Shareholder Gerald Armstrong criticized the board for repeatedly opposing his effort to change the company's incorporation to Delaware, where all directors would be up for election each year rather than the staggered terms the company enjoys today.
“The absence of good governance practices has become even more apparent,” the Denver resident told McClendon. “Accountability is what this effort is all about. It's time for a change.
“Five directors are likely to be replaced and it's likely you will not be with us next year. But I don't give up.”
Armstrong's nonbinding proposal passed with 53 percent of the votes cast. The company did not specifically address his effort to reincorporate in Delaware, but said it is working to change director elections.
“Chesapeake will take the necessary actions so that shareholders will have the opportunity to elect the entire board of directors at the 2013 annual meeting of shareholders,” the company said in a statement Friday.
Another shareholder asked how the new board will help the company decide whether to “kick the can down the road” by selling a few assets or whether it would consider selling the company outright.
“We don't intend to kick the can down the road,” McClendon said. “We intend to crush the can. We'll do that with asset sales.”
Earlier Friday, Chesapeake announced the sale of $4 billion in pipelines and other midstream assets. The sale price is about 34 percent of the company's total market capitalization based on its share price.
Besides the two directors, Chesapeake shareholders also voted against several proposals the company favored.
The proposal to change the company's bylaws to majority voting received 97 percent of the votes cast, but only 64 percent of the shares outstanding — less than the two-thirds required. But the board said it will adopt the policy, effective immediately.
The proposal to approve executive compensation failed, receiving only 20 percent of the votes cast. The annual incentive plan failed with only 31 percent of the vote.
Shareholders also overruled the board and voted in favor of several shareholder proposals directors had opposed.
The proposal that would give more control to long-term shareholders with at least a 3 percent stake in the company passed with 60 percent of the vote.
New York State Comptroller Thomas P. DiNapoli praised the shareholder actions and called on the board to act on them quickly.
“Today's voting results are a rebuke to the failed leadership of the board of directors of Chesapeake Energy,” DiNapoli said in a statement Friday. “The board should take immediate steps to implement the shareholder proposals that passed today ... The days of an entrenched and unaccountable board structure at Chesapeake must be numbered.”