Lululemon can't catch a break - loses yet another CEO over misconduct charges
Last month, we told you how Lululemon went through years of bad press because its charismatic but clueless founder, Chip Wilson, could not stop shooting his mouth off. This week, we learn that the company has parted ways with the latest CEO, Laurent Potdevin. This time, nobody is talking at all, and investors aren't happy about that, either.
According to a press release from the company, "Laurent Potdevin has resigned as CEO and as a member of the company's Board of Directors, effective immediately. lululemon 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... Protecting the organization's culture is one of the Board's most important duties."
If that note leaves you wondering just what the heck went down, you're not alone.
UPDATE: CNBC has broken the story, reporting that Potdevin had a multi-year relationship with a designer who worked under him. "Potdevin's relationship with the designer is one of several instances in which he demonstrated a lack of leadership at Lululemon, sources tell CNBC. Former employees say he had a negative impact on the company's culture, for example, which they described as toxic." While insiders are starting to leak information, the company itself remains mum.
Shareholders' rights group FAIR called the explanation "Thin", and executive director Frank Allen told Canada's Globe and Mail "Shareholders, investors are entitled to a full explanation for something of this significance."
Perhaps management learned the wrong lesson from dealing with past controversies - centering around Chip Wilson's off the cuff comments fat-shaming the athleticware company's customers and management-shaming the firm's board and CEO. At that time, the company did a pretty good job of brazenly breezing through the storm, proving the doomsayers wrong by coming out the other side stronger than ever. As we reported, the firm has finally reached the point that Wilson's rants weren't impacting the company, and now this happens.
But this seems different - by not revealing the underlying conduct, they've got everyone curious, and what might have been a one-day blip of bad news is turning into a week-long mystery. As they say, it's not the crime, it's the coverup.
"The downside of having succinct, inadequate disclosure is that people make inferences," Corporate governance expert Richard LeBlanc told the Globe and Mail. "And you lose the ability, as a board, to control the message. So, something a little more fulsome would have been better."
Two law firms have announced investigations:
- New Orleans-based firm Kahn, Swick & Foti is looking into whether Lululemon management may have breached their fiduciary duty to shareholders
- New York-based law firm Bronstein, Gewirtz & Grossman is also digging into the issues surrounding Potdevin's departure.
The separation is, at least in theory, voluntary, and Potdevin is getting a total severence package of $5 million, in exchange for not suing. I'm betting, based on their past experience with Chip Wilson, that there will be an official vow of silence attached to that package.
Meanwhile, Wilson himself has been conspicuously low-key about his successor's downfall. He issued a fairly innocuous statement:
" [This event is] an opportunity to secure a culturally-aligned leader who values athletics, the West Coast lifestyle and a deep commitment to re-establish the profit-driving people development program that was a cornerstone to our success."
He not only didn't post that to his rant-filled ElevateLululemon.com website - in the two weeks since our article, he's even taken that site down.
These days his primarly outlet is Twitter, where he mostly tweets inspirational messages. Wilson went through his day placidly, only tweeting one message that might possibly be relevant: