A week after firing the founder and CEO of Gildan and raising opposition from at least four major shareholders, the board of directors of the Montreal clothing manufacturer considers it necessary to reveal more details to explain its decision. The board questions Glenn Chamandy’s skills to execute the strategic plan and accuses him of bad faith.
“The story that concerns us is not that of a board of directors firing its CEO. It is rather that of a CEO who is trying to liquidate his board of directors,” says Luc Jobin, member of the Gildan board and former CEO of CN.
“It’s a bit of a shame, because the situation was orchestrated by Glenn to maintain his status as CEO. He skillfully structured the events to bring about a conclusion that would put him in a victim position,” the administrator said in an interview with The Press Sunday.
“For Glenn, no one can succeed him as head of Gildan. »
PHOTO PROVIDED BY CN, LA PRESSE ARCHIVES
Luc Jobin
Luc Jobin maintains that the council has “a lot of respect for the individual and what he has accomplished”, but that it began to question Glenn Chamandy’s intentions after trying to reach an agreement with him in vain .
It is not a combination of circumstances, he says, that there has not been an internal candidate put forward in recent years to succeed Glenn Chamandy at Gildan. “It reflects a man, in Glenn, who is the one who wants to make all the decisions. For various reasons, the team around him is never adequate to succeed him, at least from his point of view. »
Luc Jobin maintains that as part of discussions surrounding his succession, Glenn Chamandy informed the board two years ago of his intention to retire within three to five years. He said an internal candidate was identified, but an external assessment concluded he was not ready to take on the role of CEO and that this candidate needed “development” in the medium to long term.
The council had to look externally. And that’s where discussions started to get difficult with Glenn.
Luc Jobin
At the same time, he said, the company’s strategic plan was well underway to determine the vectors that could enable it to penetrate new segments where Gildan could gain market share. “Glenn then began to become more impatient and less comfortable with the challenge of increasing the pace of organic growth as part of the strategy put in place in 2021.”
Luc Jobin says Glenn Chamandy’s great strengths potentially become his limitations, and the board needed to ensure it had the person with the ability to lead Gildan to meet the challenges of the next five to ten years.
This is where the issues of strategy and succession come together in 2023, according to Luc Jobin.
Glenn Chamandy presented, he said, a strategy including an important new vector which is to pursue multiple acquisitions of several billion dollars outside Gildan’s field of expertise and operational field, therefore in adjacent sectors.
“Acquisitions that would be highly dilutive to our shareholders because there would be a lot of debt and equity issuance to make these acquisitions.” The level of rigor used to review acquisition potential did not meet the board’s expectations. »
Luc Jobin adds that carrying out this strategy involves a risk because it requires skills that are not fully mastered by Glenn Chamandy.
“Glenn served the council with a calculated ultimatum. The council had to agree to two requests, otherwise it was going to leave,” says Luc Jobin.
“His first request was to move forward with the acquisition strategy with a sense of urgency that took us a little by surprise, because the file was not fleshed out and there was a lot of work to do. The second condition was to review the development status of the internal candidate in two years without Glenn being able to tell the board with certainty whether this candidate would have reached the level necessary to succeed him as CEO. »
The board reportedly responded to Glenn Chamandy that he had to complete his work evaluating external candidates before taking a position. “The relationship with Glenn then deteriorated quickly,” says Luc Jobin.
Glenn Chamandy was shown the door early last week by the board, which appointed Vince Tyra, a 58-year-old American, to take over. The departure of Glenn Chamandy was then simply explained by a disagreement over the timing of the implementation of the succession plan.
In turn, institutional shareholders Turtle Creek, Browning West, Jarislowsky Fraser and Pzena Management all criticized Gildan’s decision.
Luc Jobin affirms that the American institutional investor Coliseum Capital – currently Gildan’s second largest shareholder with a 6.6% stake – supports the board of directors and intends to increase its stake in Gildan by purchasing shares on the market to become the largest shareholder ahead of Jarislowsky, who holds a 7% stake.
“Coliseum is one of the first shareholders to want to engage in more in-depth discussions to better understand what is happening. Coliseum told us they were ready to do something to help the cause. We therefore invited one of their leaders to join the council,” says Luc Jobin.
Chris Shackelton, co-founder and managing partner of Coliseum, therefore obtains a seat on the Gildan board.
Luc Jobin says the board intends to spend time this week with other institutional shareholders.
“The board held “fairly preliminary and not very extensive” discussions with the 15 or 20 largest shareholders last week. We were hopeful that Glenn would not encourage activist shareholders to take a stand and felt it was not necessary to offer so much detail so as not to harm people’s perceptions of the situation and Glenn. Unfortunately, a more factual dialogue has become necessary to help shareholders understand what happened,” he says.
Luc Jobin also claims that Glenn Chamandy sold “virtually all of his shares in Gildan” last Monday. Gildan shares lost 11% during the first trading session of the last week.
It was not immediately possible to obtain a reaction from Glenn Chamandy.