(Montreal) The annual remuneration of former Gildan boss Glenn Chamandy has approached US$10 million over the past three years, even though the board of directors accuses him of having “considerably reduced” his daily involvement in the management of the company “in recent years” as part of a shareholder war which is shaking the Montreal clothing manufacturer.
Despite these allegations which were strongly denied by Mr. Chamandy, the board of directors still judged his work sufficiently satisfactory to pay him annual bonuses in 2021 and 2022.
Even though he did not receive annual bonuses in 2023, his total compensation still reached 10.2 million US dollars, the equivalent of 13.8 million US dollars, according to regulatory documents sent to shareholders.
These emoluments were granted during a period when the board of directors alleges that the company’s boss was disengaged “in recent years” from the day-to-day management of the company. “Mr. Chamandy came to the office only four times a month and sent only a few professional emails per day,” the board alleges in the shareholder circular.
“At such a critical time in Gildan’s history, the board believed that the company could not remain in the hands of a distracted and absent CEO,” the directors said.
This version was denied by Mr. Chamandy when it was first mentioned in January. “I am offended by what appears to be a premeditated effort to publicly undermine my record and, what is even worse from a corporate perspective, is that the board’s negligent behavior also tarnishes the reputation of a great company,” replied Mr. Chamandy in a statement.
Major shareholders have come to the businessman’s defense, notably the American firm Browning West and the Montreal asset manager Jarislowsky Fraser, who are calling for the replacement of directors.
Shareholders will have the opportunity to decide the issue at the annual meeting on May 28 in Montreal.
If activist shareholders gain majority support, it could pave the way for Mr. Chamandy to return to office.
Severance pay pending
In the document, it is indicated that Mr. Chamandy would claim a bonus of “approximately” 38 million US, which represents almost 50 million. Last year, the board estimated that the executive would be entitled to a severance payment of approximately 20 million US dollars, or approximately 27 million, in the event of dismissal without cause.
The company’s board says it “cannot make an informed decision” on whether part or all of the severance package will be paid until shareholders make their voices heard.
A contradictory message
In this case, there seems to be a certain contradiction in the council’s message, notes the professor and co-director of the Center for Studies in Economic Law at Laval University, Ivan Tchotourian.
“It’s a slightly troubled message because indeed, we can’t blame him for something and on the other hand, offer him significant remuneration,” replies the governance expert.
However, several factors could have played a role in the evaluation of Mr. Chamandy’s remuneration, Mr. Tchotourian nuanced. Remuneration is established according to certain criteria, notably financial returns, which have been achieved, regardless of the judgment made as to the role that the businessman really played in achieving the objectives.
More generally, the contradiction evokes the limits of long-term compensation programs based mainly on share performance, according to the president and CEO of the Institute on the Governance of Private and Public Organizations (IGOPP), François Dauphin.
These programs are designed to align “as closely as possible” the interest of the manager with that of the shareholders, but “it does not necessarily have much to do with the personal or individual qualities of the CEO,” notes Mr. Dauphin.
If the company’s performance is good, it may take some time before the directors realize that the commitment of the big boss is not there, says Mr. Dauphin. “We meet occasionally, but we are not on the ground every day. »
The decision to fire a CEO, especially when he or she is a founder, must be carefully considered. It is normal for the council to take the time to do an internal investigation “as long as from the outside it seems to be working”.
The board of directors and Mr. Chamandy provided different versions, but it emerged that there was disagreement about the strategic plan and succession.
These discussions on succession suggest that the board had begun some work to plan a new strategic chapter and attempt a smooth transition, believes Mr. Dauphin. “There is probably some groundwork that has been put in place. I think that all this work that was intended to be done in an orderly manner did not work. »
Mr. Tchotourian also believes that the board tried to ensure a certain smooth transition with the founder, which could explain the remuneration of recent years. The strong support of important shareholders for Mr. Chamandy, as demonstrated by their discontent following his dismissal, could have complicated the work of the board, according to him.
“Mr. Chamandy is still supported by certain shareholders. So it could very well be that if he had been given compensation deemed too low, shareholders could have challenged the board of directors. You give sticks to get beaten. »