More than half of Chesapeake Energy Corp.'s board will be replaced in the coming weeks after the company bowed to pressure from its two largest shareholders, but it's unclear which members will be leaving.
Chesapeake will replace four board members, while adding a new independent chairman with no prior ties to the company.
To accommodate the new board members — who will be nominated by Southeastern Asset Management and activist investor Carl Icahn — four current members will resign their positions, Chesapeake announced Monday.
The company didn't offer any details about which board members would be stepping down, and a Chesapeake spokesman did not respond to a request for comment.
“It's almost like watching a soap opera,” said Oppenheimer analyst Fadel Gheit, who declined to speculate on who might be leaving the Chesapeake board. “It's not really an analyst's job.”
Gheit said the only Chesapeake board member he knows is Charles T. Maxwell, a fellow energy analyst.
Maxwell is leaving the board since 80 is mandatory retirement age, but his spot appears to be earmarked for a new independent chairman.
CEO Aubrey McClendon is being replaced as chairman of the company he co-founded with SandRidge Energy Inc. CEO Tom Ward in 1989, but there has been little indication the company's critics want to see him replaced as the company's chief executive. He will remain on the board and as company CEO.
Gheit said only one of Chesapeake's nine-board members appears to be safe from the panel's pending makeover.
Former GEICO executive Lou Simpson was added to the Chesapeake board last summer at the urging of Southeastern Asset Management, Chesapeake's largest shareholder.
“He's the only protected member of the board right now,” Gheit said.
The two most endangered board members could be Oklahoma State University President Burns Hargis and former Union Pacific Corp. executive Richard K. Davidson.
Hargis and Davidson, who comprise the board's audit committee, are the only board members up for re-election at this year's annual meeting.
Several institutional investors and shareholder advisory services have called on shareholders to vote against Hargis and Davidson, so discontent could cost them their positions.
“It's critical that Hargis and Davidson be among the directors who are replaced given their costly failures on the audit committee and resulting shareowner opposition to their election,” said Michael Garland, executive director of corporate governance for New York City Comptroller John C. Liu.
Hargis has been on the board since 2008, while Davidson has served since 2006.
The board's lead independent director, Merrill A. “Pete” Miller, has faced some criticism as well since his company, National Oilwell Varco, an international oil field service company based in Houston, has some business ties to Chesapeake. He has been on Chesapeake's board since 2007.
Attorney Matthew Houston, who is representing a Chesapeake shareholder suing the company's board, said Tuesday that Miller should not be considered an independent director due to his company's business with Chesapeake.
Two other board members could be at risk because of their perceived ties to McClendon: former Oklahoma politicians Frank Keating and Don Nickles.
Former Oklahoma Governor Keating has been on the board since 2003, while Nickles, who served as one of Oklahoma's U.S. senators from 1980 to 2005, joined in 2005.
The final board member, Kathleen Eisbrenner, was appointed in December 2010. She is involved with Next Decade, a new company exploring export opportunities for liquefied natural gas, according to Chesapeake's website.
The company said the new board will be introduced by June 22.