Activist investor Elliott Investment Management has called for a special meeting in December with shareholders of Southwest Airlines, a step towards a change that could oust the airline’s CEO Bob Jordan.
Elliott is calling for a meeting Dec. 10 and will be filing a proxy statement with the U.S. Securities and Exchange Commission, the investment firm said Monday. Just a few weeks ago, Elliott told shareholders of its intentions to call for a special meeting and prepare. Oct. 7 was set as a record date for shareholders. Southwest must still confirm the December meeting.
“Today, after exhaustive attempts to persuade Southwest to implement the necessary governance changes, we are formally calling a special meeting to give shareholders the opportunity to elect a completely independent, best-in-class slate of director nominees,” Elliott wrote in a release. “Absent a thorough reconstitution of its board, the story of Southwest will remain one of empty promises and unfulfilled potential.”
Elliott is encouraging shareholders “to work with their banks and brokers as soon as possible to confirm that they will be able to vote all their Southwest shares.” In September, Elliott achieved the 10% common shares required by Southwest’s bylaws to call a special shareholders meeting.
Southwest’s board of directors issued a statement calling out the timing of Elliott’s request saying it was “designed to maximize disruption of Southwest’s execution” of the airline’s business transformation as it approaches one of the busiest travel periods of the year.
”Elliott’s actions highlight its lack of understanding of Southwest’s business and its insatiable need to put its own interests ahead of those of all shareholders,” the board said in the statement. The board confirmed it would review Elliott’s request for a meeting.
There’s a 10 calendar-day waiting period before Elliott can mail its proxy statement to shareholders once its filed, according to Keith Gottfried, a shareholder activism defense adviser at Gottfried Shareholder Advisory. He said Southwest would also file a preliminary proxy statement with the Securities and Exchange Commission and wait 10 days.
“I suspect the company already has a draft fairly close to ready because they’ve been expecting this,” Gottfried said. “It’s hard to believe that anybody gets anything in the mail, even on an accelerated timetable before Nov. 1. That’d be very quick.”
He explained that despite Elliott requesting a date on Dec. 10, Southwest may not have to actually schedule the meeting then, based on its bylaws. However, Elliott would want the meeting to happen sooner rather than later to avoid the lull from the end of year holidays, he said.
“From my perspective, in order to put a stake in the ground, [Elliott said,] ‘We want to have a special meeting and we want to have it this year,’” Gottfried said. “This was like the last week to do that.”
The company said in September it made over a dozen phone calls, had several in-person meetings and offered Elliott to participate in its board refreshment process.
Elliott has submitted an updated slate of eight candidates to Southwest and is calling for the removal of eight directors:
- Michael Cawley, former deputy CEO, COO and CFO of Ryanair
- David Cush, former CEO of Virgin America
- Sarah Feinberg, former senior official at the Department of Transportation and former head of the Federal Railroad Administration
- Hon. Josh Gotbaum, longtime adviser to companies and labor groups and the former chapter 11 trustee of Hawaiian Airlines
- Dave Grissen, former Group President of Marriott International
- Robert Milton, former CEO of Air Canada and ACE Aviation Holdings and the former Chairman of United Airlines
- Gregg Saretsky, former CEO of WestJet
- Patty Watson, current EVP and Chief Information & Technology Officer at NCR Atleos and a longtime technology executive
The list was originally 10 candidates, but it now omits Nancy Killefer, former McKinsey senior partner in consumer and retailing practice and current board member of Meta; and Eash Sundaram, former chief digital and technology officer of JetBlue. Killefer and Sundaram did not respond to request for comment on the matter.
The eight Southwest directors Elliott would like removed include: Douglas Brooks, Eduardo Conrado, William Cunningham, Thomas Gilligan, David Hess, Gary Kelly, Elaine Mendoza and Jill Soltau.
However, some directors have already decided to retire from the current 15-member board including David Biegler, Veronica Biggins, Roy Blunt, Cunningham, Gilligan and Soltau. Kelly, Southwest’s longtime CEO who handpicked Jordan as his successor, also announced he would retire following the 2025 shareholders meeting.
But that’s not enough for Elliott, which has called for months to remove both Kelly and Jordan from the helm as soon as possible.
“The board continues to evade the most critical question facing Southwest: Why is Mr. Jordan — who has delivered years of unacceptable financial results and, until very recently, was dismissive of the actions announced [Sept. 26] — the right leader to execute on these ‘transformative’ changes? The answer is clear: He is not,” Elliott wrote in a statement.
If Elliott got its way with the removal of more board members, that would only leave current board members Lisa Atherton, Rakesh Gangwal, Christopher Reynolds and Bob Fornaro. Atherton and Gangwal joined this year and Reynolds joined in 2022. Fornaro was announced to join the board on Sept. 26 effective immediately.
“If you believe that this is a company that needs to find a bridge to the future from its historic, esteemed legacy, you want to be able to have some institutional memory,” Gottfried said. “To say that we’re going to do a complete refreshment, it’s a challenging thing to do because you want new directors to be able to learn from the old directors.”
On Sept. 26, the airline announced a series of plans on Investor Day, including details on assigned seating, overnight flights, revamped boarding procedures, new global airline partners and more. To Elliott, those changes weren’t enough.
In June, Elliott disclosed its total 11% economic interest in the company, made up of common stock and derivatives. Despite this, Elliott has said it has no intentions of taking over.
“Contrary to the company’s statements, Elliott is not seeking control of Southwest,” Elliott wrote in a July 8 letter to the board. “Quite simply, we are seeking to strengthen oversight, upgrade management and improve company performance.”
Elliott’s stake in Southwest is not a controlling stake, but it is a substantial one that triggered Southwest to adopt a “poison pill” plan. The “poison pill” is a move often used to thwart activist investors.
Elliott has “upped the game” by pushing forward with a special shareholder meeting, according to Gregg Ballew, who is a professor of practice in accounting and is director of the Institute for Excellence in Corporate Governance at the University of Texas at Dallas.
Nonetheless, the changes shouldn’t impact customers, he said.
“I don’t see a big customer impact,” Ballew said. “...It’s going to take a long time for it [to impact customers].”
Southwest will also need to announce a corresponding record date for shareholders.
“It is time for shareholders’ voices to be heard, so that Southwest can finally deliver on its full potential for customers, employees and shareholders alike,” Elliott’s release read.
