Chesapeake Energy Corporation
) has initiated a new compensation policy for outside directors in
response to the growing concern among its shareholders to improve
its corporate governance. Another factor contributing to this was
Chesapeake's chief executive Aubrey McClendon's undisclosed loans
in excess of $1 billion against his interests in company wells.
Under the new arrangement, an outside director's compensation
has been trimmed by about 20%. It also puts an end to the usage of
partly owned aircraft for personal travel by the outside
Chesapeake's new plan allows the outside directors to receive a
total compensation of $350,000 per year. Of the total, $100,000
will be in cash and $250,000 in equity.
Per the recently filed proxy statement by Chesapeake, the
company is appraising its compensation for 2012 and beyond. The new
reimbursement arrangement made in consultation with an independent
compensation advisor incorporates a number of alterations.
The changes consist of compensation cutback for the chief
executive officer for 2011 and coordination of the entire executive
management team's compensation with the company's performance for
2012 and beyond. Also included in the alterations is the retention
of an independent compensation advisor for the board's Compensation
Per the Bloomberg estimates, Chesapeake's new compensation -
even after the 20% cut - awards its directors 34% over the average
$260,752 in compensation received by board members at 15 other
upstream companies on the Standard & Poor's 500 Index in 2011.
Only three companies-
Anadarko Petroleum Corp.
) paid more to their board members in 2011.
Chesapeake holds a Zacks #3 Rank, which translates to a Hold
rating for a period of one to three months. For the long term, we
maintain a Neutral recommendation on the stock.
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