Aubrey McClendon, CEO of Chesapeake Energy, had a tough day last Friday at the annual shareholder’s meeting at Chesapeake’s headquarters in Oklahoma City . Shareholders passed a number of votes against the sitting board and against McClendon. McClendon had previously announced that Chesapeake’s two largest shareholders, Southeastern Asset Management and Carl Ichan will be allowed to nominate four new board members and a new chairperson, replacing more than half of the board. The new members are slated to begin later this month. Still, shareholders withheld approval of two sitting board members up for re-election. They both promptly offered their resignations.
A number of large shareholders addressed McClendon and the current board. Some were rather blunt about McClendon’s doubtful future with the company he founded in 1989:
On Friday, it seemed that even the compliments he received had a qualifier attached.
Vincent J. Intrieri, representing financier Carl Icahn, Chesapeake’s second-largest investor, told McClendon that "you are a great oil-and-gas man," but said the reconstituted board will provide needed oversight and direction. "Now the board can focus on appointing a new chairman and addressing the funding gap" between the company’s spending plans and its available cash from operations.
Intrieri said Chesapeake assets remain undervalued by investors and urged the company to "explore all strategic alternatives," adding that "the board should not say no to a sale."
Others were less diplomatic.
Gerald Armstrong of Denver, who said he had been pressing Chesapeake for years to improve its corporate governance, told McClendon that with the shareholder votes at the meeting, "five directors have been replaced, and it’s likely you will not be here next year."
He added: "Something is out of balance here at Chesapeake."*
McClendon defended his actions as CEO and pointed out if he had not moved the company into oil drilling when he did, the company would be in worse financial condition than it is now with historically low natural gas prices. McClendon also said he’s working diligently to reduce the amount of debt the company owes.
McClendon and board members did not talk with the media following the meeting.
*Fort Worth (TX) Star-Telegram (Jun 8, 2012) – Chesapeake Energy leadership rebuked by shareholders
- Bloomberg Businessweek (Jun 8, 2012) – Chesapeake Directors Resign After Shareholder Rejection
- CNBC/Reuters (Jun 8, 2012) – Chesapeake shareholders rebuke board, seek changes
- Bloomberg (Jun 11, 2012) – ‘Tainted’ Chesapeake Hears Rising Calls To Dump McClendon
- Chesapeake Energy (Jun 8, 2012) – Chesapeake Energy Corporation Announces Preliminary Voting Results from Annual Shareholder Meeting