In another victory for shareholder activism, the board of Chesapeake Energy has said that four directors will leave the natural gas producer this week, to be replaced by nominees of its largest investors.
The second-largest gas producer in the United States has been criticised over its mounting debt levels and the lavish perks given to its chief executive and founder Aubrey McClendon.
It emerged recently that Chesapeake had given Mr McClendon the right to personally acquire stakes of up to 2.5 per cent in the company’s gas wells. He used these assets as collateral to borrow up to $1.1 billion — an arrangement that is under investigation by the Securities and Exchange Commission. Chesapeake has also been struggling with low natural gas prices and high capital expenditure, which resulted in its debt growing by $4.4 billion to $23.6 billion in the first quarter. The company’s market capitalisation is currently $10 billion.
Activist investors, including Southeastern Management, which owns a 13.6 per cent stake, and the billionaire Carl Icahn, who owns 7.6 per cent, have been demanding changes to Chesapeake’s corporate governance.
They have forced Mr McClendon to give up his position as chairman. An independent chairman will be appointed at the annual meeting on Friday. Four of the nine board directors will also resign on Friday and be replaced by representatives nominated by Southeastern and Mr Icahn.