Former Gildan CEO seeks payout, rejects probe into conduct, company says

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Gildan Activewear Inc. GIL-T says its former chief executive officer is rebuffing a probe into his conduct and claiming a severance payment worth US$38-million after being dismissed by the clothing maker, an amount far higher than what the company believes he’s owed.

The Canadian maker of T-shirts and fleece, which is locked in a proxy fight with activist investor Browning West over control of the company, says Glenn Chamandy is refusing to co-operate and provide information to an external investigator looking into his actions around the time he was let go this past December. The information is contained in Gildan’s management proxy circular, made public Monday.

Mr. Chamandy did not respond to a request for comment on the allegations.

Gildan’s board says because Mr. Chamandy is not co-operating in the probe, it hasn’t been able to make a fully informed decision as to whether his dismissal is with or without cause. Attempts by certain shareholders to seek his reinstatement are also complicating the calculations of his payout and directors have decided not to make a decision on any payments to the former CEO until after the company’s shareholders elect a board on May 28.

Mr. Chamandy is claiming a severance of about US$38-million, Gildan says in the circular, an amount the company is contesting. The previous year’s information circular stated he was entitled to US$20-million under his employment contract.

Mr. Chamandy’s dismissal is at the heart of the battle for control of Gildan, an $8-billion company that owns the American Apparel brand. Institutional investors owning an estimated 35 per cent of Gildan shares are pushing for his return. They say the board botched the succession process and that his replacement, former Fruit of the Loom executive Vince Tyra, isn’t qualified be CEO.

Browning West is pushing for Mr. Chamandy’s return as CEO and is proposing a slate of eight directors it says will provide him the support he needs to reboot the company. Gildan is countering with its own revamped slate, which it says better reflects the interest of all shareholders.

What’s happening at Gildan? A primer for the months-long CEO corporate battle

In its circular, Gildan recaps the context of the current leadership battle and sheds light on some of the company’s behind-the-scenes moves as the proxy fight continues. Notably, Gildan disclosed that its directors approved $8-million in stock-based compensation to retain four senior executives during the CEO turmoil and awarded Mr. Tyra a signing bonus of $1-million plus another $1-million in restricted stock units as a “one-time hire award.”

The company also says the board has for months tried to engage Browning West in talks about a settlement to the dispute but was turned down.

“We are now at a pivotal moment in the trajectory of Gildan,” the clothing maker says in the filing. Shareholders have a choice between reverting to a past “devoid of a credible growth path” or embracing a bright future with an inspired CEO and a newly refreshed board committed to collaboration and value creation, the company says. “Don’t give up control of your investment to a self-serving activist.”

Gildan has hired law firm Dentons to look into Mr. Chamandy’s conduct in the months before and after he was let go. One particular area being probed is the former CEO’s relationship with Browning West.

The board says it suspects there was complicity between the former CEO and the Los Angeles investment firm on a scheme to get his job back. Browning West and Mr. Chamandy have denied there was such a pact.

“Shareholders would be right to question whether Mr. Chamandy and Browning West had a well-orchestrated plan in place, designed to create as much noise and chaos as possible around his departure to undermine the board and company,” Gildan says in Monday’s circular. “The aim was simple: create a false narrative to provide pretext for launching a proxy contest to take control of the board and the company, without paying any premium, and reinstating Mr. Chamandy as CEO with a more compliant board.”

Browning West has in the past dismissed the allegations as “weird and dark innuendo” that speaks to the poor credibility of Gildan’s current directors. On Monday, the firm’s founders, Usman Nabi and Peter Lee, said Gildan’s repeated claims that there was some sort of collusion between Browning West and Mr. Chamandy prior to his dismissal in December are categorically false.

“The board continues to spread this false narrative despite being told on numerous occasions by us that it is without merit and having no evidence to support its claim,” Mr. Nabi and Mr. Lee said in an e-mailed statement. “Browning West intends to raise this false claim, along with several others made in the company’s circular today, with applicable securities regulators.”

For weeks, Gildan directors have outlined the many reasons why they showed Mr. Chamandy the door. They say they lost trust and confidence in a CEO who became increasingly detached from his job as the business was losing momentum and growth was stagnating. When he tried to entrench himself by proposing a high-risk acquisition strategy only he could oversee, they let him go. They call it an ultimatum they couldn’t accept.

“Gildan cannot afford to go back to a self-interested, absentee CEO,” the company said in the circular.

Mr. Chamandy rejects any suggestions he’d become distracted and ineffective. In a March statement, he said that while he delivered more than $1.3-billion for shareholders in dividends and buybacks over the past four years alone, directors seem intent on “destroying” that legacy with their attacks against him.