Ten former directors of Gildan Activewear Inc. GIL-T are suing the company for $25.6-million, alleging the T-shirt maker failed to pay them deferred compensation after they resigned in the face of an activist shareholder campaign that succeeded last year in reinstating one of the company’s founders as chief executive officer.
Former Gildan chair Donald Berg and nine other former directors filed a lawsuit in the Quebec Superior Court this month alleging the Montreal-based apparel company withheld payouts on deferred share units they received while serving on the board.
In the lawsuit, filed on March 7, the 10 directors said the company has refused to cash out their deferred compensation because of “the investigation of certain questions surrounding the board of directors and the decisions it made during the course of the CEO succession.”
Gildan spokesperson Genevieve Gosselin declined to comment on the lawsuit. She said the company plans to make a formal response to the former directors in a court filing.
Gildan has already spent $82-million to cover the costs of lawyers, consultants and institutional investors during a bitter six-month boardroom battle that began in December, 2023, when the board pushed out CEO Glenn Chamandy in a dispute over succession. Gildan’s directors appointed former Fruit of the Loom executive Vince Tyra as the new CEO.
The decision sparked a fight between the board and a group of Gildan institutional shareholders, led by Los Angeles-based fund manager Browning West LP, that were determined to bring back Mr. Chamandy, aged 62. Mr. Chamandy co-founded Gildan in 1984 and built it into one of the world’s largest clothing manufacturers.
In May, 2024, Mr. Berg and the nine other directors stepped down from Gildan’s board ahead of a shareholder vote that put Mr. Chamandy back in control. Mr. Tyra left the company. When investors did vote on leadership at last year’s annual meeting, 84 per cent of shareholders cast ballots in favour of bringing back the company’s co-founder.
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In their lawsuit, the directors’ claims range in size from a $5.7-million payment for Mr. Berg, who spent nine years on the board, to a $221,461 claim for Sharon Driscoll, who served for six months. Mr. Berg spent his career in the consumer products industry – including 25 years at spirits maker Brown-Forman Corp., where he served as chief financial officer – prior to joining the Gildan board in 2015.
The former directors join at least one consulting firm chasing Gildan with claims of unpaid bills from the succession fight. In August, shareholder advisory firm Kingsdale Partners LP sued Gildan in the Ontario Superior Court of Justice for $2.3-million in alleged unpaid fees.
Gildan’s results have improved and its stock price soared after Mr. Chamandy returned, as the company boosted sales and bought back its own shares.
Over the past 12 months, Gildan’s stock price has risen by 43 per cent. The company is one of the world’s largest apparel makers, with a $10.4-billion market capitalization and 50,000 employees at factories in Central America, the Caribbean, the United States and Bangladesh.
Several of the institutional investors that backed Mr. Chamandy’s return have since sold portions of their holdings in the company.
In December, Browning West sold about a quarter of its Gildan stake for $168-million. In a filing, the fund manager said it took profits “to effectuate a rebalancing of Browning West’s portfolio in light of the significant appreciation in [Gildan’s] stock price.”