The Decibel - A CEO battle, a Honduras factory, and the shirt in your closet

Episode Date: May 23, 2024

Gildan t-shirts are everywhere. The ubiquity of their products has turned Gildan into one of the biggest clothing manufacturers and wholesalers in the world, bringing in billions in revenue every year. But recently, Gildan has been in the news about a fight between its former CEO and the board. And this boardroom drama has refocused attention on how the Montreal-based company makes its clothes so cheaply.Robyn Doolittle, a reporter with The Globe’s Report on Business, looked into Gildan’s work conditions at their factories in Honduras and explored the tension behind wanting cheap clothes that are ethically made.Questions? Comments? Ideas? E-mail us at [e-mail]

You know Gildan. Go to your closet, you will find a Gildan t-shirt in there. Robin Doolittle is a journalist with the Globe's report on business. And she recently looked into Canadian clothing company Gildan. I mean, if you've ever played any sports, if you've ever been part of any clubs, if you've ever tie-dyed a shirt with your friends, this is the t-shirt brand that you're using because it's good quality and it's probably the cheapest.

Gilton generates more than $3 billion U.S. dollars in revenue annually. The company also touts its environmental, social, and governance commitments. But how do you ethically make a very cheap shirt? Robin looked into this question and the company's brewing corporate battle, along with her colleagues, Nicholas Van Prat and Andrew Willis. Today, Robin's on the show to explain what she found.

I'm Maina Karaman-Wilms, and this is The Decibel from The Globe and Mail. Robin, great to have you here. Oh, I'm so excited to be here. I think we should just establish why this Canadian t-shirt company, Gildan, has been in the news. Why are we talking about them? So in December, Gildan, this Montreal-based company, out of the blue fired its CEO. This is a guy named Glenn Shimandy.

He has been involved with the company for 40 years. He's been CEO for 20 years. He is just so synonymous with this company. He built it up from a nothing little Canadian company into one of the dominant apparel manufacturers in the world. So the board shocks everyone by firing this guy out of the blue. And then they name another guy, Vince Tyree, who is the former president of Fruit of the Loom. And he's going to be the new CEO.

And almost immediately, a group of shareholders flip out. And they say, we want Glenn Schimandy brought back immediately. And this has started a five-month proxy war for the leadership of Gildan, led by a group of activist investors. It's been this very heated, high stakes, dramatic business story in Canada. So this is all going to be decided at the end of the month. And the core question that shareholders are going to have to answer is, do we want to bring Glenn Schimandy back? So what we at The Globe wanted to do was go, okay, if you're going to answer that question, let's look at the company that he built.

All right. So what about that question, Robin? Can we go back to the beginning? How did this company start? shirts, et cetera. And Glenn and his brother, Greg, actually inherited the company from their grandfather. Their own father, whose name was Harley, passed away tragically at 29 from cancer. And this is, you know, they're university students. They're young guys. And right off the bat, they are like, OK, we got to find a way to cut costs. We got to, you know, make this a more profitable business. And one of the ways that they saw to do this was to bring more steps of their supply chain in-house. So at the time, they were doing a lot of T-shirts that printed, you know, superheroes on it. They had licenses for Mickey Mouse and Batman and Superman.

And they said, OK, well, let's join up with our screen printer. So it's all in the same company. And those screen printers were two guys, Gilbert and Daniel Ayoub. Gil Dan. That's the company. And so this is the beginning of Gil Dan. Now the relationship with the Ayoubs kind of fizzled after a few years, but Glenn and Greg carried on the business. And they continued this idea of how do we make this more efficient? How do we cut costs? They want to continue this, bringing more steps of their supply chain in-house. And this is a concept called vertical integration. Remember that because it's going to be important in the story.

They want to continue to bring things like fabric production, cutting, dyeing, sewing, all of these different aspects of how you make apparel under one umbrella. And that is how they started to grow this tiny company called Gildan into this global powerhouse. Okay. So they were able to save some money then through this vertical integration, as you said, right, bringing other things under their own umbrella. You mentioned a lot of parts of the business. We didn't talk about labor costs, though. So let's talk about that. Where do they stand on that?

How do they save money on that? Okay. labor costs, though. So let's talk about that. Where do they stand on that? How do they save money on that? Okay, so when we're looking at this idea of vertical integration, along with cost savings, and you're bringing different steps of the production in-house, labor is a huge factor here. And when you're looking at saving costs, one thing that they did really early on was they said, okay, labor costs are very high in Canada and the United States. Let's look at factories abroad. And very early, they focused on Honduras. This is a country in Central America. For them, it was very appealing because it was in close proximity to a lot of raw materials. There were very established trade routes to the American market, which was their biggest market,

because of the food industry. And also there was a lot of labor. It wasn't just that they could pay people less. It was that there were a lot of people wanting these jobs. And so for that reason, they set up a tiny shop in the mid-1990s, a sewing factory in Honduras. But what really turned things around was they went public. They get $100 million together. They get a bank syndicate loan. They have all these people buying in and they spend $100 million on this mega factory that is fully vertically integrated with all the different steps in the production under one roof in Honduras. And when I was interviewing former staff that worked at Gildan, they said this was the game changer. They never looked back after that. They were making so much money from all of these savings that they just started building more and more factories. And right away, they got another half a dozen in Honduras. They expanded into Dominican. And now they're in 12 countries around the world. Wow. And how does that kind of, I guess, manifest and when it comes to the cost of things

for them? So what are they selling t-shirts for? So we interviewed Glenn Schimandy, actually, the former CEO, and he was a little reluctant at first, but he came around. And he said something that just really stuck with me. He said, when we were selling our first t-shirt in 1992, we charged something like 30 bucks per dozen. They always count by the dozen. By around 2001, they were selling them for $12.50 a dozen. Wow. A dollar a t-shirt, basically. And when he said that, all I could think of was, how do you make a t-shirt for a dollar? Yeah. I mean, this is a huge question, right? And I know you started digging on this, Robin. So what did you find? Yeah. So once I started hearing about how they had expanded and how they were able to make this huge leap in their cost savings, you obviously want to know, OK, well, what does that look like on the ground? when I interviewed workers who were working in these factories is that it was not easy work.

And there were actually some really troubling questions that these workers raised about the conditions that they have in the factories. And what was particularly interesting for me on this is that Gildan in its public disclosures on these types of issues on labor, on the environment, paints a really rosy picture. On paper, they look like an exemplary company, but the reality on the ground was a little different according to these workers. Okay. So can I ask you then on paper, what makes them look like such a good company there? Well, why don't we back up to 2002? Because this is where this really gets going. In 2002, the CBC ran an investigative report that raised real questions about the labor practices within Gildan's factories. And the following year, the Makila Solidarity Network, which is a Toronto-based NGO, released its own report that alleged all sorts of workplace abuses, really aggressive union-busting tactics. They alleged that women were subjected to pregnancy tests upon being hired and after their probation period, and that if they tested positive, they would be fired. At the time,

Gildan told the NGO that, no, they weren't testing for pregnancy, they were testing for drugs, which raises its own set of questions. But the bottom line is that it got really heated. And it initially threatened legal action, I'm told by the Makula Solidarity Network. Once kind of the temperature was turned down, they decided to work with the organization and make some changes. And over the next couple of years, they implemented a number of changes about how work is done within the factory and making conditions better. And the big thing that they did was they embraced this idea of unionization. Again, there had been really aggressive tactics around suppressing labor movements, but they embraced it. And so this is around 2005.

They got a seal of approval from a number of different labor bodies that they were being good actors in these countries. And I do think it's important to note here that I think sometimes we hear numbers about how much workers in these countries are making and it's gobsmacking, you know, compared to what we're earning here. These companies can be real positive in these areas because there aren't other employers. You know, I interviewed a minister in Honduras who said if Gildan ever left the country, it would be disastrous for their economy. Like they provide good jobs, stable jobs, good paying jobs, and that they really are lifting people out of poverty.

So all of that is great. But the question is, what are the conditions like? And could they be better while still giving Gildan the margins that they need and while still treating people with dignity? So after that, those years of where they got the seal of approval, kind of time is ticking on and everyone sort of shifted their focus. And it was because of this proxy battle that we kind of returned to some of those questions. And what I learned when I was doing interviews about Gildan is that actually a series of events that happened last year in the country really put the focus on Gildan's labor practices once again. We'll be back after this message. And Robin, I think you actually got the chance to speak to someone who had worked in one of these factories, right? Yeah, one of the women that I interviewed, her name is Rosa Dalila Lopez Correa.

She started working for Gildan in 2005. Good morning. My name is Rosa Dalila Lopez Correa. I worked at Gildan for 18 years. She initially wasn't super excited to work for the company. She knew it was going to be long, grueling hours, but it was good pay for the area. There weren't a lot of employment opportunities. It was solid work. It was a stable job. It was better than, you know, she'd been working at a grocer in the area. And this was a much better option. The other thing was that the company didn't ask for, you know, diplomas or educational requirements. She was over 30 at the time, and they gave her a job.

She said it's very hard to get a job in Honduras once you're over 30. And so she started working at the factory. But she talked about some pretty, you know, grueling conditions. She is at the factory for 11 and a half hours a day. She's doing the exact same thing over and over again. She is finishing the bottom hem of T-shirts. So she's curled over a sewing machine. The factory floor

is divided into teams. Her team had about 20 workers on it. And every single day they had to finish 500 dozen t-shirts. Gildan assesses things by the dozens. And she says the only way to hit that very high quota is you have to skip your breaks. So everyone gets two 15-minute breaks per day and a half an hour lunch. But she said there's no way to hit your quota and do your breaks. So most people skip it. And in fact, she limits how much water she drinks in order to limit the number of times she has to go to the bathroom. She said that if you don't hit your quota, there's very harsh rebukes from managers. It's a very intense pressure cooked environment. Your pay is also impacted.

If you don't hit your quotas, you're paid less. I think it's actually structured in the form of if you hit your quotas, you're paid more. But the bottom line is if she's hitting her quotas, she's making the equivalent of about $143 a week Canadian, which is above the minimum wage and is a decent amount of money, but it's still not a lot. The other thing, if you're not hitting your quotas, Gildan talks a lot about providing free lunches to employees. But what I found from interviewing workers is that only the workers who are meeting their quotas are given the free lunch tickets. So again, just kind of really intense, stressful days and long days at the factory.

But more than that, she says, because she's doing the same thing over and over and over again, before long, she starts to have really serious pain in her shoulders, arms, and hands to the point where it's just shooting pains, it's numbness, but she needs this job. And so she's continuing to go in every day and struggling.

She said she did go to Gildan's doctor, which is on site. Gildan talks about providing medical staff at the factories. But she says she was given a shot for pain management and then sent back to the factory floor. There wasn't something more than that, she says. So actually, from looking at Rosa's experience here, Robin, this is getting back to what you're saying before about on paper versus the actual conditions, right? So on paper, you get two breaks, but in reality, you can't take them because you need to hit your quotas. On paper, you get lunch, but you only get lunch if you hit your quotas, right? So there's that. On paper, there's doctors, but in reality, those doctors, according to Rosa, are there to make sure that they can just work longer.

And this is Rosa's life. Four days a week, leaving her house before dawn, getting on a bus, getting to the factory, working for 11 and a half hours, and then getting home late. And finally, she has to take a leave from work for an unrelated surgery. It needs some accommodations after her surgery, she says that she is promptly laid off. And this is about seven years ago. And it's part of a layoff of about 150 workers. And Rosa, along with four others, say that they were targeted because of their workplace injuries. And they sued Gildan. And last year, they won in the Supreme Court. The Supreme Court determined that Gildan had violated their labor rights, and they ordered Gildan to immediately

reinstate all of the workers with back pay. So she gets her job back. But then what happens, she's only four months back on the job, and the manager comes over the loudspeaker at the factory in San Miguel and says, we're closing the plant. And all 2,700 workers are going to be out of a job now. And this is really significant for a bunch of reasons. I talked to a number of organizations that work with and support the workers in these factories, and these workers are primarily women. And they say the problem is that so many of these workers encounter the kind of injuries that Rosa has from the constant repetitive stress on their bodies that they're going to have problems getting jobs elsewhere. various unions and public statements afterwards, there was a real feeling that the women who had sued Gildan were to blame for the factory closure, that this was some sort of retribution and that Gildan didn't want to have to deal with the precedent of rehiring injured workers. Gildan has categorically denied this and said it was an economic decision,

but the timing of events was really suspicious to them. Robin, earlier you mentioned that Gildan fought employee efforts to unionize, but then accepted them. So how have unions changed the conditions for these workers? What this has meant is that workers have collective bargaining and their wages are going up and their working conditions are going up. They have a say. But Honduras is also a really difficult country for union members. And there are death threats, intimidation, assaults, even assassinations on union leaders.

And actually, after the announcement of the San Miguel closure, just four days later, four members of the union from the San Miguel plant of the union leadership, including the president, were murdered in a pool hall massacre that claimed the lives of 13 others. The police have said that this was related to, you know, a gang drug territorial war. But for staff who work on the ground who know how common threats are, there was a feeling that this was retribution for the factory closures, that the union leaders somehow played a role in the closure of the factory. So to take on a union role in this situation, it's a very difficult situation, could be a very scary situation for them then as well. It is. And difficult situation, could be a very scary situation for

them as well. It is. And I think that, you know, one of the reasons this is really relevant to bring up is there's a real fear among people who work in the factory to speak out about the conditions and what they're facing. I had a very hard time finding anyone who would comment because they are very afraid of retaliation and physical harm for speaking out. Now, you can say whether that's justified or not, but you lay out the facts on the table of what they're witnessing, and I understand where it's coming from. We talked a little bit about this, Robin, but let me just ask you directly, what has Gildan said about these labor complaints? So in terms of the Supreme Court ruling last year, what it noted was that it had been found to have violated the workers' labor rights.

The question of their injuries was not litigated during the case. That wasn't the issue at hand. Gildan has talked about the fact that they are on the Dow Jones Sustainability Index for the last 11 years that they are accredited by the Fair Labor Association. You know, they sent us a statement talking about how they really value the health and safety of their employees. Let me just read this from you from the spokesperson, Genevieve Goslin. She says, we recognize our responsibility to contribute to a higher standard of living for our employees by offering benefits that help better meet their overall needs, such as free on-site medical clinics, vaccination and medicine programs,

parental leave, financial assistance, subsidized meals, and free transportation to and from work. On some of the specifics, I didn't get a response. I also interviewed Emma Pullman, who is the head of shareholder engagement at NDSG at the BC General Employees Union, which happens to be a Gildan investor. And she raised this issue again, that on paper, Gildan looks really great. But how do you reconcile what's on paper with what they're hearing from workers? And actually, when Gildan shareholders are going to be deciding the fate of the next CEO, they're also going to be asked to vote on a resolution from the BC Trade Union asking Gildan to evaluate its effectiveness

of its human rights infrastructure, given these recent allegations from workers. And this is something that's more front and center for a lot of companies now, because consumers, I think, in the last few decades are paying a lot more attention to where their goods, their clothes are coming from. So this is something that I would imagine shareholders are going to be quite concerned about, too. People want to know more about where their goods are coming from. People also want to pay as little as possible. So there is that tension. And I think, you know, people like Emma Pullman and other advocates that I've talked to have said that this is a real financial and reputational

risk for Gildan if they're not living up to the standards that they're setting for themselves. Just very lastly, Robin, what is next for Gildan? So what are you watching and what is the company looking to do next? So, you know, again, a very vicious fight the last five months. Everything is going to be decided in about a week at the annual general meeting. We're going to know, is Glenn Schimandy coming back? Is Vince Tyree staying on? Right now, it is looking very much like the founder, CEO Glenn Schimandy, will be returning to the leadership of Gildan. The company, you know, a big growth strategy the company has is they're trying to replicate

the success that they had in Honduras by moving into Bangladesh. And so this is just another reason that I think labor advocates and human rights organizations are saying this is the time to really start interrogating these labor practices abroad since they're doubling down on it. Robin, always great to have you here. Thank you for being here. Thank you. That's it for today. I'm Maina Karaman-Wilms. Our intern is Aja Sauter. Our producers are Madeline White, Cheryl Sutherland, and Rachel Levy-McLaughlin. David Crosby edits the show.

Adrian Cheung is our senior producer, and Matt Frainer is our managing editor. Thank you so much for listening, and I'll talk to you soon.