* Shares edge lower post-market
* Incentive compensation for execs slashed
* More reimbursement for personal jet use
* No personal jet use for execs except CEO
* New compensation clawback provision
By Anna Driver and Brian Grow
Jan 7 Chesapeake Energy Corp, the U.S.
oil and gas company battling a governance crisis and financial
strain, said on Monday its chief executive officer, Aubrey
McClendon, will not receive a bonus for 2012.
The board, in a filing to regulators, said it made several
changes to the company's corporate governance structure and
executive pay. The company said McClendon recommended he not
receive a bonus.
Other actions taken include deep cuts to incentive pay, a
ban on personal jet travel for top executives other than
McClendon, and measures to increase shareholder influence.
Last year was rough for Chesapeake and McClendon. The
company faced both a liquidity crisis brought on by low natural
gas prices and heavy spending and a governance crisis that
resulted in big shareholders effectively taking control of the
board of directors in June.
McClendon is under scrutiny from federal regulators and his
board for blurring the line between his personal dealings and
that of the company. He was stripped of his title as chairman of
the company he co-founded in 1989 last year.
A Reuters investigation published in April found that
McClendon had arranged to personally borrow more than $1 billion
from EIG Global Energy Partners, a firm that also is a big
investor in Chesapeake.
The loans, arranged through McClendon's personal shell
companies, were secured by his interest in company wells.
McClendon is allowed to take a 2.5 percent stake in every single
well Chesapeake drills under a controversial program called the
Founders Well Participation Program (FWPP).
He must also shoulder the same percentage of the wells'
costs. After the Reuters report on McClendon's personal loans,
the company's board, at the urging of major shareholders, said
in May it would end the well program 18 months early in June
The FWPP has also come under the scrutiny of the U.S.
Securities and Exchange Commission and the Internal Revenue
Service and Chesapeake's board.
Other Reuters investigations found McClendon ran a $200
million hedge fund that traded in the same commodities the
company produced and plotted with a competitor to suppress
prices of oil and gas acreage in Michigan.
The U.S. Department of Justice is investigating Chesapeake's
land deals in Michigan.
In each of the prior three years, McClendon received a bonus
of nearly $2 million.
Shareholders, who delivered a stringing rebuke of the
executive and board in June at the company's annual meeting,
have demanded change.
As part of the its efforts to shore up governance, McClendon
will also reimburse the company for his personal use of company
aircraft in excess of $250,000. Previously that amount was
$500,000, according to a filing.
Chesapeake said it will also make deep cuts to other
executive's incentive compensation and eliminate their personal
use of company jets, according to a filing with the U.S.
Securities and Exchange Commission.
The Oklahoma City, Oklahoma company also pledged to
implement a shareholder proposal passed in June that would
eliminate the staggered election of its board of directors.
Chesapeake originally lobbied for the Oklahoma statute
mandating classified boards but said it will now seek to have
all of its directors elected on a annual basis, beginning in
Among other changes, Chesapeake said will adopt a proxy
access measure, action New York City Comptroller John Liu said
will give shareholders a much stronger voice at the table. New
York City pension funds hold 1.6 million Chesapeake shares.
Chesapeake also put in place a clawback provision on
executive incentive compensation that can be exercised "in the
event that the company is required to restate any financial
Some viewed the changes as relatively minor. Mark Hanson,
oil analyst at Morningstar said investors are more keenly
focused on the outcome of the company's probe into the FWPP and
McClendon's personal loans, as well as the 2013 budget and
"Cutting overhead and slashing bonuses won't do much for a
company that's facing another potential multi-billion funding
shortfall in 2013," Hanson said.
Shares of Chesapeake edged lower after the close of regular
trading. The stock fell to $17.58 from its New York Stock
Exchange close of $17.62.