Lululemon founder tries to shake up the board


Yogawear retailer Lululemon Athletica Inc's logo is pictured as security personnel guard the entrance to the company's annual general meeting in Vancouver June 11, 2014. REUTERS/Ben Nelms 

Chip Wilson, the founder of Lululemon whose controversial comments about some women's bodies not working for the company's yoga pants prompted an uproar last year, officially stepped down as the board's chairman on May 16, remaining a director.

But he is not stepping down quietly.

Wilson, who owns 27 percent of the company's shares, announced Wednesday morning — the same day as the company's annual shareholder meeting — that he had voted against the re-election of two outside directors. One of them, Michael Casey, is a former Starbucks executive who was named independent chairman. The other, RoAnn Costin, is the president of a financial investment firm.

"I am concerned that the board is not aligned with the core values of product and innovation on which Lululemon was founded and on which the company thrived," Wilson said in a statement. He cites a "palpable imbalance in board representation, which is heavily weighted towards short-term results at the expense of product, culture and brand and longer-term corporate goals."

The company Wilson founded fired back with its own response. "The Lululemon board of directors and management team have been consistently focused on enhancing shareholder value and will continue to take actions to achieve this objective," it said in its statement. "Contrary to Mr. Wilson's assertions, Lululemon's board members are aligned with the company's core values and possess the necessary expertise to successfully lead Lululemon forward."

At the annual meeting Wednesday afternoon, shareholders re-elected both Casey and Costin to the board.

Yet what was motivating Wilson to speak out now? A spokesman for Wilson said he would allow his statement to speak for itself. Some analysts, meanwhile, saw Wilson's vote as an example of the dynamic that can play out when a founder who has nurtured a company from its roots steps away from the main leadership role.

Neil Stern, a senior partner with the retail consultancy McMillan Doolittle, says "whenever you have an iconic founder, it can be very awkward" when the founder relinquishes a position to an outsider.

Stern says he doesn't see evidence that the store experience at Lululemon is "eroding," but says the quality issues from last year have had an impact on the brand. In the company's most recently announced quarter, comparable store sales decreased two percent. The company will report its first quarter results on Thursday.

Stern also says Lululemon faces more competition from the likes of Gap's Athleta and Urban Outfitters, which recently began getting into the growing "athleisure" trend, too. "Everybody’s figuring out this is a big category," Stern says. Lululemon is "dealing with the fact that they don’t have the segment themselves anymore."

Meanwhile Andrew Burns, an analyst at D.A. Davidson & Co. who covers Lululemon and recently rated the company a buy, says he's not concerned by Wilson's votes. "I think it is a parting shot from a disenfranchised founder," he says, yet adds that the public airing of board disputes could be a "headache" for investors.

Greg Lowman, a spokesman for Chip Wilson, said in an emailed statement that "the notion that Chip is trying to undermine the company he founded and remains a major shareholder of is absurd on its face. The only reason that Chip is taking these actions is to better the long-term interests of Lululemon."

Keeping founders on the board is very often a good thing, according to Jeffrey Sonnenfeld, a professor at the Yale School of Management. It helps keep the company true to its roots. But, he says, it also carries risk: "Dissent is a great thing on the board, but it should happen in private, not publicly."

Lululemon announced in December that Wilson would be resigning from the board, when the company also shared news of a new CEO, Laurent Potdevin, who had previously served as president of TOMS Shoes. The move came about a month after Wilson, in an interview with Bloomberg Television, made comments that some interpreted as meaning customers' body size was partly to blame for the yoga pants' quality problems. The comments sparked an online firestorm, prompting Wilson to issue an apology.

Now, in his statement Wednesday, Wilson said that he is "excited about the management team that I helped put in place" and that he resigned as chairman in order to focus on other ventures.

Read also:

When life gives you Lululemons...

Founder's apology doesn't pass the drishti test

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Jena McGregor writes a daily column analyzing leadership in the news for the Washington Post’s On Leadership section.
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