Chesapeake Energy Corporation (NYSE:CHK) is again being targeted by proxy advisory firms undermining the company’s efforts to placate the shareholders ahead of next week’s annual meeting, says a report by Daniel Gilbert from WSJ. Chesapeake in recent times have made significant changes to its management team along with designing a new executive-pay policy.
Thomas Ryan Might Lose Focus
Proxy advisory firms, Institutional Shareholder Service Corporation International (NYSE:SCI) and Glass Lewis & Co., are asking the shareholders to vote against Thomas L. Ryan, the company’s newest independent director. Ryan currently sits on the board of four companies, which these two influential proxy firms think is too many.
Southeastern Asset Management Inc, Chesapeake Energy Corporation (NYSE:CHK)’s top shareholder, suggested the name of Mr. Ryan for the board. Following which he was appointed in May.
Mr. Ryan is the CEO of funeral-services provider Service Corporation International (NYSE:SCI) and also sits on the board of Texas Industries Inc., Weingarten Realty Investors and Chesapeake. The proxy advisers claim that, with so much responsibility, Mr. Ryan might lose focus.
The energy company in a filing with the U.S. Securities and Exchange Commission on Wednesday mentioned that Mr. Ryan intends to resolve this issue before the end of the year.
Last year’s meeting
Last year in the annual meeting the energy company was widely criticized for their operations.
In the last year’s meeting, the majority of investors opposed the election of two directors and criticized the company’s executive pay policies. Investors were in favor of the Delawareallowing big shareholders to nominate directors. Shareholders also desired that Chesapeake must reincorporate in Delaware, which will allow it to bypass the regulation requiring staggered elections of directors.
Changes In Chesapeake Energy, since last year
The two proxy advisers, despite opposing Mr. Ryan, applauded Chesapeake Energy Corporation (NYSE:CHK)’s efforts for making remarkable governance changes since last year.
Since last year’s meeting, the nation’s second-largest natural-gas producer appointed a new independent chairman, Archie Dunham, and CEO, Doug Lawler to replace Mr. McClendon, who kept both the portfolio’s. Chesapeake Energy Corporation (NYSE:CHK) has replaced all of the board members (except for one) with those that were either recommended or approved by its largest shareholders.
Last year, the energy company had also slashed the executive and director pay. Mr. McClendon, on his own recommendation, received no bonus. The company is also in favor of the proposal that allows big shareholders to recommend directors.
In a report, Glass Lewis said that the changes “represent one of the strongest sets of governance enhancements that we’ve seen at any major U.S. company in recent memory.”
Despite so many changes made by the company, ISS still oppose the $11 million paid to Mr. McClendon in the form of cash severance. ISS claims that the amount is three times more than what is entitled by his employment agreement.