Rebel Gildan Executives Push for Board Change, Return of Ex-CEO Chamandy

(Bloomberg) -- Some executives of clothing maker Gildan Activewear Inc. are urging investors to support an activist shareholder that’s trying to win control of the board and reinstate fired Chief Executive Officer Glenn Chamandy.

The executives have written a letter, addressed to Gildan shareholders, saying that it’s “critical” to bring back Chamandy — who ran the company for decades before he was ousted late last year — and end a long power struggle. Investors will vote to choose a board on May 28. 

“The ongoing proxy battle will determine the future leadership of our company, and we firmly believe that reinstating Glenn as CEO is vital for Gildan’s success,” the letter says. Four of the executives behind the letter, all of whom are at the vice-president level or higher, spoke with Bloomberg on condition they not be identified because they believe they would risk losing their jobs for speaking out publicly. 

Gildan has a stock market value of $6 billion. The Montreal-based firm is among the world’s largest makers of cheap casual apparel, providing inexpensive clothing to retailers such as Walmart Inc. and blank T-shirts to printwear shops and designers. It also owns the American Apparel brand, which it bought out of a bankruptcy proceeding. 

Gildan’s board stunned investors on Dec. 11 by announcing that Chamandy had left and would be replaced by Vince Tyra, a former Fruit of the Loom executive and former athletic director at the University of Louisville. The shares fell 11% that day. 

The CEO change triggered a contest for control of the board, with Los Angeles-based investment firm Browning West LP launching a formal campaign to replace most of the directors. 

Browning, which owns about 5% of the shares, has gained the backing of other large shareholders, and it scored another victory when two proxy advisers, Institutional Shareholder Services Inc. and Glass Lewis & Co., each advised Gildan investors to vote for Browning’s entire slate of nominees. They include United Rentals Inc. Chair Michael Kneeland and seven others, including Chamandy. 

Glass Lewis said the board’s move to fire Chamandy was “a poorly reasoned decision to remove a sitting CEO with a favorable track record.” Tyra, the firm said, “offers inferior experience and expertise.”

Absenteeism Claims

The executives’ letter does not take issue with anything Tyra has done in his four months as CEO. But the executives suggest directors misled the public when they claimed that Chamandy had been an absentee leader. Their letter praises his dedication and detailed grasp of Gildan’s operations, which include about 30 production facilities globally.

“His deep understanding of Gildan’s processes and operations is unparalleled,” their letter states. “Claims of absenteeism are misleading. Glenn has always been engaged with the executive team and committed to driving our company’s success.”

Scott Davidson, an outside spokesperson for Gildan, said the company became aware of the letter after an employee contacted its internal ethics hotline about it.

“As we approach the shareholder voting deadline, Gildan wants employees to vote their shares at their discretion and not feel pressured to take a public position in this contest,” he said by email. “The email behind this letter, urging employees to take a position, is an example of recent behaviors during this proxy contest.” 

‘Climate of Fear’ 

Gildan responded to shareholder pressure by replacing much of its board recently, including Chair Don Berg, who stepped aside for Tim Hodgson, a former Goldman Sachs executive. But the company is standing by Tyra as CEO. 

Read More: Most of Gildan’s Board to Exit as Activist Gains Ground

The rebel executives who spoke with Bloomberg said it has been difficult to organize and obtain personal emails from colleagues to communicate about the proxy contest — they didn’t feel it was safe for them to do so using their Gildan email addresses, and believe that their company emails are filtered. 

“Although many of us wished to affix our names to this letter, a climate of fear due to concerns of retaliation by the current leadership prevented all of us from feeling free to do so,” the executives’ letter states. 

The group behind the letter asserts that Chamandy has the support of the majority of Gildan executives at the vice-president level or higher. Bloomberg was unable to independently verify that claim.  

The board has explained Chamandy’s firing by saying there were serious disagreements about succession and strategy. Chamandy wanted to pursue a multibillion-dollar acquisition strategy and gave the board an ultimatum over the issue, the company has said. The board said the proposed acquisitions were too risky.

(Updates with Glass Lewis recommendation and commentary in seventh and eighth paragraphs.)

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