Lululemon Reaches Settlement with Founder, Boards Reshuffle to Pave the Way for New CEO

According to a report in the Financial Times, Lululemon has reached a settlement with founder Chip Wilson, agreeing to add two candidates nominated by Wilson to the board of directors following the annual shareholders' meeting in June, and to appoint an additional director with experience in apparel products and brands before October 1. In exchange, Wilson, who holds 8.7% of the company's shares, has agreed to cease pressuring the company for 18 months and to sign a non-disparagement agreement.

This agreement ends the proxy fight between the two parties over board seats, and also allows Lululemon to avoid leaving board composition issues to be resolved by a shareholders' vote at the annual meeting on June 25. The two candidates who will be joining the board of directors are Marc Maurer, former co-CEO of On Holding, and Laura Gentile, former Chief Marketing Officer of ESPN.

Wilson's conflict with Lululemon has been ongoing for several years. Since leaving the board in 2015, he has repeatedly criticized the company's poor performance, arguing that Lululemon lost its product appeal and ceded its leading position in the technical apparel industry to new competitors. In December last year, Wilson escalated his criticism into action by nominating three competing director candidates in an attempt to reorganize the board.

Last week, the two parties were close to a settlement, but negotiations broke down at the final stage. Subsequently, Lululemon publicly urged shareholders to reject Wilson's nominations, stating that its own list of directors was "far superior to Wilson's list". Wilson stated in a statement that the board adjustments and strategic changes already made by the company are part of restoring the focus on products:

“The new board members announced by Lululemon today, along with the strategic changes the team has already made, reflect meaningful progress towards restoring a product-first vision and unlocking significant value for shareholders.”