Chesapeake Energy Corp. could be on its way to making amends with disgruntled shareholders.
The Oklahoma City oil and natural gas company announced Monday it would replace four members of its board of directors amid ongoing questions about its corporate governance.
A fifth member will come on board later this month as Chesapeake replaces a retiring director with a new independent chairman, who will replace embattled CEO Aubrey McClendon in the role.
The company did not say which directors will be replaced, but the new members will hold a majority on Chesapeake’s nine-member board.
The changes come after “extensive” discussions with the company’s two largest shareholders.
Southeastern Asset Management and billionaire activist Carl Icahn, who together hold more than 21 percent of the company’s stock, will nominate four new board members.
Those new members will be able to sign off on the new chairman being selected by the existing board. The new independent chairman will not have any previous relationship with Chesapeake.
The reconstituted board will be introduced on or before June 22, the company said Monday.
“We are pleased to announce these important actions taken by the board in consultation with our two largest shareholders to further enhance Chesapeake’s corporate governance for the benefit of all shareholders,” said Merrill A. “Pete” Miller Jr., Chesapeake’s lead independent director. “We greatly appreciate the substantial contributions of all of our directors, but recognize our shareholders’ desire for change.
“Following implementation of these initiatives, the Chesapeake board will have been substantially reconstituted with five new independent directors, including a new independent chairman, in addition to Lou Simpson who joined the board last year.”
The board announced plans May 1 to replace Chesapeake co-founder McClendon as the company’s chairman amid ongoing questions about personal loans used to fund his share of the company’s wells.
Reuters reported April 18 that McClendon had secured up to $1.1 billion in loans using his 2.5 percent stake in the Chesapeake wells as collateral. Some of the loans reportedly came from a private equity firm doing business with the company, spurring questions about a potential conflict of interest and a board review.
Several institutional investors, including Icahn, subsequently called for a leadership change at Chesapeake. Some called on investors to vote against the re-election of Oklahoma State University President Burns Hargis and retired Union Pacific Corp. executive Richard K. Davidson to the board.
New York City Comptroller John C. Liu, who wrote a May 17 letter urging shareholders to replace Hargis and Davidson, was heartened by Monday’s announcement.
“This agreement goes to the heart of the problem — the directors themselves — and hopefully will result in an independent board that acts in the long-term interests of the company and its shareowners,” Liu said. “We look forward to the naming of new directors and other changes that address long-standing shareowner concerns. By voting for proxy access, shareowners can help hold new directors feet to the fire if they fail to exercise independent oversight of management.”