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18 October 2024
Elizabeth Pfeuti
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October 18, 2024
Southwest Airlines has condemned a shareholder’s proposal to replace board members, calling it an “unnecessary and inappropriate” attempt to “maximise disruption.”
Elliott Investor Management, one of Southwest’s largest shareholders with a 10% stake, proposed to remove eight members of the airline’s board of directors and elect eight of its own candidates.
When the shareholder initially proposed changes to the board of directors in June, it argued that the airline’s poor performance made new leadership necessary.
In a letter to Southwest, Elliott said: “Southwest's rigid commitment to a decades-old approach has inhibited its ability to compete in the modern airline industry.”
However, Southwest has called Elliott’s request for a special meeting on December 10 to consider the proposal “unnecessary and inappropriate considering the extreme nature of Elliott’s demands.”
Southwest argued that the timing of Elliott’s requests appears to be designed to “maximise disruption” of the airline’s ongoing business transformation as it approaches one of the busiest travel periods of the year.
It added that Elliott’s actions highlighted its lack of understanding of the business and its “insatiable need to put its own interests ahead of those of all shareholders.”
According to Southwest, it has attempted to reach a resolution with Elliott, offering a framework to interview Elliott’s candidates and appoint up to three to the 13-member board. The board would then be reduced to three when executive chair Gary Kelly retires at the 2025 AGM.
However, Southwest claimed Elliott “remains entrenched in demanding control of the board” and continues to prevent its director candidates from being interviewed, hindering any potential for a constructive information.
Southwest added: “Elliott's failure to provide actionable feedback, coupled with the disruptive nature of its demands, should give Shareholders pause about Elliott's true intentions.”
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