Chesapeake Energy Corp. CEO Aubrey McClendon, who sold his antique map collection in 2008 to the company in a deal that gave him a big profit in a year in which Chesapeake’s stock plunged by 60%, has agreed to reimburse the company with interest, according to court records.
The settlement was filed on Tuesday in state court in Oklahoma City, where Chesapeake is headquartered. An uproar from shareholders and several lawsuits followed the release of McClendon’s 2008 compensation package, which included a $75 million bonus (see Daily GPI, April 28, 2009; Jan. 9, 2009). McClendon that year had been forced by margin calls to sell 31.5 million shares in Chesapeake, or 94% of his holdings (see Daily GPI, Oct. 13, 2008).
In addition to the salary and bonus, many were enraged when they learned that in addition to the compensation package, McClendon was paid $12.1 million for a collection of historical maps of the American Southwest, together with books, water color art and photographs. McClendon apparently made a $4 million profit on the sale to the company.
Several lawsuits were filed by shareholders over the board members’ approval of the deal, including one by the Louisiana Municipal Police Employees’ Retirement System. Proxy adviser Glass, Lewis & Co. that also gave the company’s compensation structure an “F,” citing the compensation package, the lack of independent directors, eliminating shareholder rights to call special meetings, and for buying the antique map collection (see Daily GPI, June 8, 2009).
The directors were reelected in 2009, but a majority of shareholders that year voted in favor of corporate governance resolutions (see Daily GPI, June 15, 2009).
According to a preliminary settlement, McClendon, who also is the company’s founder, agreed to reimburse Chesapeake $12.1 million plus interest for the map sale. His 2008 bonus would remain in place under the settlement, which still requires court approval. The company also agreed to several corporate governance and compensation changes, which include hiring an independent compensation consultant. And it forbids executives from using Chesapeake stock to hedge or trade in puts or calls.
Chesapeake General Counsel Henry Hood called the settlement “fair and conducive to bringing this matter to a positive conclusion.” The company is scheduled to issue its quarterly earnings and operations report on Friday.
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