The board of Chesapeake Energy offered a stinging referendum on the leadership of chief executive Aubrey McClendon, embracing sweeping governance changes and slashing executive and director pay.
The embattled natural gas producer also said it plans to allow investors to nominate some directors, a key initiative that shareholder activists have long advocated.
At Chesapeake, where corporate governance has been little more than an afterthought in recent years, the steps are long overdue. Under outside chairman Archie Dunham, who was appointed last summer, Chesapeake is getting its muddled finances in order.
In a regulatory filing, the company said it would reduce spending on charitable and political donations and cut other overhead. That comes on top of other asset sales announced last year aimed at reducing the company’s huge debt load.
The Oklahoma City-based company said it eliminated McClendon’s annual bonus, cut his incentive package and will match his compensation to his industry peers. It’s also reviewing other compensation practices for McClendon, who was stripped of his chairman’s title last year. That includes a controversial program under which McClendon borrowed hundreds of millions of dollars from companies that do business with Chesapeake and used the proceeds to invest privately in Chesapeake’s natural gas wells.
McClendon had agreed to stop the program, which the company, stretching the bounds of credulity, claims isn’t a conflict of interest.
McClendon’s runaway pay isn’t the only compensation to come under the board’s scrutiny. Directors decided to reduce their own pay by 20 percent since last year’s shakeup that ushered in Dunham, a former ConocoPhillips executive. A majority of Chesapeake’s board seats are now controlled by large investors rather than McClendon’s cronies.
The sweeping changes are a sign that the days of McClendon using the company as his personal financial playground are over.