Chesapeake Governance Measures Fail In Vote

After a year of successfully pushing for sweeping changes at Chesapeake Energy Corp., shareholders on Friday failed to adopt corporate governance measures some investors had been demanding for years.

Chesapeake, the second-largest U.S. natural-gas producer after Exxon Mobil Corp., parted with longtime Chief Executive Aubrey McClendon in April following a shareholder revolt over high spending. The revolt also resulted in the replacement of all but one board member with directors recommended or approved by Chesapeake's largest shareholders.

Since its previous annual meeting last June, Chesapeake has hired a new independent chairman, Archie Dunham, and a new CEO, Doug Lawler, to succeed Mr. McClendon, who had held both roles.

At this year's meeting, the new board supported measures that investors had long called for, including proposals affecting executive pay and board elections and membership.

But most of the measures failed to pass Friday, including a proposal that would have lowered the bar for approving future shareholder measures, allowing the board to adopt them if they received affirmative votes from a simple majority of shares outstanding, instead of a 66% supermajority. The proposal garnered approval from 60% of shares outstanding.

Also failing to reach the necessary two-thirds approval was a measure that would allow shareholders to vote for all board members annually, instead of a third of the board every three years. A proposal to allow certain large shareholders to nominate their own director candidates failed as well.

Shareholders approved changes to Chesapeake's executive compensation and incentive plans, bringing them in line with Anadarko Petroleum Corp. and other competitors.

Changes in Chesapeake's CEO suite and board of directors have already helped the company become more responsive to shareholders, said Morningstar analyst Mark Hanson. The board had recommended approval for many of the proposals that went down in defeat.

Chesapeake shareholders approved the direction the new board has taken. Board members up for re-election won with an average of 96% of votes cast.

Copyright (c) 2012 Dow Jones & Company, Inc.


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