Change is coming to Chesapeake Energy, the Oklahoma City natural gas giant’s directors said on Monday.
Many of the changes were proposed by shareholders at last year’s annual meeting, but were rejected by Chesapeake’s directors. The composition of the board has changed since, and shareholder criticism fueled the appointment of five new independent directors.
Among the changes is a cut in CEO Aubrey McClendon’s compensation and corporate perks. Chesapeake also reiterated its effort to ask the Oklahoma Legislature for an exemption from a law the company helped write — one specifically designed to help prevent what happened at Chesapeake: a boardroom takeover. Chesapeake helped write legislation signed into law in June 2010 by former Gov. Brad Henry.
The law was amended in 2011 to allow companies like ONEOK — which complained — to keep their declassified board structure.
The law requires companies incorporated in Oklahoma to have what’s known as a “classified” board structure. That means board members are divided into classes with staggered elections so that only one-third of the members face a vote of shareholders each year.
Such classified structures make companies less vulnerable to board takeovers, a threat Chesapeake now faces.
The law received overwhelming support in the state House and Senate, and its passage was praised by the State Chamber of Oklahoma for ensuring “continuity of leadership” and “orderly transitions” at Oklahoma public companies.
The changes that will be proposed at the company’s annual meeting this summer also include increased proxy access, the elimination of supermajority voting requirements from the company’s corporate bylaws, and the publication of “certain” political contributions.
Chesapeake officials wouldn’t comment on the law or the company’s plans to secure relief from it when StateImpact reached out in June.
Here’s what the company wrote in Monday’s SEC filing:
If action is not taken by the legislature sufficiently in advance of the 2013 annual meeting, the Board will take the steps necessary to ensure that shareholders are allowed to elect the Company’s entire board of directors at the 2013 annual meeting. In the event the Oklahoma legislature declines to grant relief from the classified board statute, the Board intends to take the steps necessary to allow the Company to re-incorporate in Delaware.
We’ve asked a spokesperson for more details on plans for relief from the law. We will update you with their comments.
CEO McClendon recommended he not receive a bonus for 2012. The board agreed.
Last year was a rough one for Chesapeake and Mr. McClendon. The company faced both severe financial strains, brought on by low gas prices and heavy spending, and a corporate governance dispute that resulted in shareholders effectively taking control of the board away from Mr. McClendon, Chesapeake’s co-founder, in June.
Mr. McClendon has come under fire for blurring the line between his personal dealings and those of the company. He was stripped of his title as chairman in June.
In an interview with Oklahoman reporters Adam Wilmoth and Jay Marks, Argus analyst Phillip Weiss characterized Chesapeake’s changes as “incremental positives”
“… but I’m more interested in finding out the results of their investigation of McClendon,” Weiss said.