Chesapeake Energy Corp. (CHK: Quote), which has been facing pressure from its key shareholders Southeastern Asset Management Inc. and Carl Icahn for a board rejig, said Thursday that its board has appointed five new independent directors to its reconstituted nine-member board. The company named Archie Dunham as its new independent non-executive chairman.
Dunham is former chairman of ConocoPhillips (COP) and also former chief executive of Conoco. He replaces Aubrey McClendon, who will remain a director and continue to serve as Chesapeake's chief executive officer and president.
Chesapeake is the second largest natural gas producer in the U.S. The company has been under investor scanner for sometime after McClendon was found to have taken loans of $1.2 billion using his stake in company wells obtained under a controversial program.
Both Southeastern Asset Management or SAM and activist investor Icahn have been pushing Chesapeake for shedding its pipeline assets and other non-core business in order to focus on its core oil and gas drilling assets. They had also been forcing Chesapeake to replace nearly half of its board to improve governance at the company, which has seen a sharp erosion in share value.
Of the other four newly appointed independent directors, three directors were proposed by SAM, Chesapeake's largest shareholder with a 13.9 percent ownership stake. The three new directors are Bob Alexander, Brad Martin and Frederic Poses.
The other new director, Vincent Intrieri, was proposed by Icahn, Chesapeake's second-largest shareholder.
These five new directors will replace Richard Davidson, Kathleen Eisbrenner, Frank Keating and Don Nickles, who have resigned, and Charles Maxwell, who retired at the annual meeting on June 8, 2012.
Chesapeake said that Davidson and Burns Hargis had submitted their resignations when they did not receive support of a majority of the shares voted. While the company's board accepted Davidson's resignation, it did not accept the resignation of Hargis due to his current role as chairman of the audit committee, and reflecting input from SAM and Icahn.
However, the board will consider Hargis' resignation following completion of the review of financing arrangements between McClendon and the entities through which he participates in the Founder Well Participation Program, and any third party that has had or may have a relationship with the company in any capacity.
The other directors remaining on the Chesapeake board are McClendon, Louis Simpson, who was proposed by SAM in 2011 and will now become chairman of the nominating and governance committee, and Merrill Miller who was serving as lead independent director.
Chesapeake said the role of lead independent director has been eliminated following the appointment of the independent non-executive chairman. Miller will now become chairman of the compensation committee.
The company noted that the reconstituted board will make the final board committee assignments. The board will also take the necessary actions to enable shareholders to elect the entire board of directors at the 2013 annual meeting of shareholders.
CHK is trading at $18.55, down $0.49 or 2.57 percent on a volume of 3.46 million shares.
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by RTT Staff Writer
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