Chesapeake chief survives shareholder vote

Aubrey McClendon, chief executive of Chesapeake Energy, has survived a shareholder push for his ouster from the board over his compensation package.

A day before Friday’s vote, Chesapeake said in a regulatory filing that it had hired Cogent Compensation Partners to review its pay practices and provide recommendations. “The compensation committee is committed to implementing an executive compensation system that includes objective performance criteria,” the company said.

Mr McClendon’s salary has remained at $975,000 since 2006 and will remain at that level through 2013, under his contract. His annual bonus compensation may not exceed $1.95m per year through 2013. The value of Mr McClendon’s stock award in 2010 was $16.8m.

Of shares voted on Friday, 78 per cent then backed the reappointment of Mr McClendon, Chesapeake’s founder, to the board through 2014.

Michael Kehs, Chesapeake’s spokesman, said, “This is an overwhelming majority of our shareholders who have endorsed our board and executive team.’’

But Carol Bowie, head of compensation policy development at Institutional Shareholder Services, a proxy advisory firm which had called for Mr McClendon’s ouster, said, “The average level of opposition to directors is usually well below 10 per cent.’’

“Shareholders are sending a message to the board,’’ she said.

Some shareholders have been pressing for change since 2008, when the energy industry was hurting amid the financial crisis but Mr McClendon received a bonus of more than $75m after Chesapeake’s falling stock price forced him to sell more than 90 per cent of his shares to meet a margin call from creditors.

By contrast the bonus for Rex Tillerson, ExxonMobil’s chief executive, was $4m that same year. And yet Exxon had the highest return on capital employed of 2008 and the second highest total shareholder return.

Chesapeake, the second biggest natural gas producer in the US, said it ties executive compensation to equity performance and other long term metrics. Indeed, it says 80 per cent of Mr McClendon’s compensation is equity-based to align the interests of the chief executive with those of shareholders.

Ms Bowie said: “There are no specified performance conditions for his cash compensation or his stock compensation. Shareholders generally expect compensation be tied to the attainment of pre-established performance goals.’’

ISS had urged shareholders to withhold support for the re-election of Mr McClendon and Don Nickles, the only incumbent directors on the ballot, since no compensation committee members were up for re-election.

Mr Nickles’ reappointment came with 79 per cent of votes cast. In contrast, Kathleen Eisbrenner and Louis Simpson each received 99 per cent of votes cast in winning their first board terms on Friday.

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