Browning West which owns 5.0% of Gildan's outstanding shares, has filed the lawsuit against Gildan Activewear with the Superior Court of Quebec – Commercial Division in a bid to ensure the Annual Meeting of Shareholders goes ahead without any delay or interference.
Browning West seeks to appoint an independent chair to oversee the meeting to ensure what it describes as "a fair and transparent process" after what it claims to be “desperate, wasteful and self-serving entrenchment tactics to date" by Gildan's board of directors following the removal of former CEO Glenn Chamandy in December.
Browning West added that it believes the current directors would do “anything to preserve their current positions".
Allegations against Gildan Activewear and its board
Browning West's lawsuit is said to outline several grievances against Gildan and its board claiming they have acted in a way which unfairly disregarded the rights and interests of shareholders "by pursuing a strategy of entrenchment, obfuscation and disparagement of dissenting shareholders, improperly placing their interests ahead of the interests of the company and its shareholders, contrary to the reasonable expectations of Browning West".
Browning West lists its allegations against Gildan and its board of directors as follows:
- Leaking corporate documents and confidential information to journalists and sharing this information with a third-party “governance expert” hired by the board, while refusing to share those same documents and information with shareholders
- Improperly soliciting proxies before filing a management information circular
- Pursuing meritless litigation with the primary purpose of undermining and delaying Browning West and Gildan shareholders from exercising their rights
- Launching unwarranted public attacks on Browning West and imposing costs associated with defending meritless litigation in a clear attempt to deter and silence shareholders from raising their concerns publicly
- Signing a “support agreement,” which was not in the best interest of the company and includes board representation rights for a shareholder who has a conflict of interest due to a significant ownership stake in one of Gildan’s largest customers
- Attempting to justify its decision to terminate Gildan founder Glenn Chamandy and name Vincent Tyra as CEO with a misleading and evolving set of explanations that directly contradict signed statements in Gildan’s prior annual reports
- Making groundless attacks on Browning West, including false accusations of acting jointly or in concert with other shareholders, and collaborating improperly with Chamandy while he was CEO of Gildan.
Gildan Activewear had not responded to Just Style's request for comment at the time of going to press.
Browning West’s Usman Nabi and Peter Lee said: “While we expect Gildan to oppose Browning West’s application, we will not be deterred and will continue to do whatever is necessary to ensure that all shareholders have an opportunity to replace the directors whose decisions have destroyed shareholder value and who have failed to give due regard to the views of investors.”
Browning West's ongoing dispute with Gildan Activewear
The company faced backlash from investors, including Browning with requests to reinstate Chamandy, which was denied by Gildan.
Gildan defended its appointment of Tyra and said its confidence in the former CEO had been “eroded gradually” after Chamandy’s plans to pursue “highly dilutive multi-billion-dollar acquisitions,” which Gildan said would sift the company away from its core manufacturing expertise.
“The board’s decision to hire a new CEO is based on our joint responsibility to see that Gildan is well positioned for future success. 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,” Gildan said at the time.
In a separate statement published on 17 January, former CEO Chamandy was keen to defend himself and said: “It is with regret that I observe the board’s current focus on a strategy seemingly aimed at undermining my reputation and my record through insinuation and distortion of the truth."
Browning West remains critical of Gildan’s justification in naming Tyra as the company’s new CEO and has described him previously as "an extremely poor leadership choice".
