Embattled Chesapeake CEO to step down in April
Chesapeake Energy Corp. said founder and CEO Aubrey McClendon will leave the company on April 1, ending a 24-year run as the oil-and-natural-gas driller's leader.
Mr. McClendon, whose personal financial dealings with Chesapeake have come under scrutiny, will step down even though Chesapeake said its review of alleged conflicts of interest involving Mr. McClendon had found no improper conduct.
Chesapeake chairman Archie Dunham said in a statement the company needs a new leader to help develop the oil and gas assets the company has amassed under Mr. McClendon.
The 53-year-old has been the company's CEO since its inception in 1989 and was chairman until 2012. He will resign from the board when his successor is appointed and will receive his full compensation and other benefits to which he is entitled under the terms of his employment agreement, Chesapeake said.
"While I have certain philosophical differences with the new board, I look forward to working collaboratively with the company and the board," Mr. McClendon said in a statement.
Investors in the nation's second-biggest natural-gas producer by volume after ExxonMobil have been pressing for changes at the company, which has been criticized for heavy spending and extravagant compensation for executives and directors.
Chesapeake has already made significant corporate changes. In June it replaced a majority of its board with directors proposed by its largest shareholders, Southeastern Asset Management Inc. and activist investor Carl Icahn.
Mr. Icahn, who amassed a nearly 9% stake in the Oklahoma City company and called for Mr. McClendon to be replaced as chairman, said on Tuesday: "I am confident that history will prove that Aubrey has been correct about the value of natural gas in general and the value of Chesapeake in particular."
If Chesapeake directors hold strictly to the terms of Mr. McClendon's employment contract, the longtime CEO could have to pay the company some of a $75 million award, made in 2008, on his way out the door.
According to Chesapeake's May 2012 proxy statement, Mr. McClendon must repay the company a portion of the award if he leaves before Dec. 31, 2013. The repayment is on a sliding scale; because he is retiring April 1, Mr. McClendon would have to pay $11.25 million, according to the terms listed in the proxy.
Mr. McClendon isn't entitled to cash severance or accelerated vesting of restricted stock. As of Dec. 31, 2011, Mr. McClendon held roughly 1.5 shares of restricted stock, then valued at $33.5 million.
Mr. McClendon also is entitled to deferred compensation, which was valued at $7.2 million at the end of 2011, according to the proxy.
The company has retained recruiters Heidrick & Struggles International Inc. to assist in its search for a new CEO and said it would consult with Mr. McClendon in connection with the search.
Chesapeake said it would release its final report regarding financing arrangements between Mr. McClendon and any third party that has had a relationship with the company on Feb. 21. Mr. McClendon's decision to leave isn't related to the board's pending review of his financing arrangements and other matters, it said.
The probe began in April, after it was revealed that entities controlled by Mr. McClendon had borrowed up to $1.4 billion from private-equity firm EIG Global Energy Partners LLC, which has paid hundreds of millions of dollars for preferred shares in Chesapeake subsidiaries. Some corporate-governance experts said there was the potential for a conflict of interest.
Mr. McClendon borrowed the money largely to pay for his share of the drilling costs for wells in which he owns a small interest-- investments he acquired through a perk that allowed him to take a small stake in every well Chesapeake drilled.
"As the company moves toward more fully developing the value of its outstanding assets, Chesapeake is at an important transition in its history and Aubrey and the board of directors have agreed that the time has come for the company to select a new leader," Mr. Dunham said.
Dow Jones Newswires
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