO on December 10, 2023.
And while Mr. Chamandy had agreed to follow the original succession timeline, he later worked to entrench himself as CEO.
The most glaring example of that was his October 2023 proposal to the Board that we should actively pursue, within weeks, high-risk and highly dilutive multi-billion-dollar acquisitions that would shift Gildan away from its core area of manufacturing experience. In addition, his request was to stay on as CEO for several more years to implement such plan. If the Board did not approve his timing, he told us repeatedly that he would leave the company in the near-term and sell all of his shares.
We now know that Mr. Chamandy had no intention of abiding by the agreed succession plan. He made that clear in his own words while speaking to The Globe and Mail in an article on December 16, 2023: “I had no intention of leaving. You know, my view is that I would leave when I think the time is right for the company.”
The Board is disappointed in Mr. Chamandy’s attempts to inflict the maximum amount of disruption to Gildan’s business in order to remain as CEO.
Vince is the right person to lead Gildan to the next stage of its evolution and we look forward to his engaging with our stakeholders. We are also proud that Chris Shackelton, Co-Founder and Managing Partner of Coliseum Capital Management, has accepted our invitation to join our Board. Coliseum has committed to support Gildan’s Board and to grow its position with the hope of becoming Gildan’s largest shareholder.
Change in a global enterprise is hard, especially when it involves a transition from a founder CEO. We are proud of our employees who work hard every day for our customers and our shareholders and whose contribution continue to make Gildan the exceptional company that it is today.
As fellow shareholders, we know that Gildan’s best days are ahead. The Board looks forward to continuing to engage with shareholders and welcoming their perspectives as Gildan embarks on its next chapter.
Sincerely,
Donald C. Berg, Chair of the Board of Directors
Maryse Bertrand, Chair of the Corporate Governance and Social Responsibility Committee
Luc Jobin, Chair of the Audit and Finance Committee
Shirley E. Cunningham, Chair of the Compensation and Human Resources Committee
* * *
Turtle Creek Asset Management Inc., a Canadian independent investment management firm with a 25-year history and a decade-long shareholder of Gildan Activewear, also issued a second letter to the Board of Directors of Gildan on Wednesday afternoon urging it to reverse its termination of Glenn Chamandy and reappoint him as CEO of the company. The most recent letter came after the Board sent their letter out earlier in the morning.
The full text of the letter to the Board follows:
The Board of Directors of Gildan Activewear Inc.
c/o Donald Berg, Chair of the Board and Arun Bajaj, EVP, Chief HR Officer & Legal Affairs
600 de Maisonneuve Boulevard West, 33rd Floor
Montréal, Québec, H3A 3J2
Via email
Dear Gildan Directors,
We appreciated the opportunity to meet with directors Donald Berg, Maryse Bertrand and Luc Jobin on Monday, December 18th to discuss the Gildan board of directors’ approach to succession planning, the circumstances around Mr. Chamandy’s termination, and the Board’s pursuit of an agreement with Coliseum Capital Management.
In our letter of December 14th, we described our dismay over the events surrounding Mr. Chamandy’s termination that we believe expose Gildan to significant risks, including a loss of essential leadership, damaged employee morale, and threatened key customer relationships. Having had the opportunity to reflect and deliberate on what we heard during our meeting with you, we remain convinced that Mr. Chamandy must be reinstated as Gildan’s Chief Executive Officer and as a director. In fact, we are so disturbed by the Board’s actions and its conduct that we now believe a significant reconstitution of the Board is essential.
Faced with an unprecedented outpouring of shareholder opposition to the Board’s reckless and ill-conceived termination of Mr. Chamandy, the Board issued no public statements and ignored requests for further meetings with shareholders to explain its rationale. Instead, the Board concocted a new narrative surrounding Mr. Chamandy’s termination that it disseminated via a press release and media interviews late Sunday. But not before it further confounded and alienated Gildan’s long-time shareholders by entering into a hasty, secret agreement with a relatively short-tenured hedge fund shareholder in a bald-faced attempt to further entrench themselves by trading a Board seat for voting support. Adopting defensive entrenching measures to protect the Board is at odds with its duty to act as responsible and independent fiduciaries for all shareholders.
We spent nearly an hour and a half meeting with your representatives on December 18th. We earnestly, and with an open-mind, attempted to understand the timeline and reasons behind Mr. Chamandy’s termination. At the end of our meeting, we asked a simple question: When we spoke with Mr. Berg last Monday, why had he not highlighted to us the Board’s issues with Mr. Chamandy’s acquisition strategy? Mr. Berg responded that the termination arose from a dispute over the timing of when Mr. Chamandy would leave the CEO role, and not a dispute over acquisitions. We left the meeting shocked.
We have been equally alarmed at the Board’s demonstration that it is willing to go to any length, including distorting Mr. Chamandy’s stellar track record of value creation for shareholders, in order to justify the Board’s hasty, ill-conceived and value destructive decision to terminate him. It is clear to us that this is an example of a succession strategy that was haphazardly implemented and blindly pushed along.
We have met with representatives of the Board a number of times over the years. At no point were concerns raised about Mr. Chamandy and his performance at the firm he co-founded and led for over 20 years, a firm that is one of Canada’s great success stories. A founder/CEO who has presided over a 90-fold increase in share price over 25 years deserves to be treated with respect. Quite frankly, if Mr. Chamandy needed more time to make certain that Gildan was on a solid footing to ensure its success for another 25 years, then he should have been given the time.
As shareholders of the Company with a substantial investment in its success, we demand the Board immediately reappoint Mr. Chamandy as CEO and a director. In addition, in order to halt the Board’s continued destruction of value, we intend to seek the most expeditious opportunity to significantly reconstitute the Board through all means available to us as shareholders.
Sincerely,
Turtle Creek Asset Management Inc.
* * *
And so it continues…
Keep an eye on SGB Media and SGBonline.com for updated reporting on this story as we watch it develop.
Read additional coverage from SGB Media on this matter here:
Gildan Investor Wildfire Spreads as More Firms Join the Call to Reinstate CEO
Gildan Board Hit With Strong Shareholder Blowback After CEO Ouster
Coliseum Capital Co-Founder Joins Gildan Board; Firm Plans Further Investment
Gildan’s Ousted CEO Denies Giving M&A Ultimatum to Directors
