Earlier this week, Canadian clothing maker Gildan announced it was replacing Chamandy with Vince Tyra, effective 12 February 2024. In the interim, the company said its CEO role would be filled by Craig Leavitt, who has served as a director of the company since 2018.

After facing backlash from major shareholders, Gildan’s board of directors issued an open letter to its shareholders clarifying its position.

The board states that while it gives Chamandy credit for co-founding Gildan and building the company over the past 20 years, it claims the company has struggled in the past four years.

The board says its confidence in the CEO has been “eroded gradually” in the past two years, as it looked for long-term growth strategies.

The letter states: “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.”

The letter outlines how, with Chamandy, the board had agreed to a three-year CEO succession plan in December 2021 and started the search for a new CEO in January 2022.

“While Mr Chamandy had agreed to follow the original succession timelines, he later worked to entrench himself as CEO,” the letter claims.

The board also highlighted concerns around Chamandy’s proposed plan to pursue “highly dilutive multi-billion-dollar acquisitions”, that would shift the company away from its core manufacturing expertise, which he proposed in October 2023.

The plans came with a suggestion that Chamandy should remain in place as CEO for several more years while the acquisitions took place.

The board reiterated that it believes Tyra is the right person to lead Gildan going forward.

Shareholders urge board reconstitution

The letter triggered a response from investor Turtle Creek Asset Management, which has held shares in Gildan for the past decade, and earlier criticised the board’s “tactics and shifting narrative” around the move.

In a letter to Gildan’s directors, Turtle Creek said Chamandy’s termination exposed the company to significant risks, including the loss of leadership, reduced employee morale and a disruption to customer relationships.

This is the second time the asset management firm has written to Gildan’s directors about this matter, having previously called for Chamandy to be reinstated on 14 December.

In its second letter to Gildan, Turtle Creek has now called for a “significant reconstitution of the board” as well as Chamandy’s reinstatement.

The letter states: “Having had the opportunity to reflect and deliberate on what we heard during our meeting with you, we remain convinced that Mr. Chamandy must be reinstated as Gildan’s Chief Executive Officer and as a director. In fact, we are so disturbed by the board’s actions and its conduct that we now believe a significant reconstitution of the board is essential.”

Turtle Creek Asset Management also criticised the board’s “hasty, ill-conceived and value destructive” decision to remove Chamandy and demanded that he is reinstated with immediate effect.

Browning West, another Gildan investor, which owns 4.8% of the clothing company, has also written a letter to the board of directors, calling for Chamandy to be reinstated and for Donald Berg to be removed as chair.

The investors also called for Browning West co-founder Peter Lee to be appointed as a shareholder representative to the board.

The letter warns Gildan's board: "If you continue to ignore the feedback of more than 33% of shareholders, Browning West is fully prepared to requisition a special meeting of shareholders to hold the board accountable for its actions and prevent the further destruction of value. Shareholders will not tolerate the board doubling down on its poorly conceived succession and its backroom deal in exchange for an individual investor’s support."

This latest development comes weeks after Gildan reported a fall in profits in the third quarter of 2023 on the back of lower demand and higher costs, in November 2023.