After what seemed like an interminable period of inaction, the board at Lululemon Athletica has finally made itself heard.
On Tuesday, the iconic activewear company stunned the business world with a two-pronged announcement: first, founder and chairman Chip Wilson would step down; and second, Laurent Potdevin, formerly head at TOMS Shoes, was stepping in as CEO to replace the successful Christine Day.
The Lululemon board clearly realized that after months of dysfunction and controversy over a sheer misfortune of a product recall, it was time to take action. To its credit, Lululemon realized Wilson’s departure and Potdevin’s appointment had to be done simultaneously.
Although most eyes were on Wilson during the past year, the bigger concern for the company may have been Day’s announcement in June that she wanted out.
Under Day’s watch, Lululemon consistently outperformed expectations and saw significant increases in share value. When she announced her intention to leave, share prices plummeted and the company lost $1.6 billion in market value. Day announced her intention to resign before any apparent successor was identified, a clear sign by any organization that there is trouble brewing behind the scenes.
Day has remained discreet about the reasons for her departure, but that didn’t stop people from speculating. Her announcement came just a few months after the recall, even though she led a successful re-tooling of Lululemon’s quality control processes to eliminate the problems that led to the recall.
In the wake of Day’s announcement, however, Wilson went on the offensive and suggested in November that some of his customers’ bodies were simply not appropriate for the body-hugging fabric used in Lululemon’s yoga pants. As Wilson’s personal brand imploded, Day was invisible.
Even if Day’s decision was NOT a result of a conflict with Wilson, the fact that she was not motivated to step in and stop Wilson from making a bad situation worse is clear evidence of the dangers of a lame duck CEO.
Reflecting back, it appeared that for most of the last year, there were challenges and breakdowns in many important roles and relationships in the company.
So, what can we learn from Lululemon to bring back to our own boardrooms? Here are a few ideas.
- A confident and compelling CEO is necessary to offset the often powerful influence of a charismatic founder that remains on the board. Critical skills cannot be compromised in this situation.
- Regardless of the lifecycle stage or financial success, boards always, always need a CEO succession plan in place. One never knows when a CEO wants to, or has to, leave his or her post.
- A strong board of directors is needed to ensure that the relationship between the CEO and founder remains constructive. While these types of situations are often sensitive and complex, the board has an obligation to surface and resolve the issues.
A balanced blend of personal courage and effective board practices are fundamental for all of these requirements.
The great news is that in one fell swoop, the Lululemon board has shown that after a period of inaction, it is back in the game. Investors, and yoga-inspired athletic apparel aficionados alike are issuing sighs of relief this week.