The heat on Chesapeake Energy Corp.'s board continues to rise.
New York State Comptroller Thomas P. DiNapoli on Tuesday became at least the fourth institutional Chesapeake investor to call for a leadership change at the Oklahoma City-based oil and natural gas producer.
DiNapoli, who is trustee of the New York State Common Retirement Fund, said replacing Oklahoma State University President Burns Hargis and former Union Pacific Corp. executive Richard K. Davidson on Chesapeake's board is “a necessary first step” in crafting a panel that is accountable to shareholders.
“For too long, CEO (Aubrey) McClendon has been allowed to dominate the board and the board has failed to perform its critical role in overseeing the company on behalf of its shareholders,” DiNapoli wrote Tuesday in a letter to Chesapeake shareholders. “As members of the audit committee, directors Hargis and Davidson should be held accountable for the board's significant failings in its oversight responsibilities.”
Activist investor Carl Icahn, California Public Employees' Retirement System and New York City Comptroller John C. Liu also have called on shareholders to withhold votes for Hargis and Davidson at Chesapeake's June 8 annual meeting. Three investor advisory firms have done the same.
Chesapeake's largest shareholder, Southeastern Asset Management Inc., also expressed its displeasure with the board and the company's strategy earlier this month.
The Chesapeake board responded to Liu's complaints last week by defending its accomplishments in addressing shareholder concerns.
“We believe that Chesapeake has built the nation's best collection of E&P (exploration and production) assets,” the board wrote in a letter to shareholders, “and the company has a clear strategy to harvest those assets by focusing on developing the 10 core plays in which Chesapeake has built a No. 1 or No. 2 position while also continuing our transition from natural gas to liquids, reducing capital expenditures and paying down long-term debt.”
DiNapoli, who oversees a retirement fund that owns about 3.5 million shares of Chesapeake stock, contends the company needs new leadership because its stock performance over the past month has been “dismal.”