Chesapeake Energy Corp. has remade itself over the past year after concerns about its corporate governance led to an investor uprising, but that doesn't mean the company is without obstacles heading into next week's annual meeting.
Two shareholder advisory services have recommended voting against Chesapeake's newest director, Service Corp. International CEO Thomas L. Ryan. One of the advisory firms also opposes the company's executive compensation plan.
Ryan, 47, was appointed last month after Louis A. Simpson resigned, but Institutional Shareholder Services Inc. and Glass, Lewis and Co. LLC contend he has too many other obligations to adequately serve Chesapeake's shareholders.
Ryan is a director for Texas Industries Inc. and Weingarten Realty Investors, as well as his own company.
“Directors with full-time jobs have even less time to devote to outside board directorships,” according to the ISS report. “A CEO, for example, cannot reasonably be expected to serve on more than two public boards at one time in addition to his or her full-time duties as chief executive.”
Chesapeake noted Ryan was highly recommended by Southeastern Asset Management, the company's largest shareholder. He also intends to reduce his commitments by the end of the year, Corporate Secretary Jennifer Grigsby wrote Tuesday in a letter to shareholders.
“We believe this is strong evidence of his commitment to Chesapeake and hope that you show your support by casting your vote ‘for' Mr. Ryan,” Grigsby wrote.
ISS opposes Chesapeake's executive compensation plan because of “problematic provisions” in former CEO Aubrey McClendon's severance package, but the company countered that the board reduced McClendon's severance benefits by 20 percent in December when it cut his employment contract from five years to four.
McClendon received nearly $40 million in cash and other benefits when he left the company on April 1.
Shareholders will vote on the measures at June 14's annual meeting.