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December 20, 2023

Gildan Board Slams Chamandy, Seeks To Assuage Investors as CEO Firing Fallout Persists

Meanwhile, shareholders continued calls for Glenn Chamandy’s reinstatement and criticized his appointed successor, all while outside law firms say they’re looking into whether or not the Gildan board committed securities fraud.

By  Christopher Ruvo

The bitter dispute over the ouster of Top 40 supplier Gildan’s (asi/56842) former CEO Glenn Chamandy shows no signs of abating.

Faced with criticism from key shareholders and calls by investors for Chamandy’s reinstatement following what they felt was an abrupt and unjustified dismissal, the Montreal-headquartered firm’s board of directors issued a statement Wednesday, Dec. 20, that said it had come to believe that the Gildan co-founder was no longer up to the chief executive job and that it undertook a responsible, planned multi-year succession process to replace him.

The directors reaffirmed their decision to appoint Vince Tyra, a former Fruit of the Loom and Broder Bros. executive, to the role of president/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,” the board said in its statement.

Chamandy ‘Struggled,’ Board Says

While crediting Chamandy for “driving exceptional growth and value” for much of his two-decade tenure as CEO, the directors said that over the last four years he “struggled to find additional avenues of long-term organic growth.” As a result, the board lost confidence in Chamandy’s ability to power new revenue gains and develop Gildan.

“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 statement said. “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.”

Based on that belief, the board said it engaged in a nearly two-year CEO succession process that included hiring an executive search firm for help identifying the right new leader. Internal and external candidates were considered, the board said. And, the directors stated, Chamandy was not only aware of the process, but also in line with it.

Until, they said, he wasn’t.

“While Mr. Chamandy had agreed to follow the original succession timeline, he later worked to entrench himself as CEO,” the Gildan directors asserted.

An example of this, the board maintained, was an alleged October 2023 proposal from Chamandy to the board that Gildan should pursue what the directors characterized as high-risk multi-billion-dollar acquisitions that would shift the vertically integrated maker of apparel basics away from its core manufacturing business.

“In addition, his request was to stay on as CEO for several more years to implement such a plan,” the board said. “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.”

The board worked through its shortlist of CEO candidates, which had allegedly been established as of September 2023, and ultimately appointed Tyra on Dec. 10. Tyra’s tenure begins Feb. 12, 2024. Craig A. Leavitt, a Gildan director since 2018, will serve as interim president/CEO until Tyra is on the job.

“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,” the board said.

Investors Attack Tyra

Both Chamandy and shareholders that support him have raised doubts over Tyra being the correct leader for Gildan. Investment firm Browning West, one of Gildan’s top shareholders, said in a letter that “the board’s CEO search criteria and process were flawed from the outset, resulting in the appointment of a new CEO with limited manufacturing experience and a record of value destruction.”

Browning West added that the executive search “lacked a focus on best-in-class manufacturing and vertical integration experience, which is apparent in Mr. Tyra’s appointment. After studying Mr. Tyra’s background, it became clear that none of his prior executive roles involved complex global manufacturing operations comparable to those of Gildan.”

“Vince [Tyra’s] diverse professional background will provide the necessary leadership skills to propel Gildan to even greater success.” Donald C. Berg, Gildan (asi/56842)

Gildan described Tyra as an experienced executive whose career includes leadership roles in the apparel and investment sectors, as well as a three-year stint as director of intercollegiate athletics at the University of Louisville. He formerly was CEO of supplier Broder Bros., which has evolved into Top 40 supplier alphabroder (asi/34063).

Gildan said Tyra’s other experience includes serving as president of the retail and activewear division of Fruit of the Loom (asi/84257), where Gildan said he helped lead a turnaround that culminated in the company’s sale to Berkshire Hathaway.

Tyra was also an operating partner at Southfield Capital, where he was a member of the investment committee. Most recently, he served at Houchens Industries as senior vice president of corporate strategy and mergers and acquisitions.

“[Tyra] has an extensive career as a global organization leader with experience as an apparel industry executive, an operator, an investor and transitioning founder-led companies,” said Gildan board Chairman Donald C. Berg. “Vince’s diverse professional background will provide the necessary leadership skills to propel Gildan to even greater success.”

Shareholder Pressure Continues This Week With New Concerns

In publicly issued statements, Chamandy has contested the board’s version of events. He denies that he ever presented an ultimatum regarding acquisitions and his continuing as CEO.

“I do believe it is essential that a leadership transition be conducted in a manner consistent with Gildan's successful track record,” said Chamandy. “Preserving our talent, culture and expertise – the pillars of our success – is vital. Obviously, considering shareholder engagement is integral to the decision-making process.”

For sure, some top shareholders feel left out of the CEO transition process. Last week, five investment firms that reportedly hold about 25% of Gildan’s shares denounced the board’s decision to do what they described as prematurely dismiss Chamandy. They called for his reinstatement, and some shareholders want Berg gone.

Charles Nadim“We ask the board to acknowledge the significant and unprecedented opposition to the CEO transition and reinstate Glenn Chamandy as CEO effective immediately to avoid any potential disruption to the business.” Charles Nadim, Jarislowsky Fraser Ltd.

The firms included Jarislowsky Fraser Ltd., Pzena Investment Management Inc., Browing West, Turtle Creek Asset Management, and Cooke & Bieler LP. Browning West has said it will seek a special shareholders meeting to change the board if directors fail to give Chamandy his job back.

Jarislowsky Fraser, which is reportedly Gildan’s largest shareholder, renewed its call this week for Chamandy to be returned to the apparel manufacturer’s C-Suite.

“We ask the board to acknowledge the significant and unprecedented opposition to the CEO transition and reinstate Glenn Chamandy as CEO effective immediately to avoid any potential disruption to the business,” Jarislowsky’s head of research, Charles Nadim, said in an e-mailed statement to The Globe and Mail.

Jarislowsky Fraser and other investors also questioned the Gildan board’s decision to forge a support agreement with Coliseum Capital Management, a large investor in Gildan. As part of the deal, Coliseum co-founder/managing partner Chris Shackelton joined the Gildan board. The support agreement was announced following Chamandy’s departure and the outcry from other investors.

“We find the nomination to the board of a hedge fund manager, who has only held shares since 2022, with the expectation to vote in line with the board for two years, a serious governance concern and a clear conflict of interest, especially when combined with the fact that this hedge fund owns a stake in one of Gildan’s largest customers,” Nadim told The Globe and Mail.

Legal Trouble Brewing?

Amid all the Gildan clamor, attorneys are circling.

This week, law firms including New York-based Levi & Korsinsky and Pomerantz LLP announced that they are investigating Gildan in the wake of Chamandy’s termination.

“The investigation concerns whether Gildan and certain of its officers and/or directors have engaged in securities fraud or other unlawful business practices,” Pomerantz said in a news release.

Depending on how things go, the firms could potentially pursue a class action civil suit against Gildan on behalf of shareholders. Gildan’s stock fell about 7% last week after Chamandy’s ouster was announced. On Dec. 20, the stock remained down from the levels seen directly before the CEO change.

Pomerantz describes itself as a firm with more than 85 years of history that practices in the areas of corporate, securities and antitrust class litigation. The firm, with locations in New York, Chicago, Los Angeles, London, Paris and Tel Aviv, has recovered billions of dollars in damages awards on behalf of clients/class members.

In business for over 20 years, Levi & Korinsky also specializes in securities litigation and says it has secured hundreds of millions of dollars for aggrieved shareholders. Nationally recognized, the firm has ranked in ISS Securities Class Action Services' Top 50 Report as one of the leading securities litigation firms in the United States.