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Southwest Airlines' outgoing and incoming board members' compensation plan includes free flight perks and financial payment, according to an Oct. 24 filing that outlined the Dallas-based airline's recent corporate agreement with Elliott Investment Management LP.
The agreement announced last week with Elliott, which controls 11% of the airline’s common stock, ended the threat of a looming proxy fight between the company and the activist investor. Elliott withdrew its request for a December special meeting of the company’s shareholders.
As part of the agreement, Southwest (NYSE: LUV) agreed to appoint Elliott’s board nominees David Cush, Sarah Feinberg, David Grissen, Gregg Saretsky and Patricia Watson effective Nov. 1. Their initial terms will expire at the company's 2025 annual meeting.
An 8-K filing with the U.S. Securities and Exchange Commission details the compensation all Southwest directors receive. The perks include free Southwest travel for board members, their spouses and their children, along with 50 one-way free flight passes for unrestricted use and 50 passes for qualified charities and nonprofits.
After their board service, members receive free Southwest travel for themselves and their spouses as well as 50 one-way flight passes annually. Their free flight privileges and number of passes correspond to the number of terms they served on the board.
For example, if the director served less than five terms, they receive the passes and free travel for five years. If the director served at least 10 terms, they earn a lifetime privilege of 50 one-way flight passes annually and they get lifetime free travel on Southwest Airlines for themselves and their spouses. Benefits continue for spouses after the directors' deaths.
Board members also receive an annual membership retainer fee of $90,000 that will be pro-rated for the new directors.
Board members receive $1,500 for each meeting of the board or committee attended more than regularly scheduled board and committee meetings.
Board members are eligible to receive equity grants and retirement payments as well.
According to the agreement with Elliott, two incumbent Southwest directors will not stand for re-election to the board at the annual shareholder meeting. The board decreased its size from 16 members to 15 and agreed to limit its size to no more than 15 members until the 2025 meeting. Then, the board will have no more than 13 members.
Southwest and Elliott will also have an "information sharing agreement" that enables the airline to share confidential information regarding certain upcoming company announcements and other confidential information relating to the company.
Southwest announced that Executive Chairman Gary Kelly, the former CEO of the airline, will also retire from the board on Nov. 1. Kelly had previously agreed to retire next spring. The newly reconstituted board will appoint a new independent chairman.
Kelly has been chairman of the Southwest board since May 2008.
David Biegler, J. Veronica Biggins, Roy Blunt, William Cunningham, Thomas Gilligan and Jill Soltau will also resign from the board on Nov. 1.
The board on Oct. 23 appointed Pierre Breber, effective Nov. 1.
Elliott began pushing for leadership change at Southwest in June when the investor disclosed a roughly $2 billion stake in the company.
"We are pleased to have reached a collaborative resolution with Elliott, continuing our board refreshment with the addition of new directors who bring complementary skills and experience," Kelly said in a statement. "I am confident this board will continue to hold the leadership team accountable for executing its transformational plan and delivering financial performance."
