CHK CEO vs. CHK Investors
Co-Founder of Chesapeake Energy, Aubrey McClendon, is a billionaire getting paid a hefty salary for his work. Investors have become privy to this information, and are beginning to ask questions. Are there changes in the works? Christopher Helman has the details.
…I can’t fathom why shareholders have put up with this for so long. I called for McClendon’s ouster after he almost tanked the company in 2008. He had borrowed big to buy more Chesapeake shares, and when the liquidity crisis hit he faced a margin call that forced him to sell off his entire Chesapeake stake into a plummetting market. Because of his colossal lack of risk management, McClendon lost his $2 billion stake in the company. As he was forced to liquidate his position, shares fell from $67 in July 2008 to bottom out near $11 that December (they’re at $29 today).
Small investors had to eat their loss. But not McClendon. In December 2008 the Chesapeake board gave him the pay package of a lifetime, including $1 million in salary, a $20 million stock grant, $75 million bonus, $12 million to buy his map collection, $600,000 for private use of corporate jets, $600,000 for accounting services, $131,000 for personal “engineering support.” Chesapeake also paid $4.6 million in 2008 to sponsor the NBA’s Oklahoma City Thunder, of which McClendon owns 20%.
It hasn’t gotten much better since then. In 2010 his package was $21 million, including a baffling $16.8 million stock award, $2 million bonus, $250,000 in accounting support, and $120,000 in personal security…
…Though he owns less than 1% of company shares, McClendon maintains a kingly deal set up in Chesapeake’s early days that allows him to buy a 2.5% interest in every one of the company’s wells. It’s only because of these well interests that McClendon has managed to stay on the Forbes 400 list of richest Americans. These interests also give McClendon enormous incentive to make deals to sell Chesapeake’s developed acreage to other buyers. In February he dished Chesapeake’s Fayetteville shale position to BHP Billiton for $4.75 billion. The company’s proxy says that McClendon sold his stake in conjunction with the deal, but not for how much…
This outrageous spending can be misunderstood and unaccepted by investors for many reasons. Some of the spending can be viewed as unnecessary and excessive. Either way, the company is going to need to answer to their investors and provide explanations in order to maintain them.
Quotes taken from report by Christopher Helman, Read the entire article here.
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