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In a week when Southwest Airlines announced a "reconstituted board" amid a director shakeup stemming from a settlement reached with an activist investor, the Dallas-based airline also detailed the compensation and travel perks that its board members receive.
The terms of current compensation for "non-employee" board members include: an annual retainer fee of $90,000 and $1,500 for each not regularly scheduled board or committee meeting, according to a Thursday securities filing. Members are also eligible for equity grants (which had a $170,000 grant date value this year), and those who serve at least five or 10 years are eligible for a cash payment of $35,000 or $75,000, respectively, as of their retirement date.
In addition, while serving on the board the members' benefits include free travel on Southwest for the director, director's spouse, and children as well as 50 one-way "unrestricted" free Southwest flight passes annually; and, subsequent to board service those directors who have logged at least 10 terms get "lifetime free travel" on Southwest Airlines for themselves and their spouses, according to the filing.
An analyst and corporate governance expert differed as to how the terms compare to those of other firms. Charles Elson, founding director of the Weinberg Center for Corporate Governance at the University of Delaware, said the retainer and stock grant was not unusual and said that companies to a certain extent will provide discounts on their products of some kind to board members.
But he said retirement pay for board members has largely been phased out by many companies and he noted that the volume of free travel benefits for members' friends and family offered by Southwest was unusual. "I can understand giving a discount on flights but free travel for that many people and being able to take friends and family -- that's bizarrely generous," Elson said in an interview.
Nicolas Owens, an industrial equity analyst at Morningstar who covers Southwest, agreed that the lifetime travel for long-tenured board members is "a little bit unusual," but said that it doesn't cost the company much. Overall, he said he did not think the board compensation was "lavish or outlandish" as compared to that offered by other U.S. airlines or corporations. "These expenses don't affect the operating profit of the company in any meaningful way," Owens wrote in an emailed response to questions.