Shareholders want answers from Lululemon

Shareholder advocates and analysts are calling on Lululemon Athletica for more disclosure surrounding the abrupt resignation of its chief executive who “fell short” of the Canadian athleisure company’s conduct standards.

Frank Allen, the executive director of the Canadian Foundation for Advancement of Investment Rights (FAIR Canada), said the Vancouver-apparel maker’s statements explaining the sudden departure of CEO Laurent Potdevin after four years at the helm were “thin.”

“Shareholders, investors are entitled to a full explanation for something of this significance.”

The Vancouver-based apparel maker was mum on Tuesday after announcing a day earlier that Potdevin had resigned, effective immediately, and was no longer on its board of directors. Lululemon said in a statement it “expects all employees to exemplify the highest levels of integrity and respect for one another, and Mr. Potdevin fell short of these standards of conduct.”

According to a filing to the U.S. Securities and Exchange Commission, Lululemon and Potdevin reached a separation agreement in connection with his resignation. Under the agreement, Lululemon will pay Potdevin a $3.35-million cash payment “as soon as practical” and another $1.65-million total in monthly instalments made over a year and a half.

In return, Potdevin agreed not to sue the company and would co-operate with it in the future, among other stipulations.

Lululemon has begun searching for a new CEO.

Corporate governance expert Richard Leblanc says Lululemon’s public statements on the matter are “bordering on inadequate.”

“The downside of having succinct, inadequate disclosure is that people make inferences,” said LeBlanc, a governance professor at York University. “And you lose the ability, as a board, to control the message. So, something a little more fulsome would have been better.”

Canaccord Genuity analyst Camilo Lyon said in a research note Tuesday that the Lululemon board has moved quickly to quarantine the fallout that could have ensued if details were to have been made public.

However, he noted, judging by the company’s specific language in its statement, “we can only assume there were claims of inappropriate behaviour.”