In the last month, Southwest Airlines (LUV) has been going through a boardroom battle worthy of the hit HBO show “Succession.”
Repeatedly echoing its desire to see chief executive Bob Jordan and board chairman Gary Kelly ousted over what it classified as “poor execution and leadership’s stubborn unwillingness to evolve,” hedge fund Elliott Investment Management eventually bought up enough company stock to be able to call a special shareholder meeting that could eventually put the question to a vote.
Related: Southwest Airlines’ Succession-style boardroom battle
Southwest, which has previously said that it is “confident that [it] has the right leadership team in place,” has responded to growing investor pressure by shaking up its board of directors.
Here is what you need to know about Southwest’s board shake-up
While Jordan survived to see another day as CEO, Kelly has resigned from his role as board chairman by announcing early retirement. Six more directors of the board will leave their roles in a major shake-up; these include Compensation Committee Chairman David Biegler, Nominating and Corporate Governance Committee Chair Veronica Biggins, Senator Roy Blunt and Lead Director Dr. William Cunningham.
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While it has not yet floated any potential names, Southwest also said that it plans to add four new directors to the board in “the near future” and will consider candidates suggested by Elliott for their places. The investment firm had previously expressed its desire to see former Ryanair (RYAOF) and Virgin America chief executives Michael Cawley and David Cush, respectively, on the board.
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‘Engaged a leading independent search firm to identify new candidates’
“In addition to considering Elliott’s Director candidates, the Nominating and Corporate Governance Committee has engaged a leading independent search firm to identify and review strong candidates who can bring complementary skills and experience to lead the airline forward,” Southwest said in a statement that also wished departing board members “all the best in their future endeavors.”
In a statement on his departure, Kelly said that it is “time to shake things up, not just stir them a bit.”
The shakeup comes amid a number of other major changes that Southwest has made in response to mounting investor pressure over its poor financial performance. In July, Jordan dropped the axe in announcing that the airline would be replacing its decades-old open seating policy by one in which customers pay to select their seat. Many are now speculating that the airline’s two-bags-regardless-of-fare-class perk may be next to go in drastic steps to start bringing in profit.
Elliott had called this commitment “too little, too late” to undo months of dropping revenue and overall business strategy it does not agree with.
Southwest stock, which is already down by more than 3% from the same time last year, fell by 4.31% to $28.35 in the morning of Sept. 10.
Elliott responded to the news of the board shake-up with a statement similar to past ones.
“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,” the investment firm writes on its website.
