New York City Comptroller: Replace Chesapeake board members

Hargis, president of Oklahoma State University, and Davidson, former CEO of Union Pacific Corp., both are up for re-election at the company's June 8 annual meeting.

Comptroller John C. Liu, who manages $122 billion in assets for the city's pension funds, said Chesapeake's shareholders deserve board members who are more responsive to their needs. New York City Pension Funds owns 1.9 million shares of Chesapeake stock.

“Shareowners urgently need new directors who are willing and able to exercise strong, independent oversight of Aubrey McClendon, a willful CEO with a penchant for risk,” Liu wrote Thursday in a letter to others who own Chesapeake stock.

Hargis and Davidson, who each earned more than $500,000 in cash, stock and other considerations last year as directors, are part of the Chesapeake board's audit committee.

“We believe recent revelations regarding previously undisclosed transactions ... demonstrate the audit committee's costly failure to act in the best interests of shareowners,” the comptroller wrote.

Liu said shareholders should vote “withhold” on Hargis and Davidson, while casting ballots in favor of a proxy access bylaw that would allow certain shareholders to nominate director candidates.

Hargis referred all Chesapeake queries to the company, whose spokesman declined to comment Thursday on Liu's letter.

Chesapeake recommends retaining Hargis and Davidson and rejecting the comptroller's bylaw, which officials maintain is not “necessary or appropriate,” according to its May 11 proxy statement.

Comptroller's concerns

Argus Research Analyst Phil Weiss said he doesn't know how much sway the comptroller's opinion will have on Chesapeake shareholders.

“I'm sure they are not the only organization thinking this way,” Weiss said. “Having them publicly voice this view can't hurt; I'm just not sure how much it helps though.”