Chesapeake Energy Corp. directors have asked shareholders to approve executive pay and corporate governance changes they say are essential for the Oklahoma City energy company's future.
The directors addressed the challenges of the past year and outlined proposed changes as part of their annual proxy filing for shareholders released Friday.
“After a difficult year in which we saw decade-low natural gas prices and experienced unprecedented scrutiny, Chesapeake has emerged as a strong company with a promising future,” the directors said in the filing. “We believe that our corporate governance and executive compensation reforms further strengthen the company by enhancing oversight and accountability.”
The directors also outlined the changes they have made over the past year and the additional moves they have proposed to shareholders.
“In the past year, the board has implemented governance reforms focused on enhancing financial and management oversight, board accountability to shareholders and corporate responsibility,” the directors said in the proxy.
One of the main focuses over the past year has been to more closely tie pay and performance.
Since June, the board has cut the CEO salary by $1 million and held base salaries flat for some top executives. The directors last week asked shareholders to approve a plan they say would tie 91 percent of executive pay to shareholder interest, with only 46 percent of the pay guaranteed.
The board also has submitted proposals to make each director stand for re-election every year and to eliminate supermajority voting requirements.
“We believe Chesapeake's brightest days lie ahead, and we look forward to delivering maximum value to shareholders as we develop our exceptional asset base,” the directors said in the proxy.
The proposals will be voted on at Chesapeake's annual shareholders meeting, which is scheduled for June 14 in Oklahoma City. Several of this year's company proposals are similar to stockholder proposals Chesapeake's former board opposed last year.
Founders Well Participation Program
Friday's filing also provided updated information on the Founders Well Participation Program, through which Chesapeake co-founder and former CEO Aubrey McClendon has bought up to a 2.5 percent stake in almost every well Chesapeake has drilled.
McClendon left the company April 1, but under terms of his severance agreement, he has chosen to buy 2.5 percent of each well the company drills through June 30, 2014.
McClendon has paid more than $1 billion for capital expenditures related to drilling and completing wells since 2010, including $434 million in 2012, according to the proxy.
McClendon told the company he values his stake in the future production of the wells at $335 million.