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Potential Proxy Fight at United Continental Spotlights Activist Demands for Board Skills
March 11, 2016
Shareholder activism has pushed board assessment and refreshment to the forefront in the 2016 proxy
season. With proxy access
becoming a hot-button issue, more and more companies are
voluntarily offering
this option to shareholders.
When board election contests are not resolved amicably, they often result in proxy fights, where
shareholders and companies actively disagree over the composition of the board. Proxy fights take
various forms, and the case of United Continental Holdings in the news this week brings together
several common shareholder concerns.
Miffed at what they perceive to be declining performance in comparison to its peers—indeed, United
found itself consistently in the bottom half of The Wall Street Journal’s annual
U.S. airlines rankings — PAR Capital Management
and Altimeter Capital Management are planning to bring six new directors to the slate on United
Continental’s upcoming board election. Notably, the activists have proposed Gordon Bethune, former
chairman and CEO of Continental Airlines, as the chairman candidate on their slate—who has graciously
accepted the challenge.
The proxy fighters, including Bethune, allege that the current board does not have sufficient
industry experience. This is not an unusual request, and
according to Equilar,
nearly 60% of companies include industry experience in their board skills matrices—a visual
representation of their directors’ experience. Industry is the second most commonly cited
skill set among these companies, behind finance.
However, the scenario is unusual in the sense that United added three new board members just
days earlier, and two of the new board members have been executives at airlines. Four of the
six directors nominated by the activists have travel industry experience.
Another element complicating this situation is that United’s current board comprises 100%
outsider directors, an attribute shared by just three other S&P 500 boards, according to MSCI.
Over the past few years, companies and their shareholders have moved toward more unaffiliated
directorships, with “outside” directors now accounting for 86% of all boards, increasing from
just under 83% a few years ago, Equilar data found. Given the concern regarding sufficient
industry experience, perhaps shareholders will see Bethune’s inside knowledge of the history
and the company as the right mix to lead it forward. Though Bethune is technically an outsider
at this point, he ran Continental until 2004, and has a direct tie to many of the company’s
current leaders. If this eventually comes to a shareholder vote, it will be interesting to
see the results given the confluence of competing trends here.
Changes in governance discourse are continually pushing companies to refresh director
experience to reflect the needs of the company as well as shareholder interests—whether
that be to meet the demands of
modern technological advancements or to better represent their
customer or employee bases. Stay tuned throughout proxy season as we cover
up-to-date trends on a day-to-day basis.
For more information on Equilar’s research and data analysis, please contact Dan Marcec, Director of Content &
Marketing Communications at dmarcec@equilar.com.