Southwest Airlines Overhauls Board Amid Activist Pressure - Update
Dow Jones Newswires September 10, 2024 09:18:00 AM ET
Southwest Airlines Executive Chairman Gary Kelly will step down next year in a big board shake-up as the airline faces pressure from an activist investor to overhaul its leadership and business strategy.
Kelly has worked at Southwest for nearly 40 years. He served as Southwest's chief executive for 18 years and has been its board chairman since 2008. He left the CEO role in 2022 to become executive chairman.
Elliott Investment Management earlier this summer announced it had built a big position in Southwest with the aim of revamping what it said was the airline's entrenched leadership -- including Kelly. Elliott has said the airline needs swift changes to address what it has said is an outdated strategy and lackluster results.
The fund last month announced its intention to launch a proxy fight at Southwest, including plans to nominate 10 directors to the airline's 15-member board.
Six other Southwest directors intend to retire in November as the airline looks to refresh its board. Southwest said it would appoint four new directors in the near future, and will consider filling as many as three of those spots with candidates from the slate Elliott put forward last month.
Elliott didn't immediately respond to requests for comment Tuesday.
Kelly wrote Tuesday in a letter to Southwest shareholders that his role as executive chairman was always meant to be transitional. He said he had intended to consider retiring next year but opted to expedite his plans in an effort to address questions about the airline's governance and demonstrate his confidence in the airline's other leaders.
"Now is the time for change. It's time to shake things up, not just stir them a bit," Kelly wrote.
But Southwest and its board continued to defend Chief Executive Bob Jordan, another of Elliott's targets.
"Bob has a proven track record over decades and, most importantly, he has what it takes to lead Southwest through a significant transformation and usher in a new era of profitable growth, innovation, and industry leadership," Kelly wrote in his letter.
The announcement comes after Kelly and two other independent directors met with Elliott at its New York office on Monday. Kelly acknowledged in his letter that the airline's emergence from the Covid-19 pandemic has fallen short of its expectations, but said the airline is taking bold steps, including making sweeping changes to its business model by assigning seating, offering more premium options, and operating red-eye flights.
-Dean Seal contributed to this article.
Write to Alison Sider at alison.sider@wsj.com |
