Elliot accused the airline's leaders of resorting to "entrenchment tactics" to save their own jobs
A hedge fund seeking big changes at Southwest Airlines has escalated its criticisms of the carrier. In a proxy letter to shareholders filed Monday with the Securities and Exchange Commission, Elliott Management called out Southwest’s recent defensive maneuvers that aim to keep control with its current management team.
“Instead of embracing responsible governance and a spirit of collaboration,” the fund wrote, “[Former CEO Gary] Kelly and [Current CEO Bob] Jordan have resorted to entrenchment tactics – so-called ‘poison pills,’ one-off announcements of long-overdue changes, and a rushed, unilateral Board refreshment process that lacks legitimacy. This is not how company leadership demonstrates confidence in its plans and establishes credibility with shareholders; it is how failed corporate leaders attempt to preserve their own jobs and perquisites, despite the wishes of the company’s constituents.”
The fund also filed notifications that it’s been funding ads directed at shareholders under the slogan “A Stronger Southwest.” As part of its campaign, which formally started in June, Elliott wants to fire CEO Bob Jordan — who has said he has no plans to go quietly — and install new board directors in order to pursue a strategic business review.
Last week, Southwest itself noted in a securities filing that it has also started funding digital ads to promote its defensive campaign, which enlisted an op-ed from former United Airlines CEO Oscar Munoz.
“I know from personal experience that investors, when collaborative with leadership, can play a useful role in driving positive change,” he writes. “But realizing enduring change with long-term benefits is hard to achieve in this industry—and chasing a short-term bump in share price can trigger long-term negative implications for the brand, business, and culture.
“A wholesale leadership change might benefit an investor looking to quickly flip its shareholding position but could undermine Southwest in the long term.”
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