Chesapeake Business Practices

[MikeOKC]

How did this get missed? I haven't seen anything on the forum. Not to mention, The Oklahoman found it unworthy of news. And here we are just 48 hours before the annual meeting.

ISS advises against McClendon for board

Influential proxy advisory firm ISS has recommended Chesapeake Energy shareholders oppose chief executive Aubrey McClendon's re-nomination to the board of directors.

The group cited an unresponsiveness on McClendon’s part to investors and compensation issues, Reuters reported.

ISS also urges shareholders to vote against the reelection of former US Senator Don Nickles, who is chairman of the governance committee of the US natural gas company.

"A pay-for-performance disconnect has been identified at this company," ISS said in a 16 May report. "The company does not use any performance-linked incentive, choosing to rely instead on the discretion of the compensation committee."

Chief executive Aubrey McClendon's pay rose 13.4% last year, while one-year total shareholder return was only 1.4%, below the peer median of 35%, ISS said.

McClendon also receives excessive perks, the proxy advisory firm wrote.

ISS also recommended holders opposed the company's executive compensation plan, the filing said.

In a letter to shareholders, Chesapeake wrote that ISS's reliance on short-term stock performance should instead be focused on the long term.

The company also told investors that its board takes feedback from corporate governance specialists and big shareholders, factors that ISS did not take into account.

-------------------------

He's treated like a God here in Oklahoma City, but McClendon deserves the boot from the board. And he's not the only one, that board is loaded with McClendon lackeys. His compensation package is so far askew from reality that it should be derided by all that care about the future of CHK. The big question - will stockholders or the SEC bring down Aubrey McClendon first? CHK is rogue and out of control.

http://www.upstreamonline.com/live/article258872.ece

[MikeOKC]

CHKand McClendon still out of control. ISS says McClendon & Nickles should get the boot from the Board of Directors. Thread here.

Edit: At the thread linked above is another link to an MSNBC story today from the Motley. "It's Even Worse Than You Think At Chesapeake Energy"

[Midtowner]

With McClendon out, how long before CHK merges with someone or relocates to Houston?

[MikeOKC]

I think the question should be turned around:

With McClendon still running the show, how long before CHK becomes a prime takeover target and relocates to Houston?

Remember, ISS just says he should be kicked off the board - he's still CEO. However, I think he's a disaster waiting to happen for Oklahoma City.


(........waiting for Brent Gooden & his "PR" firm to enter the thread and "correct" the record.)

[MikeOKC]

And the piling on begins (and rightfully so).....

MSNBC (today) from Motley's Matt Koppenheffer:

"It's Worse Than You Think At Chesapeake Energy"

The governance practices at Chesapeake Energy with regards to its CEO are a complete joke.

"Keep pulling the sweater ... Eventually the thing will unravel."
-- Zoolander

That odd quote from Ben Stiller's classic comedy has been stuck in my head ever since I published a story on the compensation for Chesapeake Energy's Aubrey McClendon.

I got plenty of good feedback on the story, and a number of folks who shared the view of McClendon as the consummate big-spending gambler. I also heard a couple of times that the extent to which McClendon gets rich from Chesapeake only begins with the compensation package that I focused on previously.

The rest of the story:

http://www.msnbc.msn.com/id/43325721...s-motley_fool/

[MikeOKC]

Here's the original story (from last week) that, after closer inspection, prompted Koppenheffer to write the follow-up (in the MSNBC link above).
"Is This Company's CEO Worth It: Chesapeake Energy"
http://www.fool.com/investing/genera...ke-energy.aspx

[BoulderSooner]

CHK and McClendon are both great and getting better every day .... did/do you read the annual report? ... ISS is a joke ... clearly you have something personal against AM and or CHK

[MikeOKC]

CHK and McClendon are both great and getting better every day .... did/do you read the annual report? ... ISS is a joke ... clearly you have something personal against AM and or CHK

Riigghhhhtttt. That's it. Kill the messenger. Make it about ME. Is your head in the sand?

[mugofbeer]

So, exactly why is it so important that you publish any negative information or article about CHK? There's a clear trend here. Head in the sand? Over what? Unless you work there you've got no horse in the race so what does it matter? What is it that you are trying to achieve? CHK does an enormous amount of good in this city and employs thousands of people. CHK will have a hard enough time trying to remain independent as time goes on. As big as it is, if Exxon-Mobil or BP or someone decided they wanted to absorb CHK, they could do it easily. Then OK would ahve about a zillion square feet of really nice EMPTY office space up on western.

[onthestrip]

So, exactly why is it so important that you publish any negative information or article about CHK? There's a clear trend here. Head in the sand? Over what? Unless you work there you've got no horse in the race so what does it matter? What is it that you are trying to achieve? CHK does an enormous amount of good in this city and employs thousands of people. CHK will have a hard enough time trying to remain independent as time goes on. As big as it is, if Exxon-Mobil or BP or someone decided they wanted to absorb CHK, they could do it easily. Then OK would ahve about a zillion square feet of really nice EMPTY office space up on western.

This response is foolish. We should ask no questions or be critical of anybody as great as OKCs savior, Mr McClendon? Please. The guy obviously does some shady stuff. We should definitely ask questions. I also don't have to work there to be concerned. If Chpk failed it would have a huge impact on the entire city, not just employees. But wait, what am i doing? I shouldn't question Aubreys actions, he's bringing us Whole Foods, developed Classen Curve that has only siphoned tenants from other OKC centers, built some boathouse stuff and has a nice looking campus. When he does that why should I ever question the risky business practices he uses.

[Dustin]

http://www.cnbc.com/id/43564235

[zookeeper]

CHK and McClendon are both great and getting better every day .... did/do you read the annual report? ... ISS is a joke ... clearly you have something personal against AM and or CHK

What a difference a year and a half can make. When MikeOKC was posting what we now know as fact you were smearing him and thought he had a personal problem with Aubrey McClendon. Looking through this thread is eye opening but in the long run, this has got to be the best thing for Oklahoma City.

[okcpulse]

I find it rather humorous that anytime anyone ever worries about any company in Oklahoma, their default twitch is "looks like they are relocating to Houston." If Aubrey gets the boot, maybe they will, or maybe they won't. Oklahoma City is a completely different environment today than it was during the energy exodus to Texas in the 1980s. It's even different when Kerr McGee was dissolved, but that company had dried up long before Anadarko swallowed them up. The city is much more appealing to companies when considering the QOL factor, so the chance is greater they will want to stay.

Now, if CHK DOES become a take-over target by a Texas company... well, let's just put it this way: Texans only care about Texans.

[BG918]

I find it rather humorous that anytime anyone ever worries about any company in Oklahoma, their default twitch is "looks like they are relocating to Houston." If Aubrey gets the boot, maybe they will, or maybe they won't. Oklahoma City is a completely different environment today than it was during the energy exodus to Texas in the 1980s. It's even different when Kerr McGee was dissolved, but that company had dried up long before Anadarko swallowed them up. The city is much more appealing to companies when considering the QOL factor, so the chance is greater they will want to stay.

Now, if CHK DOES become a take-over target by a Texas company... well, let's just put it this way: Texans only care about Texans.

The only companies I could see buying Chesapeake would be Exxon, ConocoPhillips, and Encana.

[soonerguru]

I find it rather humorous that anytime anyone ever worries about any company in Oklahoma, their default twitch is "looks like they are relocating to Houston." If Aubrey gets the boot, maybe they will, or maybe they won't. Oklahoma City is a completely different environment today than it was during the energy exodus to Texas in the 1980s. It's even different when Kerr McGee was dissolved, but that company had dried up long before Anadarko swallowed them up. The city is much more appealing to companies when considering the QOL factor, so the chance is greater they will want to stay.

Now, if CHK DOES become a take-over target by a Texas company... well, let's just put it this way: Texans only care about Texans.

Agree. Houston is a total craphole. Other than some nice museums, it offers:

- Endless sprawl
- Third-world economic inequality
- Terrible highway and public transit infrastructure
- Miserable weather
- Copious crime virtually everywhere in the city
- People live there to collect a check, not because they want to live there
- General Texas backward racial and social attitudes
- Horrific traffic coupled with bad roads
- Loser sports franchises

Houston's halcyon days are in the past. Just do a simple search for Houston message boards and you'll quickly get a sense of how much that city has changed for the worse and how it offers very little in "quality of life" save for some very good restaurants. In my opinion, OKC is getting very close to competing with cities like Houston. Right now, if I were unfortunate enough to be marooned in that hellhole, I would jump at a chance to come to OKC. Right now our quality of life is better, and so much improvement is under way.

The OKC Chamber has some real opportunity to pluck some companies out of Houston, IMO.

[redrunner]

Yikes...Trouble in paradise?

[bluedogok]

The ISS's of the world are the reason why the financial sector is a complete mess, they are symptomatic of the typical short sightedness that the profit takers (they can no longer be called investors) focus on. It is pretty dang simple, if someone feels that CHK is a bad investment, don't put your money in there and eventually the stock prices will reflect that many people do but evidently most don't. All upper level management types get a ridiculous payday anymore, it isn't just McClendon or energy sector honchos, the worst of the worst are the financial sector upper management who keep granting themselves lavish packages when they lose billions.

[MikeOKC]

The ISS's of the world are the reason why the financial sector is a complete mess, they are symptomatic of the typical short sightedness that the profit takers (they can no longer be called investors) focus on. It is pretty dang simple, if someone feels that CHK is a bad investment, don't put your money in there and eventually the stock prices will reflect that many people do but evidently most don't. All upper level management types get a ridiculous payday anymore, it isn't just McClendon or energy sector honchos, the worst of the worst are the financial sector upper management who keep granting themselves lavish packages when they lose billions.

I think the major point from analysts is that CHK was raked over the coals on the now infamous AM compensation package and all the board has done to correct it is - nothing. Did you read those articles? It's clear that very many people believe AM is still running CHK like it's a private company and has a board that's doing his personal bidding for compensation-stacking that is unacceptable at a public company. It's obviously very carefully skirting the law. Yes, you are right, there are a lot of ridiculous pay packages out there. But they aren't the issue. CHK and Aubrey McClendon are being singled out for a reason. "Horrible corporate governance" in the words of one. Having board directors making $577,000.00 a year is rightfully called "scandalous" for a reason. They're not going to buck you when you're on the board and controlling things like it's a private company and paying them those ludicrous pay days for - literally - a few days of work. I think CHK stockholders better listen. When that one writer quoted Zoolander, I'm afraid he's pretty damn close: "Keep pulling the sweater ... Eventually the thing will unravel." And frankly, Oklahoma City cannot afford problems at CHK with corporate cowboys putting not only CHK, but our city, at risk.

[MikeOKC]

Today - it's the Wall Street Journal

Chesapeake CEO Faces Storm

"Chesapeake Energy Corp., facing calls from an influential advisory firm to oust co-founder and Chief Executive Aubrey McClendon as chairman over executive pay issues, gave ground hours before its annual meeting.

Mr. McClendon has proved a controversial figure, at once admired for building the nation's second-largest natural-gas producer from scratch, but also criticized for appearing to flout normal standards of corporate governance regarding compensation. Unlike many executives in the country, Mr. McClendon's compensation is set solely at the nine-member board's discretion and hasn't been tied to stated performance standards.

Hours ahead of the annual meeting, Chesapeake on Thursday filed a statement with the U.S. Securities and Exchange Commission committing to implement an "executive compensation system that includes objective performance criteria," as recommended by an independent compensation consultant the company engaged in March. The company had eschewed tying compensation to such objective metrics as recently as April, according to regulatory filings."

~

"Mr. McClendon has made more than $152 million in cash, stock and perquisites since 2008, according to federal filings, making him one of the nation's highest-paid chief executives in any industry."

~

"Directors' pay for 2010 averaged above half a million dollars, including their personal use of corporate aircraft."

http://online.wsj.com/article/SB1000...181597036.html

A McClendon apologist is also quoted - there's few of them. Many of my friends here at OKCTalk don't realize this man's hubris has made him the poster boy for all that's wrong with corporate governance.

[okcpulse]

Well, see here's the problem. Before the Devon Tower began construction, someone came on here claiming that Devon might be up for sale and there would be no tower. Yyyyeah. Then, people speculated that the Devon Tower would be scaled back like the OneOK Tower was in Tulsa after oil prices dropped. Last time I checked, the forms are coming together for floor 47. For every piece of good news about OKC we celebrate, there is always a group of people that say "well, that's great, but..."

So when is enough going to be enough? I am not saying MikeOKC is wrong or right, but we seem to hit these 'The sky might be falling, pack for Texas' conversations every year like clock work. Am I the only one that sees a problem here?

[onthestrip]

The thing is is that we aren't really the ones saying this. These concerns are coming from national writers and industry experts. One thing that I don't think anyone can disagree with is his $75 mil salary a couple years ago when the stock price tanked. That is complete recklessness.

[Snowman]

The thing is is that we aren't really the ones saying this. These concerns are coming from national writers and industry experts. One thing that I don't think anyone can disagree with is his $75 mil salary a couple years ago when the stock price tanked. That is complete recklessness.

Many 'national writers' analysis is totally/nearly useless, that is why their day job is writing about stocks not trading them.

[MikeOKC]

Today - it's the Wall Street Journal. "
"Chesapeake CEO Faces Storm"
http://www.okctalk.com/showthread.ph...389#post437389

Yes, Aubrey, we keep telling you it's a public company now!

[onthestrip]

Many 'national writers' analysis is totally/nearly useless, that is why their day job is writing about stocks not trading them.

Well now its just another writer, from the nobody newspaper Wall Street Journal. They probably dont know anything either.

Chesapeake may very well be fine and go on to do great things and make shareholders happy but it doesnt have to take any national writer to realize that Aubrey has stocked the board with yes-men that do whatever he wants them to do. Hard for board members to say no when they are getting the compensation he gives them

[MikeOKC]

So when is enough going to be enough? I am not saying MikeOKC is wrong or right, but we seem to hit these 'The sky might be falling, pack for Texas' conversations every year like clock work. Am I the only one that sees a problem here?

Per the the Texas bit.... I was responding to Midtowner more in jest than anything. That's not the issue. The issue is the continued rogue behavior of CHK.