Last updated: 04:50 PM ET, Wed May 04 2016

United Appoints Two New Board Members in Compromise with Investors

Airlines & Airports | Josh Lew | April 22, 2016

United Appoints Two New Board Members in Compromise with Investors

It appears that the power struggle in the United Airlines board room is over for the time being.

Activist investors, unhappy with the company’s recent performance and not confident in the abilities of CEO Oscar Munoz to turn things around, had asked for as many as six new directors to be put on the board. The two sides struck a compromise by agreeing to two new board members.

The two new board members will represent investment firms

Among others, they pushed for former Continental CEO Gordon Bethune to be given a place, a move that many saw as a blantant power grab. 

Methune was not tapped to join the directors, but two other candidates favored by the investment groups, PAR Capital Management and Altimeter Capital Management, are being appointed to the board. This was seen as a settlement of sorts. The move was meant to keep the status quo and give Munoz a chance to continue to implement his plans while also giving the shareholders, who together own about 7.1 percent of the airline, representation. 

The two new directors are Barney Harford, former CEO of Orbitz, and Edward Shapiro, who is one of the partners at PAR Capital Management. United recently appointed three new board members who support the current direction that the airline is moving.

This move was made to ensure that the pro-Munoz directors would still have a majority even if PAR and Altimeter were able to push through their plan to vote on six of the members. A third board member, that will be mutually agreed upon by both sides, will be appointed in the near future. Meanwhile, three of the currently serving members of the board are retiring.  

READ MORE: United Gears Up For Power Struggle As Munoz Returns to Work

The compromise was made after United posted poor figures recently. The airline’s traffic numbers and operating revenue have both been down. With these recent results, the current directors had little choice but to give in to some of the shareholder's demands.   

Veteran directors to help guide Munoz

Robert Milton, the former CEO of Air Canada, will take the roll of non-executive chairman this summer. Though he was chosen by the current regime, Milton will also be looked on favorably by the investment firms and those opposed to Munoz. 

Retired CEO Milton has a lot of experience in the industry as the head of a flag carrier. His level of expertise is something that the activist investors claim has been missing from United’s boardroom over the past few years. One of their desires was to have veterans in positions of power to help guide a relatively young and inexperienced CEO in Munoz. 

READ MORE: United CEO Oscar Munoz Returning To Work Next Week

Can United move forward now?

Despite the contentious nature of the boardroom brawl that has taken place over the past month, Oscar Munoz had nothing but good things to say about the two new board members when he spoken with CNBC recently: ”I think they can do a lot, frankly. We've really reconstituted the board with some great experience across technology, innovation, certainly the airline experience, that's important.” 
It appears, at least for the time being, that Munoz will get to continue his strategy of focusing on employee relations and customer satisfaction and then making more improvements once all those fundamentals are in place. However, if financial performance doesn’t get any better, he could find himself under increasing pressure from the board room. 


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