Southwest shareholders needn’t act like passengers
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Jeffrey Goldfarb
NEW YORK, Aug 14 (Reuters Breakingviews) -Airplane passengers tolerate a lot of discomfort because of their limited choices. Shareholders often suffer similarly even though they’re not equally constrained. Southwest Airlines LUV.N, the discount carrier that Elliot Investment Management has turned into a battlefield, shows it doesn’t have to be that way.
The rabble-rousing hedge fund firm on Tuesday threatened to nominate 10 candidates, including the former chief executives of Air Canada AC.TO and Virgin America, to Southwest’s 15-person board. With an 11% stake in the $15 billion company, Elliott has the power to convene a special meeting of shareholders to advance its agenda, which ultimately involves ousting boss Robert Jordan. Southwest effectively dug in its heels, expressing confidence in its leadership and strategic plan.
Elliott’s timing is curious. It started its public campaign in June, shortly after shareholders enthusiastically elected Southwest’s proposed slate of board members, despite the airline’s shrinking operating profit margin and huge loss in market value. Such sheep-like behavior is all too common. Through mid-July, U.S. director nominees on average had received 95.3% of the ballot, 60 basis points higher than in 2023, according to consultancy Semler Brossy.
Look closer, however, and there are signs of frustration. More than a fifth of shareholders voted against Southwest’s executive pay plans, even though advisory firm Institutional Shareholder Services backed them. Moreover, eight out of 10 analysts rate the company either a “hold” or a “sell,” according to Visible Alpha, in a break with the typical deference to management that brokers provide.
Jordan has other reasons to worry too. Elliott hasn’t run a U.S. proxy battle since 2017, a sign that the many companies it targets are usually unnerved enough to make concessions. The CEOs of Starbucks SBUX.O, Johnson Controls International JCI.N and Crown Castle CCI.N also recently raised the white flag following the activist fund manager’s arrival on the scene.
On this occasion, shareholders may have to force the issue themselves if they want to shake things up. It’s a tall order. To oust a board member mid-term requires 50% support from all outstanding shares, as opposed to the mere plurality needed to win election at an annual meeting. Southwest is due to present its own plans for reviving its stock in September. Then shareholders can decide if they want to exert more influence than flyers typically do.
Follow @jgfarb on X
CONTEXT NEWS
Elliott Investment Management said on Aug. 13 that it plans to nominate 10 candidates for the board of Southwest Airlines in further pursuit of its aim to shake up the carrier.
Southwest responded on Aug. 14 that it had previously tried to engage with the activist investment firm, including arranging a meeting for early September. The company, which is being advised by Bank of America and Morgan Stanley, also said it is confident it has the right leadership team in place.
Elliott on June 10 disclosed an 11% stake in Southwest and urged changes to senior leadership as well as the board, currently made up of 15 directors.
The fund manager’s director candidates include former Ryanair Deputy CEO Michael Cawley, former Virgin America CEO David Cush and former Air Canada CEO Robert Milton.
Graphic: Southwest shareholders expressed only some displeasure https://reut.rs/4ctlkGv
Editing by John Foley and Sharon Lam
Mga Kaugnay na Asset
Pinakabagong Balita
Disclaimer: Ang mga kabilang sa XM Group ay nagbibigay lang ng serbisyo sa pagpapatupad at pag-access sa aming Online Trading Facility, kung saan pinapahintulutan nito ang pagtingin at/o paggamit sa nilalaman na makikita sa website o sa pamamagitan nito, at walang layuning palitan o palawigin ito, at hindi din ito papalitan o papalawigin. Ang naturang pag-access at paggamit ay palaging alinsunod sa: (i) Mga Tuntunin at Kundisyon; (ii) Mga Babala sa Risk; at (iii) Kabuuang Disclaimer. Kaya naman ang naturang nilalaman ay ituturing na pangkalahatang impormasyon lamang. Mangyaring isaalang-alang na ang mga nilalaman ng aming Online Trading Facility ay hindi paglikom, o alok, para magsagawa ng anumang transaksyon sa mga pinansyal na market. Ang pag-trade sa alinmang pinansyal na market ay nagtataglay ng mataas na lebel ng risk sa iyong kapital.
Lahat ng materyales na nakalathala sa aming Online Trading Facility ay nakalaan para sa layuning edukasyonal/pang-impormasyon lamang at hindi naglalaman – at hindi dapat ituring bilang naglalaman – ng payo at rekomendasyon na pangpinansyal, tungkol sa buwis sa pag-i-invest, o pang-trade, o tala ng aming presyo sa pag-trade, o alok para sa, o paglikom ng, transaksyon sa alinmang pinansyal na instrument o hindi ginustong pinansyal na promosyon.
Sa anumang nilalaman na galing sa ikatlong partido, pati na ang mga nilalaman na inihanda ng XM, ang mga naturang opinyon, balita, pananaliksik, pag-analisa, presyo, ibang impormasyon o link sa ibang mga site na makikita sa website na ito ay ibibigay tulad ng nandoon, bilang pangkalahatang komentaryo sa market at hindi ito nagtataglay ng payo sa pag-i-invest. Kung ang alinmang nilalaman nito ay itinuring bilang pananaliksik sa pag-i-invest, kailangan mong isaalang-alang at tanggapin na hindi ito inilaan at inihanda alinsunod sa mga legal na pangangailangan na idinisenyo para maisulong ang pagsasarili ng pananaliksik sa pag-i-invest, at dahil dito ituturing ito na komunikasyon sa marketing sa ilalim ng mga kaugnay na batas at regulasyon. Mangyaring siguruhin na nabasa at naintindihan mo ang aming Notipikasyon sa Hindi Independyenteng Pananaliksik sa Pag-i-invest at Babala sa Risk na may kinalaman sa impormasyong nakalagay sa itaas, na maa-access dito.
