The board of directors at Chesapeake Energy Corp. (NYSE: CHK) is under fire for the compensation package handed to CEO Aubrey McClendon -- and with good reason: He took home $112 million last year even as the stock tumbled from a 52-week high of $74 to its current price of $20.According (subscription required) to The Wall Street Journal, "The compensation package, one of the largest for any corporate executive last year, included a one-time $75 million bonus, a $975,000 base salary, and $32.7 million in stock, according to the company's proxy statement. Chesapeake, one of the biggest U.S. producers of natural gas, also disclosed several transactions involving Mr. McClendon or companies in which he has an interest, including a deal to buy Mr. McClendon's collection of maps and artwork for $12.1 million."
"I have never seen a more shameful document than the Chesapeake proxy statement," shareholder Jeffrey Bronchick wrote in a letter to Chesapeake's board. "If I could reduce it to one page, I would frame and hang it on my office wall as a near perfect illustration of the complete collapse of appropriate corporate governance." What appears to have happened is that Chesapeake's board of directors decided to serve as a personal bailout for McClendon, who had nearly his entire stake in Chesapeake wiped out through margin calls back in September. His net worth evaporated and now the too chummy board of directors has opted to give him a helping hand. Perhaps the most egregious is the company's decision to buy his collectibles with $12.1 million of shareholder money. It just looks so bad. Sure, the company will say it was done at arm's length but here's the question: If it was, why couldn't McClendon sell to someone else at arm's length? Why do something that looks so incredibly slimey?
Not so long ago, Wall Street observers like Jim Cramer were enamored of McClendon, but I've always thought he was a slimeball. In 2004 he donated $250,000 to the Swift Boat veterans group for the purpose of discrediting Senator John Kerry's military service. Regardless of your political leanings, that affair was gutterball politics at its lowest ebb, and indicative of a CEO without a strong moral compass.
The pay package handed to McClendon for a period of abysmal returns to shareholders suggests a board of directors that was too chummy and lacking in independence.
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Reader Comments (Page 1 of 1)
5-07-2009 @ 1:46AM
Steve Hunt said...
McClendon is one of the owners of the OKC Thunder. The ownership group has received upwards of $1/4b from tax payers, and will probably receive more in the near future.
Something no one is talking about, which I think is very serious, is that the ownership group got a deal with Citadel Communications (cdl, have a look for a good laugh!) owned "Sports Animal 98.1 fm" to broadcast the games on said station and receive ALL REVENUE from the ads during the games. Well, McClendon is having them almost exclusively run Chesapeake ads.
I looked in Citadel's public file, and saw nothing of good-will spots to Chesapeake, which more than likely means he is PAYING HIMSELF for these ads! I am sure the shareholders and possibly the FCC would like to know about this.