– Reuters (paywall) reported that Southwest Airlines added aviation industry veteran Rakesh Gangwal to its board. ‘Rakesh’s expertise in travel technology will be valuable as we continue to make investments that support our operations and strategic initiatives,’ said Gary Kelly, executive chair of Southwest’s board.
Activist investor Elliott Investment Management has called for a reconstitution of Southwest’s board with ‘new, truly independent’ directors possessing expertise in airlines, customer experience and technology.
– CNBC reported that Elliott said it would launch a proxy fight to push for change at Southwest Airlines through a special shareholder vote unless management is willing to negotiate, citing a poison pill and board expansion that the investor views as ‘entrenchment maneuvers’.
In its letter to Southwest’s board, Elliott said it remained open to collaboration but that the board had taken actions to block the investor. Elliott is seeking the removal of CEO Bob Jordan and executive chair Gary Kelly, claiming underperformance and a failing corporate culture. Unless the board changes its stance, Elliott partner John Pike and portfolio manager Bobby Xu said the investor planned ‘to move expeditiously to give shareholders a direct say on the necessary leadership changes.’
A Southwest spokesperson said the airline had acted in good faith when dealing with Elliott but that the activist ‘has focused on personal attacks’ and was ‘conditioning any serious discussions on an immediate CEO change.’
The spokesperson added: ‘We remain open to constructive conversations with Elliott, including evaluating additional strong and independent director candidates, as we continue to solicit candid feedback from all shareholders.’
– The Wall Street Journal (paywall) reported that according to research by Marathon Strategies, the number of cases with a corporate defendant that had a jury award of more than $10 mn – what companies and insurers call a nuclear verdict – grew more than 27 percent in 2023, continuing a general upward trend. It’s a pattern that is making some insurance policies more costly and harder to come by.
Chubb, one of the world’s largest insurers, intends to appoint a full-time executive to handle what it sees as a mounting problem of inflated verdicts, CEO Evan Greenberg said recently. Chubb in a recent report also said the number of nuclear verdicts is going up. The US Chamber of Commerce said in a recent report that the number of verdicts of more than $100 mn reached a record in 2023, up nearly 400 percent from 2013.
‘Folks vote two ways: in the ballot box and in the jury box,’ said Seth Gillston, the head of North America industry practices for Chubb. ‘People are just desensitized to the numerical value [and] that’s coupled with the fact that people are angry.’
– Boeing has agreed to plead guilty to criminal fraud tied to the fatal 737 Max crashes, a move that would brand the company a felon but would allow it to avoid a trial, according to CNBC. Under the deal, if accepted, Boeing would face a fine of up to $487.2 mn, though the US Department of Justice (DoJ) recommended that the court credit Boeing $243.6 mn it paid under a previous agreement.
An independent compliance monitor would be put in place to oversee compliance at Boeing for three years during a probationary period. Boeing would also have to invest at least $455 mn in compliance and safety programs, according to a US prosecutors’ court filing. The plea deal requires the approval of a federal judge to take effect. Boeing also agreed for its board to meet with crash victims’ family members.
‘We can confirm that we have reached an agreement in principle on terms of a resolution with the [DoJ], subject to the memorialization and approval of specific terms,’ Boeing said in a statement after the court filing.
– A challenge to a Biden administration rule allowing socially conscious investing by employee retirement plans will present an early test of how courts will view federal regulations after the US Supreme Court said they no longer have to defer to the expertise of the agencies that issued them, according to Reuters.
The New Orleans-based 5th US Circuit Court of Appeals was due to hear arguments in a lawsuit by 25 Republican-led states challenging the US Department of Labor rule, which says 401(k) and other plans can consider ESG factors as a ‘tiebreaker’ in making investment decisions.
– According to CNBC, Microsoft said it would give up its observer seat on the OpenAI board amid regulatory scrutiny into generative AI in Europe and the US. Microsoft’s deputy general counsel, Keith Dolliver, wrote a letter to OpenAI saying that the position had provided insights into the board’s activities without compromising its independence. But the letter added that the seat was no longer needed as Microsoft had ‘witnessed significant progress from the newly formed board’. CNBC reached out to Microsoft and OpenAI for comment.
The European Commission said in January that it is ‘looking into some of the agreements that have been concluded between large digital market players and generative AI developers and providers’ and singled out the Microsoft-OpenAI tie-up one it would scrutinize. The EU has since concluded the observer seat did not change OpenAI’s independence, but regulators are seeking external views on the deal.
– The WSJ reported that AT&T said a hacker downloaded call and text-message information containing data on all of its wireless subscribers. The cellphone carrier said in an SEC filing that the data, mostly from 2022, was downloaded in April but it hadn’t found evidence that it had been shared publicly. AT&T said the records did not include personal subscriber information, such as names, credit card data or Social Security numbers.
The company said it was co-operating with law enforcement and that at least one person was apprehended. It did not offer more details about potential suspects. ‘At this time, we do not believe that the data is publicly available,’ AT&T said, adding that the stolen records included details about how different phone numbers interacted with each other but did not include the contents of calls or messages.
– Six US senators have written to JPMorgan Chase CEO Jamie Dimon to warn him that the firm may have misled investors and the public by backtracking on its climate and environmental commitments, according to The Guardian. In the letter, they said that a climate-disrupted world requires stronger action by the financial services industry to reduce emissions and protect nature, but that JPMorgan Chase is heading in the opposite direction. They have demanded clarification about the bank’s intentions and have given it until 24 July to reply.
The move reflects growing concern that JPMorgan Chase is watering down its public commitments. Concerns were first raised earlier this year when Dimon announced a shift in policy that suggested the bank would dilute its environmental goals. In an 8 April letter to shareholders, he indicated the company was ‘going to use the word “commitment” much more reservedly in the future, clearly differentiating between aspirations we are actively striving toward and binding commitments.’
JPMorgan Chase declined to comment. A spokesperson shared information with The Guardian showing the company is a major financier of clean energy as well as fossil fuels. On its website, the bank says it has broken down the elements in its Energy Mix Target to show oil and gas financing.
Ben Maiden
Ben Maiden is the editor-at-large of Governance Intelligence, an IR Media publication, having joined the company in December 2016. He is based in New York. Ben was previously managing editor of Compliance Reporter, covering regulatory and compliance...
