TORONTO, April 29 (Reuters) - The uproar around yogawear retailer Lululemon Athletica two years ago was about a little too much transparency. Now some shareholders are complaining about a lack of it.
Lululemon shares tumbled and executives departed following a high-profile 2013 recall of its signature yoga pants that were deemed too see-through. Its founder Chip Wilson later clashed with the board over how things were being run.
While the stock largely recovered from the pants debacle, some investors say the Vancouver-based company - which holds its annual meeting June 3 - must do more to improve its corporate governance.
"There needs to be serious reform on this board," said Roger Hardy, chair of Hardy Capital Partners, a longtime shareholder. "They've got to look themselves in the mirror."
Lululemon, which is pursuing international expansion in the face of growing competition, averted a proxy war last year when Wilson agreed to sell half his stake to Advent International, a private equity firm. Advent now has two seats on the board, a development Hardy said is positive. Wilson quit the board in February.
When the board reached a settlement that essentially ended a face-off with Wilson last year, it vowed to have an independent expert review its governance policies and board make-up. But more than eight months later, it has yet to outline any findings from the review or make any changes to its governance practices.
Wilson still owns a 14.2 percent stake and has the right to nominate one member of the board, but has not done so.
He said in an email that he has had difficulty finding a qualified candidate willing to join the board given the fact that the governance review he pushed for has not led to anticipated changes to the board's structure, composition and plurality voting system.
A veteran fund manager, who asked not to be named, said he built a position of over 300,000 shares in Lululemon, but has begun to sell it down solely because of governance concerns.
"There's something wrong in the governance of this company," he said, citing Lululemon's staggered board structure and plurality voting system and its failure to effectively engage with all shareholders.
"In my entire career, I've never seen a company run its shareholder relations program the way they are running theirs," he added.
Lululemon declined to comment on the review, or on investor comments. The retailer has a staggered board - meaning not all directors stand for election each year - and it uses plurality voting standards that lets a director be elected even if more votes are withheld than cast in favor.
Lululemon's proxy circular states its board structure is a safeguard against a buyer gaining control without paying fair value. But the practices are frowned upon by corporate governance experts as they reduce the ability of investors to agitate for change.
Brad Allen, who advises boards on corporate governance practices, notes that more than 90 percent of S&P 500 companies have non-staggered boards.
"Both from a governance perspective and from the perspective of trying to be transparent and shareholder friendly, Lululemon has a lot of work left," he said. (Editing by Jeffrey Hodgson and Alan Crosby)