Gildan Activewear Inc. GIL-T is reshaping its board of directors as it seeks to choke off a proxy campaign by dissident shareholders ahead of its annual meeting next month.
The Canadian clothing maker is replacing five directors, including current chairman Donald Berg, with new faces effective May 1. And it’s proposing to add two directors from a competing slate being championed by activist shareholder Browning West to replace two current directors not standing for re-election.
In all, the refresh would see seven of 12 directors swapped out, according to a Gildan statement.
“The slate that’s been proposed is to say ‘We’ve listened. We want to end the drama. We want to get on with building value,’ ” said Tim Hodgson, a veteran investment banker who’ll take over as Gildan chairman next month. The board backs chief executive officer Vince Tyra but will hold him accountable to deliver, he said.
Gildan’s board is locked in a feud with U.S. investment firm Browning West and other shareholders over its decision to dismiss long-time CEO Glenn Chamandy in December and replace him with Mr. Tyra, a former executive at Fruit of the Loom. Directors say Mr. Chamandy sought to entrench himself as CEO but some shareholders say the board botched the succession process and want him back.
Browning West, which holds a roughly 5-per-cent stake in Gildan, is seeking to remove eight of Gildan’s 12 sitting directors and replace them with its own nominees. The matter will come to a head at the company’s annual meeting, scheduled for May 28, if it isn’t resolved before then.
Nine institutional investors holding an estimated 35 per cent of Gildan’s stock have called for Mr. Chamandy’s reinstatement, saying Mr. Tyra isn’t qualified to lead the company. Exactly how many of those have changed their minds or sold down their positions was not immediately clear.
What’s happening at Gildan? A primer for the months-long CEO corporate battle
Bringing in new directors shows Gildan’s board is hunting for ways to resolve the conflict in a way that’s acceptable to stakeholders. But it remains intransigent on keeping Mr. Tyra as CEO. And that suggests this proxy fight will continue.
Usman Nabi, co-founder of Browning West, has told The Globe and Mail that Gildan’s board made a monumental error in replacing Mr. Chamandy with Mr. Tyra and that he sees no scenario under which Mr. Tyra can stay. “In my career, this is possibly one of the biggest own goals that I’ve seen a board make; in the same league as Apple firing Steve Jobs,” he has said.
Gildan’s board is pushing back against the idea that there is widespread, uncontested shareholder support for Browning West and for Mr. Chamandy being rehired as CEO. The company said it has held dozens of meetings with investors over the last five months that suggest investor opinion is more nuanced than might be believed.
“Through that engagement, it was evident that there was not unanimous support for the Browning West nominees – even amongst those who Browning West counts publicly as supportive,” the board said in a statement on Monday. “Specifically, there was concern about Mr. Chamandy returning to the company, that the nominees were selected by Browning West without input from other shareholders, and about providing Browning West with unchecked control of the company.”
Browning West has rebuffed repeated attempts by Gildan’s board to discuss a solution both sides might accept, Mr. Hodgson said.
The conflict has become one of the most acrimonious corporate power struggles in recent years in Canada. Adding to the intrigue: Gildan’s board is weighing takeover offers for the company after being approached by a potential buyer. Initial offers were due earlier this month.
Gildan provided a short update on the sale Monday, saying “There continues to be external interest in acquiring the company and the process is ongoing.” It said it does not expect to make any further announcements about that before the May 28 meeting.
Mr. Hodgson served as special adviser to former Bank of Canada governor Mark Carney and was also CEO of Goldman Sachs Canada. He’ll be joined on Gildan’s board shortly by Lee Bird, a former executive with Nike Inc. NKE-N and The Gap GPS-N; Jane Craighead, a finance and accounting specialist and a former executive at Bank of Nova Scotia; Lynn Loewen, who previously led Minogue Medical as president; and Les Viner, a lawyer and accountant formerly with Torys LLP. They replace Donald Berg, Maryse Bertrand, Shirley Cunningham, Charles Herrington and Craig Leavitt.
Sitting directors Luc Jobin and Chris Shackleton will not stand for re-election in May, Gildan’s board said. The board said it recommends that investors vote for two Browning West director candidates, namely Karen Stuckey, a former Walmart Inc. executive, and J.P. Towner, a former finance chief at Dollarama Inc. who now works for hardware retailer Rona Inc.
The rest of Browning’s slate doesn’t offer an increase in expertise or experience to Gildan’s business, the board said. Browning West wants its co-founder, Peter Lee, on the board but Mr. Lee is not being offered a spot by Gildan’s board.
Nicolas Van Praet
Andrew Willis