Gary C Kelly, executive chairman of the board of directors at Southwest Airlines (WN, Dallas Love Field), has announced his retirement, effective immediately after the company’s annual meeting next year. The decision follows a meeting held on September 9 with Elliott Investment Management, an activist investor firm that was invited to participate in “refreshment efforts and other corporate governance changes,” the airline said in an announcement on September 10.
In addition to Kelly, six current directors have announced plans to voluntarily step down this coming November: David Biegler (Compensation Committee chairman), Veronica Biggins (Nominating and Corporate Governance Committee chair), Senator Roy Blunt, William Cunningham (lead director), Thomas Gilligan (Audit Committee chairman), and Jill Soltau. A new board will be elected afterwards, but it was not disclosed if this new board would include any Elliott-backed candidates for the board.
During Kelly’s meeting with Elliott, both parties agreed to eliminate the board’s Executive Committee and establish a new Finance Committee, which will oversee financial, operational, and business strategies, major transactions, capital structure, and capital allocation priorities, among other responsibilities.
Despite Elliott’s previous efforts to oust CEO Bob Jordan, the board said it remains confident in his leadership, saying he is well-positioned "to successfully execute Southwest Airlines’ robust strategy to evolve the airline and enhance sustainable shareholder value." In a letter to shareholders, Kelly described Jordan as "instrumental" in ensuring the company’s strong financial performance over the past two decades.
Elliott Management, which holds a stake of approximately 11% in Southwest worth around USD1.9 billion, has pushed for changes at the company, including replacing many executives and board members. However, "the added component of leadership change in the middle of Southwest’s largest transformation to date is simply a risk that the company and its shareholders do not need and cannot afford,” Kelly wrote in the statement.
Southwest Airlines will share a comprehensive updated business plan during its Investor Day on September 26.
Elliott Management has a reputation for forcing changes - including management shake-ups - in the companies it invests in, such as Starbucks Crown Castle, NRG Energy, and Goodyear Tire & Rubber.
