The settlement proposal, which is subject to Oklahoma County District Court approval, was filed Nov. 1.
Despite a negative 2008 stock performance, in December 2008, the company awarded McClendon a substantial increase in compensation over the previous year, a five-year contract, a bonus of around $77 million, almost $33 million in stocks and the purchase of his collection of antique maps for $12 million.
The company said the increase in compensation was because McClendon (pictured) had to sell his stock after the banks made a margin call when the company’s stock price collapsed during the 2008 crash. There was concern McClendon may leave the company, and he played an active role in shale oil property acquisition that netted the company more than $1 billion in revenue.
Lawsuits were filed against McClendon and the company by some groups of investors, and negotiations for a settlement began in early 2011.
As part of the settlement, McClendon will buy back his map collection for $12.1 million, plus interest; Chesapeake will pay almost $3.8 million to the plaintiffs for attorneys’ fees and will implement significant corporate governance reforms, such as hiring an independent compensation consultant, recommending a bylaw requiring director nominees to get a majority of affirmative votes for election, creating a lead independent director position, adopting policies prohibiting senior management from engaging in derivative or hedging transactions involving company stock and increasing shareholder access to the board.
“We are pleased to have reached this settlement and believe it is fair and conducive to bringing this matter to a positive conclusion,” Henry Hood, Chesapeake’s general counsel and senior vice president of land and legal, said in a statement. “Since the settlement remains subject to final court approval, we will limit further comment.”
Earlier this year, Chesapeake’s board staved off a recommendation at the annual shareholder meeting to oust McClendon and former U.S. Sen. Don Nickles from the board.
McClendon and Nickles, chairman of Chesapeake’s Nominating and Corporate Governance Committee, both had come under fire by Institutional Shareholder Services Proxy Advisory Services, an advisory firm that recommended that shareholders not re-elect McClendon as chairman and vote to oust Nickles from the board.
At the June 10 meeting, however, McClendon and Nickles both were re-elected to the board with about 80 percent of the vote, although only 58 percent of voters endorsed the company’s pay plan.
A spokesman said Chesapeake would be more transparent when it comes to its pay plan, and has hired a consultant to take a look at its compensation structure.
Photo by Mark Hancock