Proxy battle cost Gildan US$65M, as investors re-elect Chamandy, new slate to board

MONTREAL — The bitter battle over who would run Gildan Activewear Inc. cost the company at least US$65 million, according to its newly returned CEO, as the apparel maker looks to turn a corner after a turbulent six months.

“This is probably the largest proxy fight in history, even more so than Disney, for example, which is 40 times our size,” said chief executive Glenn Chamandy, referring to a high-profile struggle at the entertainment giant in recent years.

Shareholders of the T-shirt manufacturer voted to place Chamandy back on its board alongside a slate of candidates put forward by activist investors on Tuesday, capping a months-long leadership battle.

The election marks another vote of confidence for the company co-founder, who retook the helm Friday after being ousted from the top job in December amid accusations he was no longer fit to lead the firm.

Chamandy told reporters in Montreal the conduct of Gildan’s prior board over the past several months showed “poor judgement,” causing a stressful period for him, his family and employees at the company.

“I was a little saddened, I would say, by the way I think the board handled the succession — and handled me personally,” he said.

Activist shareholder Browning West LP pushed for Chamandy’s return to the clothing manufacturer for months after former Fruit of the Loom executive Vince Tyra took over Gildan’s CEO post. Gildan’s largest shareholder, Jarislowsky Fraser, supported Browning West and its slate of eight board members, Chamandy among them.

In a shock move last week, Tyra and Gildan’s board stepped down after counting shareholder votes cast ahead of the annual general meeting, paving the way for Chamandy’s return and for Browning West’s cast of directors to be elected.

The US$65-million battle comprises severances to outgoing board members and two executives, the company sale process — floated in March and since scrapped — as well as legal costs that include a pair of lawsuits launched by Gildan against Browning West, which were dismissed earlier this month, Chamandy said. That does not include his own severance, which he said he never received.

“This board was very entrenched and I think was very abusive to shareholders’ money,” he said of the departing directors. They had called his commitment and growth plans into question, saying in January he had “no credible long-term strategy and no vision for the future,” a position Chamandy rejected.

Roughly US$26 million of the US$65-million severance total went to Tyra, who headed the company for four months, and Arun Bajaj, Gildan’s former human resources chief, said Chamandy, who deemed the compensation to his predecessor “shocking.”

“They actually got the money for their severance and then left the company subsequently a couple days later, which is really strange,” he said. “From our view, it’s not very clean.”

Nonetheless, Chamandy suggested legal recourse is unlikely: “We’re putting this behind us.”

Meanwhile, the new board slate received “overwhelming support” from shareholders, the CEO said. The precise tally is expected by Wednesday morning.

Leading proxy firms Institutional Shareholder Services Inc., Glass Lewis and Egan Jones had all recommended Browning West’s group of candidates be elected.

Gildan had previously replaced five directors in April and said it would back two nominees by Browning West, which owns about five per cent of the company.

Browning West co-founder Peter Lee said Tuesday the legal battles cost his firm “millions of dollars.” The Los Angeles-based hedge fund will determine “down the road” whether Gildan might cover some of that expense, he said.

“Overall, justice has prevailed,” Chamandy told reporters. “The shareholders have spoken. This is a new beginning for Gildan.”

No sooner did he step back into the C-suite than questions of succession arose, given the tortuous saga of the past half-year.

“I’ve got a lot of energy. I’m in my early 60s, which is early 50s in the future,” he said.

While Chamandy declined to speculate on when he might step down, chairman Michael Kneeland said, “Obviously, we’ll say three to five years — that’s probably good guardrails, but there’s no set time limit.”

Chamandy also threw cold water on the idea of a sale of the clothing maker, which the previous board announced barely two months ago. The chief executive pointed to Gildan’s ability as a publicly traded company to raise billions of dollars in capital for investment in garment factories.

“Private equity comes in and they buy the company and they put $5 billion of debt on the company, which is unmanageable,” he said. “We’re not going be able to reinvest in the company itself and we’ll lose our competitive advantage.”

Chamandy said he is still weighing whether to go ahead with a $200-million loan from the Caisse de dépôt et placement du Québec, the province’s pension fund manager, that was secured under Tyra’s tenure.

At the annual meeting in downtown Montreal, a shareholder proposal calling on Gildan to review its “human-rights risk infrastructure” after the closure of a Honduras factory in San Miguel last year was voted down. The company said Tuesday evening precise results were not yet available.

Asked about complaints from factory workers, Chamandy stood by the company’s practices, saying that most facilities are unionized and subject to periodic audits from monitoring and certification programs such as Worldwide Responsible Accredited Production. He also claimed high worker satisfaction among Gildan’s 44,000 employees and highlighted the whistleblower lines available to them.

This report by The Canadian Press was first published May 28, 2024.

Companies in this story: (TSX:GIL)

Christopher Reynolds, The Canadian Press

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Gildan Activewear Inc. shareholders will have a chance this morning to weigh in on a slate of directors put forward by activist investors. The Gildan logo is seen outside their offices in Montreal, Monday, Dec. 11, 2023.  THE CANADIAN PRESS/Christinne Muschi

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