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Chesapeake announces governance, compensation changes

Chesapeake Energy Corp. is moving forward with corporate governance and compensation changes sought last year by unhappy shareholders, the company announced Monday in a regulatory filing.
BY ADAM WILMOTH AND JAY F. MARKS Business Writers Modified: January 7, 2013 at 7:53 pm •  Published: January 7, 2013

Chesapeake Energy Corp. directors on Monday said they will enact many of the stockholder proposals a former board opposed at last year's annual meeting, and that they will cut compensation and perks for CEO Aubrey McClendon and other executives.

The Oklahoma City-based natural gas and oil company's directors made the changes as part of a comprehensive review of Chesapeake's corporate governance practices and executive compensation structure, according to a regulatory filing Monday.

The company declined further comment.

“This is a landmark corporate governance reform that gives shareowners a much stronger voice at the table,” activist Chesapeake shareholder and New York City Comptroller John C. Liu said Monday. “We welcome the new board's responsiveness to majority shareowner opinion.”

While calling Monday's announcement good news for shareholders, Argus analyst Phillip Weiss said he is looking for much more.

“These are all incremental positives, but I'm more interested in finding out the results of their investigation of McClendon,” Weiss said. “I'd like to know what the investigation really means to Aubrey.”

Chesapeake Chairman Archie Dunham in June said he expected the internal investigation into McClendon's personal finances to be completed within 90 days.

Monday's action is one of the first public steps by Chesapeake's rebuilt board.

Shareholders in June voted against the two directors who were up for re-election, passed resolutions the directors opposed and rejected the board's proposals. Facing strong criticism from its largest shareholders, Chesapeake's board then appointed five new independent directors, including Dunham, former chairman of ConocoPhillips Inc.

The board also said it accepted McClendon's recommendation that he not receive a bonus for 2012. Also on Monday, Chesapeake said it is changing its executive compensation program to tie pay to the company's performance, while reducing perks such as personal use of company aircraft.

Argus analyst Phillip Weiss has been critical of Chesapeake's executive compensation structure.

“If you lower his compensation, that's positive,” Weiss said Monday. “After all that came out about him (McClendon) this year and the poor performance of the stock, he doesn't deserve a bonus in 2012.”

Weiss compared Monday's announcement to 2008 when Chesapeake's stock price collapsed as natural gas prices plummeted. McClendon was forced to sell nearly all of his Chesapeake stock holdings to pay for loans he had taken to buy the stock.

Months later, the board awarded McClendon a $75 million bonus and paid him $12 million for a map collection he owned that adorned Chesapeake offices. McClendon later agreed to buy back the map collection to settle a shareholder lawsuit.

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