Proxy Blog

Southwest

April 19, 2018

The annual proxy for this airline had the following proposals: 

  1. Proforma votes on directors, appointment of auditors, and “say-on-pay” advisory vote 
  2. Shareholder proposals on:
    -Written consent
    -Independent chairman 

Magni voted as follows: 

  1. Magni voted for and against the proforma proposals.
    -For directors – All but two of the directors were consistent with Magni Corporate Governance best practices. Two directors are from Welsh Carson. Only one person from this company should be on the board. Voted against Bruce Anderson as his experience seemed less applicable than the other proposed director from Welsh Carson.
    -For auditors – There appear to be no controversies with the financial statements of the company.
    -Against say-on-pay” Advisory Vote – The proxy did not contain the peer group used for comparisons; it only contained general criteria. Further, the proxy materials went to great lengths to explain that the board and compensation committee were not bound by the vote. The reluctant and perfunctory nature of the vote is inconsistent with good shareholder relationships.

  2. Magni voted for and against shareholder proposals.
    -Against written consent – Shareholders making a written consent proposal generally believe the capability would improve responsiveness to shareholders. Magni believes written consent, if enacted by a company, could be used in ways that are counter to shareholder best interests and hence inconsistent with corporate governance best practices. Simply put, written consent potentially provides an opaque process for a limited number of shareholders with a slight majority to make changes. Magni will soon post a research article defining the firm’s position on written consent.
    -For independent chairman – An independent board is an important part of good governance. An independent chairman is an element of an independent board, though there are situations where an independent chairman does not make sense (e.g., Elon Musk and Tesla). Southwest does not have one of those situations.