Chesapeake Energy’s corporate perks have grabbed a lot of headlines, from well investment opportunities afforded CEO Aubrey McClendon, private plane trips offered to executives and directors, and its plush, amenity-laden Oklahoma City campus.
But the natural gas giant’s “most extraordinary perk” might not be for executives, Reuters reports. About 1,600 mid-level employees are guaranteed payment if Chesapeake changes hands.
Employees — from title attorneys and land men to lab technicians — throughout the company and its subsidiaries have contracts that include “change-of-control” payments, according to Reuters, which reviewed internal company documents.
The roughly 1,600 employees with the contracts represent about 12 percent of the company’s workforce and could be worth between $100 million and $140 million, Reuters reports.
Perhaps most unusual, the Chesapeake employees would be entitled to these “change-of-control” payments even if they kept their jobs at Chesapeake after the company changed hands. For some employees, that means cash payments of 50 percent of their salary plus 50 percent of their most recent annual bonus, according to contracts examined by Reuters.
The contracts aren’t for top company executives, so Chesapeake doesn’t have to disclose the arrangements to shareholders. A company spokesman wouldn’t discuss the rationale of the contacts with Reuters reporters.
The perks provide job security. And Chesapeake has made it a point to hire top talent, so the perks could be used to “lure” workers to Oklahoma City, “which lacks some of the amenities of larger cities,” Reuters reports.
Or they could be a “poison pill” — a measure installed to discourage hostile takeovers.
According to Reuters, most companies that have such perks require a “double-trigger” before the contract provision is activated: 1) change of control AND 2) the employee loses their job. But those 1,600 workers at Chesapeake only need a “single-trigger” — change of control.
“The only rationale for a single trigger is to provide a windfall to management at shareowners’ expense, which is why they are increasingly rare,” Michael Garland, head of corporate governance for New York City, which holds almost 2 million shares of Chesapeake stock, tells the news service.
The provision could have been installed to make a hostile takeover of Chesapeake more expensive. Or they could simply be a generous employee perk, Reuters reports.
There’s another unanswered question. Chesapeake has suffered a big board shakeup recently, and five new directors comprise the majority of the company’s nine-member board.
Was the board shuffle a “routine change” or “as a result of an actual or threatened election contest?”
Chesapeake has told Reuters and its employees that the board shakeup was routine.
Paul Hodgson, senior research associate at GMI Ratings, a corporate-governance consulting firm, disagreed, saying the change-in-control trigger “in fact has already happened with the new directors,” Reuters reports.