As I've written in the past, Chesapeake Energy (NYSE: CHK) CEO Aubrey McClendon has come under some well-deserved fire for his high compensation in the face of poor results and a declining stock price. He was paid a one-time $75 million bonus at the end of 2008 -- suspicious timing given that the stock had lost most of its value in recent months and Mr. McClendon had lost his entire stake in the company to margin calls.
The company also made the extremely unusual decision to use $12.1 million of company money to buy some of McClendon's collectible maps to decorate the company's offices.
The Wall Street Journal reports (subscription required) that critics called the one-time bonus and other assorted handouts "a bailout" that used shareholder assets to help McClendon deal with his own financial woes. At the company's recent annual meeting, all directors were re-elected, and Mr. McClendon defended his compensation and stewardship of the company.
Still, from a corporate governance perspective -- a factor that has been shown to correlate with strong performance -- Chesapeake is one company to avoid. Mr. McClendon is the very public face of Chesapeake, and he and the board seem to have serious issues with understanding the boundaries between the CEO and his company: buying food at a restaurant he owns and sponsoring an NBA team he owns. Think about it: What benefit would Chesapeake derive from sponsoring a basketball team? It's an oil and gas exploration company, not a retailer. The more you learn, the more Chesapeake looks like a personal honeypot for Mr. McClendon, and that's not something I would want to subsidize with my investment dollars.
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Reader Comments (Page 1 of 1)
6-15-2009 @ 4:57PM
D Hill said...
Out here in the real world, where life is based more on long term projects-building the infrastructure of a company, with the idea that the less "middle-men" the better the long term pay-out. We are not looking to make a quick buck off the backs of American Industry. We're trying to build one, that helps all of America. From what I can see from here, Chesapeake is poising itself beautifully, for the quick and efficient production AND delivery to port of Natural Gas for years to come. The partial assignments of assets and strategic sell offs of bad leases in unproducable areas and the slow process of buying easements are a huge part of running this type of company. It's not just about the wells. It's the pipelines as well. Companies in middle America need to be perceived as community conscious and eco-friendly. The best way to accomplish this is to sponsor local charities, events, and teams. This company doesn't play around in the stock market game which exposes companies to the whims of the few in New York, but it is a good solid company, honestly run, and you guys just can't handle that, can you?
6-22-2009 @ 10:18PM
Sandeeee said...
D Hill, I am not sure what you see...I know I lost half of the value of my stock while Aubrey seems to be in fine shape.....
7-07-2009 @ 1:23PM
Rock said...
I heard from a reliable source that Chesapeake CEO Aubrey McClendon invested $5M in Tiger Truck Manufacturing LLC of Poteou, OK. He was purported to have received the $3M OK State Tax credit that was given to Tiger to move their operations from Texas to OK. If that's the case I'd have to say Mr. McClendon is a shrewd OK businessman.
Tiger, on the other hand, used the investment to make a smoke and mirrors Chinese Truck Manufacturing facility. They take previously built Chinese Trucks break them down to pieces and ship them to the USA and reassemble them and call it manufacturing. They've even gone as far as to call themselves Trade Act Agreement (TAA) compliant. And in doing so took away the 2008 GSA award won by Vantage Vehicle via protest to the GAO. So maybe Mr. Ward (Tiger CEO) is learning from Mr. McClendon how to be a shrewd OK businessman?