Chesapeake Energy Corp’s embattled board of directors is pursuing a set of changes in response to widespread criticism, including complaints about the compensation and rewards system for CEO Aubrey McClendon and other executives, the company said Monday.
In filings with the Securities and Exchange Commission, the board said it also will attempt to change an Oklahoma law that constricts the board’s structure and affects its oversight.
Critics have said Oklahoma City-based Chesapeake pushed for that law in the first place, and argue that the company should incorporate in Delaware, which requires that directors be elected annually and not to staggered terms, as are required under existing Oklahoma law.
The board said it will consider reincorporating in Delaware if the Oklahoma law doesn’t change.
Chesapeake also said it has taken steps toward “enhancing the oversight function of the board through various measures, including the appointment of a new general counsel, retention of a nationally recognized consultant to identify opportunities for the company to reduce overhead expenses, significantly reducing annual budgeted charitable, trade association and political expenditures and implementing a rigorous oversight program for such payments and commitments.”
Chesapeake’s board also moved to eliminate McClendon’s 2012 bonus, substantially reduce his incentive package and to try and match his and other executives’ compensation to those of other companies in their peer group.
McClendon has also agreed to reimburse the company for any personal use of Chesapeake’s private plane in excess of $250,000. Previously, McClendon had agreed to reimburse the company for personal use that exceeded $500,000 in costs, according to the filing.
Chesapeake’s board has faced intense criticism over the last year as investors lambasted it for lax oversight that led the company into a cash shortage as natural gas prices plunged in 2012. It is the nation’s second-largest natural gas producer behind Exxon Mobil Corp.
The company then struggled to make payments on its debt, most recently reported at $16 billion, as its stock dropped along with natural gas prices.
Chesapeake shares are down 27 percent over the last year, even as the company has scrambled to reorient its production mix toward oil.
The company has dramatically increased its oil production rates and continues to drill for the resource, but 79 percent of its production mix remains in cheap natural gas.