The leader of Oklahoma's state Senate has filed a pair of bills that would modify the state's laws on public company directors, a change pursued by Chesapeake Energy Corp. as part of a pledge to change its corporate governance.
Senate President Pro Tem Brian Bingman, R-Sapulpa, filed Senate Bill 248 and Senate Bill 594. The bills cover the same section of law, but one has an emergency clause, meaning the legislation goes into effect immediately as soon as it's signed into law.
Rep. Fred Jordan, R-Jenks, filed similar legislation in House Bill 1646.
The deadline to file bills was Jan. 17. The legislative session starts Feb. 4.
The bills strike a portion of the law Chesapeake successfully lobbied for in 2010 requiring the staggered election of public company directors. The Oklahoma City energy company asked the Legislature for that change following shareholder approval of proposals in 2008 and 2009 calling for the annual election of all directors.
In seeking the earlier law, Chesapeake said staggered board elections ensure stable management and leadership. Three other states — Indiana, Iowa and Massachusetts — also mandate staggered boards. Corporate governance experts say annually elected directors are typically more responsive to shareholders.
Shareholders approved a nonbinding resolution at Chesapeake's 2012 annual meeting to have the company reincorporate in Delaware so it would be easier to have annual director elections. The proposal, which received 53 percent of the votes, was opposed by the company's board. Institutional Shareholder Services, a shareholder advisory firm, recommended the proposal, saying it could have a positive impact on shareholder rights.
“In addition, the company would join the ranks of biggest companies that are incorporated in Delaware; as a result, the company could have minimal influence over the actions of the state legislature,” ISS said in a report issued before Chesapeake's annual meeting.
Chesapeake rolled out a series of corporate governance proposals Jan. 7 in the wake of a boardroom shake-up last summer that saw CEO Aubrey McClendon relinquish his post as chairman. The company's new board said it would pursue a change in Oklahoma law to allow annual director elections. If that fails, the company plans to reincorporate in Delaware.
Chesapeake spokesman Michael Kehs said the company would not comment on the proposed legislation beyond what it said in regulatory filings.
Bingman's spokesman, Nathan Atkins, said the senator wants to give companies more flexibility.
“Several bills have been filed to modernize our state corporate governance laws by bringing Oklahoma into line with the gold-standard of corporate governance as seen in the state of Delaware,” Atkins said. “The pro tem's intention is to provide businesses with opportunities to determine how best their organizations ought to be run.”
The prior changes to the law caused problems for two other large public companies incorporated in Oklahoma, ONEOK Inc. and OGE Energy Corp. Those companies, which were moving toward annual director elections, successfully sought a legislative change in 2012 to exempt them from the requirement for staggered boards.