Overview of the Agreement
Southwest Airlines, a leading US carrier, has announced significant changes to its board structure following a resolution of its dispute with activist investor, Elliott Investment Management. This resolution, announced on October 24, 2024, marks the end of a contentious and public disagreement between the airline and the investment firm. As part of the agreement, Six new directors will join Southwest’s board, with five of these directors nominated by Elliott earlier in the month. Additionally, Gary Kelly, the Executive Chairman of Southwest, will expedite his retirement, stepping down on November 1, 2024, and will subsequently assume the role of Chairman Emeritus.
Details on New Board Members
The new directors endorsed by Elliott bring a wealth of experience from various sectors. The list includes David Cush, former CEO of Virgin America; Gregg Saretsky, former CEO of WestJet; and Dave Grissen, former Group President of Marriott International. They are joined by Sarah Feinberg and Patricia Watson, alongside Pierre Breber, former CFO of Chevron. This infusion of new talent is expected to drive fresh perspectives and strategic insights at Southwest.
Board Transformation and Future Plans
Following the agreement, the Southwest board will be streamlined to 13 members by the 2025 Annual Shareholder Meeting. This change is part of a broader strategy to enhance business performance and operational execution. The board’s restructuring aligns with Southwest’s transformational plan, which is anticipated to foster long-term shareholder value. Elliott has retracted its earlier request for a special shareholder meeting and entered into a Cooperation Agreement with Southwest, signaling a move towards a more collaborative relationship.
Comments from the Leadership
Gary Kelly expressed his gratitude and optimism in a statement, noting, “It has been the honor of my lifetime to work with our People and serve our Customers in making Southwest the leader it is today. I believe Southwest’s best days lie ahead under the vision and leadership of Bob Jordan and the oversight of this reconstituted Board.” Similarly, Elliott’s representatives, John Pike and Bobby Xu, commented on the positive developments, stating, “We are pleased to have come to an agreement with Southwest on the addition of six new directors that will enhance and revitalize its Board… We believe the strategic changes Southwest has announced since we commenced our engagement, together with the new independent directors and governance improvements, will position the Company to enhance business performance, drive operational execution and evaluate additional changes to create long-term shareholder value.”
Initial Challenges and Elliott’s Role
The relationship between Southwest and Elliott had been strained since the summer of 2024, with Elliott actively and publicly criticizing the management of the airline and calling for the replacement of CEO Bob Jordan. Elliott’s demands initially included the removal of eight directors and the election of eight new candidates, which led to heightened tensions and a call for a special meeting to ensure shareholder voices were heard. Southwest had countered these demands, labeling them as extreme and inappropriate, indicating a significant power struggle within the airline’s governance.