In the wake of a month of scrutiny by the media and some large shareholders, the board of directors for Chesapeake Energy Corp. released a letter to shareholders this afternoon affirming its support for the company’s direction.
The letter was drafted in response to an earlier letter by the New York City Comptroller, who called on shareholders last week to vote against the re-election of directors V. Burns Hargis and Richard K. Davidson. Chesapeake’s annual shareholder meeting is June 8.
The directors said they have taken steps to address shareholder concerns, including making changes to executive and director compensation and splitting the CEO and chairman positions. The letter reiterates previous decisions to end the Founder Well Participation Program perk enjoyed by CEO Aubrey McClendon and updates shareholders on the plans for future asset sales.
Directors also touched on an ongoing review of personal loans taken out by McClendon that used his stake in company wells as collateral:
The Board is also conducting a thorough review, through the Audit Committee and its independent counsel, to determine whether there are any conflicts with the Company arising from the financing arrangements between Mr. McClendon (and the entities through which he participates in the FWPP) and any third party that has had or may have a relationship with the Company in any capacity.
UPDATE, 4:35 p.m.
“Had the board responded meaningfully to repeated concerns from shareowners over the years, Chesapeake would not be in the costly governance mess it is in today,” said New York City Comptroller John C. Liu. “The changes now being offered, overdue and only incremental, may address some symptoms of a captive board, but hold harmless the root problem — the directors themselves and their failure to protect long-term shareowner value.”