After meeting with activist investor Elliott Management on Monday, Southwest Airlines on Tuesday announced plans for a board "refreshment," including several new board members and the departure of board chairman and former CEO Gary Kelly. Current CEO Bob Jordan, though, will remain in his position, according to the carrier.
Elliott has accumulated 10 percent of Southwest's common stock as part of its 11 percent economic interestin the carrier, according to Reuters, enabling the company to call a special meeting. The hedge fund since announcing in June a $1.9 billion stake in the carrier has been calling for changes at Southwest, including replacing Jordan and Kelly. It also put forth 10 new board member nominations and has threatened a proxy battle.
In Southwest's Tuesday statement, the carrier reiterated its support of Jordan, stating the board is "confident there is no better leader" to execute Southwest's strategy and enhance sustainable shareholder value.
Kelly, however, has volunteered to step down from his role immediately after the carrier's 2025 annual meeting. In addition, six current board members have agreed to retire after the company's scheduled board meeting in November, and Southwest will appoint four new directors "in the near future." The carrier will consider up to three of Elliott's director candidates and has hired a search firm to review other "strong candidates" to "lead the airline forward."
The retiring members include David Biegler, the compensation committee chairman; Veronica Biggins, the nominating and corporate governance committee chair; Sen. Roy Blunt; William Cunningham, the lead director; Thomas Gilligan, the audit committee chairman; and Jill Soltau.
Following the members' departures, the newly constituted board will elect a new lead director, a new audit committee chair, a new compensation committee chair, and a new nominating and corporate governance committee chair, according to a letter Kelly sent to shareholders on Tuesday.
In addition, Southwest has eliminated the executive committee structure and formed a new finance committee, "consistent with feedback from Shareholders," according to Kelly, who added that the changes already undertaken to the carrier's route network; revenue management techniques; marketing, merchandising and distribution methods; as well as "significant new operational initiatives" will "transform the airline and usher in the next era of Customer loyalty and strong financial performance."
Southwest said it plans to share a "comprehensive updated business plan" at its Sept. 26 Investor Day.
In a Tuesday statement, Elliott noted that having "nearly half" of Southwest's board resign "based on shareholder feedback" was "unprecedented." It also is "pleased" that "the Board is beginning to recognize the degree of change that will be required at Southwest, and we hope to engage with the remaining directors to align on the further necessary changes. The need for thoughtful, deliberate change at Southwest remains urgent, and we believe the highly qualified nominees we have put forward are the right people to steady the Board and chart a new course for the airline."
Still, Elliott also said it intends to file a proxy statement and accompanying proxy card with the U.S. Securities and Exchange Commission to solicit proxies regarding Elliott's slate of director candidates and other proposals "that may come before the next shareholder meeting of Southwest," whether an annual or special meeting of shareholders.