In a letter released to shareholders, Wilson urged immediate reforms, including a refresh of the boardroom and the formation of a Brand Product Committee.
Wilson stated that private discussions with the Board over recent months did not yield results and accused the Board of failing to act on issues he flagged.
“The heart of the issue is a disconnect between the Company’s creative engine and the Board’s strategic oversight of how nonquantifiable power of brand and product translates to brand strength, margin durability, and long-term shareholder value,” Wilson wrote. He added that “Brand, creative and marketing skills are missing from the boardroom.”
According to Wilson, lululemon’s stock price has dropped by nearly half in the past five years, leading to an estimated $20bn loss in value for shareholders.
Wilson noted that several directors have lost support from more than 20% of shareholders, pointing to what he described as a “clear, significant and consistent frustration” with current leadership.
He also mentioned the existing crisis to hire a new permanent CEO which he described as being caused by the third failed succession planning process.
“It should be overwhelmingly clear that shareholders expect this Board to fulfill its fiduciary duty and act with urgency, clarity and humility. Unfortunately, we have seen none of this in our engagement.,” said Wildon
Efforts to resolve differences began on 15 December when Wilson presented a framework for change to the Board. After receiving no response ahead of a nomination deadline, he nominated three independent director candidates namely Marc Maurer, Laura Gentile and Eric Hirshberg and submitted a proposal to declassify the Board on 29 December.
One nominee later met with some directors, but Wilson criticised the pace of engagement, stating that “the Board only engaged with our framework for the first time on February 24, more than 70 days later.” He described their response as “weak and insufficient.”
At the time of nominating the three directors, lululemon insisted it has a “highly engaged and experienced board, well-equipped to guide the company’s future direction”.
Wilson also reported that his proposal for a Brand Product Committee was rejected by the Board, despite what he considers its proven success at other companies such as Amer Sports, where he explained a similar concept allowed brands like Wilson and Arc’teryx to deliver consistent cutting-edge performance.
In response to Chip Wilson’s letter, lululemon said it has continued to engage with him “in good faith,” but disputed his characterisation of his interactions with the Board.
