Sometimes demonstrating leadership means putting your money where your mouth is. Newly appointed Southwest Airlines director Rakesh Gangwal did just that recently when he purchased $100 million of company stock shortly after a recent leadership restructuring that resulted in board chairman Gary Kelly stepping down, and six other board members retiring. By making such a significant stock purchase so soon after joining a company that was adding seven new board members, Gangwal was indicating that he is confident that the new group can make strategic changes that will help the company improve profitability in the near future. In fact, Gangwal made a $100 million commitment to making the company more profitable. How many corporate directors would be willing to make a similar commitment to making their company more profitable?
In addition to making the stock purchase, Gangwal also made a public appeal to Elliott Investment Management (the shareholder that pushed for the strategic and leadership changes that led to his appointment) to end calls for additional changes to the management team for now. In a report from Reuters, Gangwal is quoted as saying, “I believe changing the board structure and top leadership beyond what has been already announced, would be counterproductive and not in the best interest of shareholders.” In challenging Elliott, he is putting himself at risk.
Courage and Commitment
Part of the responsibility of corporate board members is to have the courage to take action and speak up when the company is facing critical moments. Gangwal has certainly done that in the case of Southwest.
Since the winner of the 2024 presidential election has been decided, almost every board will be making critical decisions about the strategic direction their company should take in 2025. Now is the time for corporate directors to begin thinking about their commitment to the current strategic plan for their company and whether or not they can do anything to improve the future growth prospects of their organization. Corporate board members may want to consider:
- Are there critical issues involving the strategic direction of the company that have escaped the attention of the board, that I can bring up in private with board leadership or with the full board in future meetings?
- Would it be worth encouraging all board members to personally buy company stock as a show of confidence to shareholders that the board has “skin in the game” when it comes to improving the profitability of the organization?
- If I am not fully committed to the strategic direction of the company I hold a board seat, would it be better to resign and seek a different board position or stay and try to influence the board and management to improve the strategic plan?
