Southwest Airlines recently made the decision to appoint Rakesh Gangwal, a co-founder of India’s largest carrier IndiGo, to its board of directors. This move comes in response to pressure from activist investor group Elliott Management, which holds an 11% stake in Southwest. Elliott had criticized Southwest for lacking board members with airline experience outside of the company, prompting the appointment of Gangwal.
Elliott Management not only pushed for the addition of Gangwal to the board but also called for the removal of CEO Bob Jordan and chairman Gary Kelly. Despite the demands for a change in leadership, Jordan has made it clear that he has no intention of stepping down. The Southwest board has stood by its current management team, showing support for Jordan and Kelly. In an attempt to protect itself from further interference by Elliott, the board implemented a one-year rights plan, often referred to as a „poison pill“ in the world of investments. This plan would allow existing shareholders to purchase additional shares at a discounted rate if Elliott or any other entity were to acquire 12.5% or more of Southwest’s outstanding stock.
Southwest emphasized that the appointment of Gangwal is part of its ongoing efforts to diversify the board’s composition with members who bring a wide range of business skills to the table. Over the past three years, the board has added eight new independent directors, including Gangwal. With experience as the CEO of US Airways and involvement in the development of the Worldspan GDS, Gangwal brings a wealth of knowledge in travel technology to the board. Southwest’s chairman, Gary Kelly, highlighted Gangwal’s expertise in this area, noting that it will be valuable as the airline continues to invest in supporting its operations and strategic initiatives.
One of the key criticisms leveled against Southwest by Elliott Management is the airline’s technology infrastructure, which is said to lag behind that of other leading U.S. carriers. This critique underscores the need for Southwest to continue investing in and upgrading its technology to remain competitive in the industry. The appointment of Gangwal, with his background in travel technology, is a step in the right direction for Southwest as it seeks to address these challenges and drive future growth.
The appointment of Rakesh Gangwal to the Southwest board of directors demonstrates the airline’s commitment to strengthening its leadership team and addressing investor concerns. By diversifying the board’s expertise and skills, Southwest is positioning itself for success in a rapidly changing and competitive industry. Gangwal’s background in travel technology will be instrumental in helping Southwest navigate technological challenges and drive innovation in the years to come.
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