New York City Comptroller calls for Chesapeake shareholders to vote out directors

Posted by
on May 17, 2012M at 3:47 pm

The New York City Comptroller on Thursday called for Chesapeake Energy Corp. shareholders to vote against Oklahoma State University President Burns Hargis and former Union Pacific Corp. Chairman Richard K. Davidson

Hargis and Davidson are the only Chesapeake directors up for reelection at next month’s annual shareholders meeting.

Holding directors Davidson and Hargis accountable for their costly oversight failures as members of the audit committee is a critical first step,” the comptroller wrote in a statement. “But restoring independence to Chesapeake’s boardroom and creating sustainable value for its share owners will also require an infusion of qualified, genuinely independent replacements.”

Comptroller John C. Liu issued the statement on behalf of the New York City Pension Funds (NYC Funds), which owns 1.9 million shares of Chesapeake stock, representing less than 1 percent of the 662 million Chesapeake shares outstanding.

Chesapeake has faced intense scrutiny since April 18 when Reuters reported that Chesapeake CEO Aubrey McClendon used his personal stake in company wells as collateral for $1.1 billion in personal loans with some of the same lenders who have loaned money to Chesapeake.  In the following weeks, McClendon has agreed to step down as chairman, and the company said a new, independent director will take on that role. McClendon and Chesapeake also agreed to end the Founder Well Participation Program 18 months early in June 2013.

The New York City Comptroller called the steps “overdue.”

While positive steps, they are inadequate and taken under duress, underscoring the need for the strong accountability mechanism that the proposed proxy access bylaw would provide,” the comptroller stated.

The shareholders meeting is scheduled for June 8, but a group of shareholders on Wednesday asked a judge in Oklahoma City federal court to delay the meeting, arguing that shareholders do not have enough time or information to make an informed vote.