Chesapeake’s ‘Cowboy’ CEO and an Annual Meeting -turned Corporate Rodeo

• Joe Wertz
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  Joe Wertz was a reporter and managing editor for StateImpact Oklahoma from 2011-2019. He reported on energy and environment issues for national NPR audiences and other national outlets. He previously worked as a managing editor, assistant editor and staff reporter at several major Oklahoma newspapers and studied journalism at the University of Central Oklahoma.

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Weighing in on the recent tumult at Chesapeake Energy, the New York Times likens CEO Aubrey McClendon to a cowboy bracing for a bucking:

From the paper’s Clifford Krauss:

He became a billionaire as the company he co-founded aggressively outbid competitors for land leases and drilled highly productive wells in virtually every major shale gas field in the country … But Mr. McClendon also borrowed heavily, with loans currently of $846 million, to finance his participation in an unusual compensation plan that allowed him to invest alongside Chesapeake in every well that it drilled, sharing in both the profits and the expenses.

Cowboy or not, McClendon will have to face some bulls at the company’s shareholder meeting on June 8, which insiders say is likely to be quite the corporate rodeo.

McClendon is everything shareholder activists “love to hate,” says the Associated Press, reporting about this year’s anxiously anticipated annual meetings.

In 2008, a year when the stock plummeted from about $39 to $16, Chesapeake paid McClendon $12 million for his personal collection of antique maps. (A shareholder lawsuit is now forcing him to buy them back.) That same year, Chesapeake paid $3.5 million to sponsor the NBA’s Oklahoma City Thunder, of which McClendon owned almost 20 percent.

On Thursday, Chesapeake said they were ending a controversial perk — the Founder Well Participation Program — which allowed McClendon to take a personal stake in every well the company drilled.

The company’s stock has been battered, and the Securities and Exchange Commission is informally investigating the program, which raised questions about potential conflicts of interest. And on Thursday, Standard & Poor’s downgraded Chesapeake’s corporate credit rating over the fracas, which its analysts said “underscore shortcomings” in the company’s corporate governance.

A third lawsuit was filed against Chesapeake and McClendon on Thursday on behalf of shareholders over disclosures relating to the CEO perk, The Oklahoman reports. The company is facing four shareholder proposals at their annual meeting, “including one about lobbying disclosures that the company tried to keep off the ballot,” the AP reports.

The Times:

“When it comes to disclosure with this guy, there always seems to be something amiss, something in the picture that hasn’t come out,” said Mark Hanson, an energy stock analyst at Morningstar.