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"Mr. McClendon's interests and Chesapeake's (CHK) are completely aligned," says the firm,...

"Mr. McClendon's interests and Chesapeake's (CHK) are completely aligned," says the firm, responding to this morning's story. "The suggestion of any conflicts of interest is unfounded." The Board of Directors: "The BOD is fully aware of the existence of Mr. McClendon's financing transactions and the fact that these occur is disclosed in the proxy." The Q&A makes for a good read for those interested in corporate governance.
Comments (31)
  • McClendon is as crazy as a $hithouse rat. It's clear he's a "gambler type" of oil man from the days of old; not a beady-eyed capital allocator personified by guys like Lee Raymond. I don't invest with gamblers, and I'm always amazed by those who do.
    18 Apr 2012, 08:52 PM Reply Like
  • Thinking about my Lee Raymond comment......if the Board wanted to try and reestablish some semblance of credibility ( which I doubt they will since they're clearly eating out of McClendons hand ) they should ask Lee Raymond to join the Board.
    18 Apr 2012, 10:17 PM Reply Like
  • Regardless of the legality of it or not, it smacks of executive entitlement and disregard of shareholder interests. Company should go private and get out of the public company sector.
    18 Apr 2012, 11:32 PM Reply Like
  • How? I disagree. The program alligns chk, shareholders and aubery. read their filings, and their responce to these alligations. This is not new news. If you didnt know then you didnt read all the docs, do your due diligence!
    19 Apr 2012, 08:01 AM Reply Like
  • The Board is as clearly as irresponsible as this CEO. Shareholders are owed fiduciary obligation. Class action, ouster of CEO and upside as shares bounce to the $25+ intrinsic value (currently at $18, or around 30% discount).
    18 Apr 2012, 09:03 PM Reply Like
  • If the board does not act, it is as making itself an accessory. Board members need to be dragged before Congressional committees.
    18 Apr 2012, 09:08 PM Reply Like
  • The board is spineless.
    18 Apr 2012, 09:27 PM Reply Like
  • To suggest Aubrey is a gambler shouldnt be news.


    For an investor it means that the stock see's extreme valuations, both high and low. Your job is to harvest the inevitable lows.


    One thing you shouldnt forget is that CHK has valuable assets. As the heat gets turned up on the board, CHK could be put into play!


    PS The Board would kneel down and ask Aubrey what he wants. They would out of self preservation perhaps cut him off from additional funds before asking however. In the not so old days they agreed to buy his art investments in hard times.
    18 Apr 2012, 09:36 PM Reply Like
  • Would you like someone to tell you that you need to disclose your personal assets and positions? If you read their filings this was disclosed years ago, and the participation program has been in place for decades. There is no risk. If he were to default then his lenders would only hold an his interest, not chk's. Furthermore, chk has an operator lien on all wells, so they get paid first, always.


    This is really a non issue. Imho someone wants more money, went to a lawyer and is ready to sue. In fact i got a message from a law firm ready to launch a class action. They had a website up within hours.


    Aubrey, like all people, does not, by law, have to disclose their personal interests. Since its fairly clear there is no conflict, and since the recent martha stewart case hold as precedent, this is a non issue.


    All i hear are the legal time clocks cranking fees, ugh.
    18 Apr 2012, 10:27 PM Reply Like
  • Ok Ive just counted five different law firms "launching" investigations. Really?
    18 Apr 2012, 10:46 PM Reply Like
  • It would be bad enough if it was his own money. It was the company's money. Does he pay interest? Would $1 billion be better invested elsewhere? What fiduciary responsibility does the board have to shareholders?
    18 Apr 2012, 11:11 PM Reply Like
  • It is his money, and his responsibility. who are we to say how he invests his own money or how he leverages his assets
    19 Apr 2012, 07:51 AM Reply Like
  • Aubrey needs to refinance his interests out of CHK and they Ned to take the cash and pay down the debt. He can easily find a bank or Goldman Sachsen to refi it.
    18 Apr 2012, 11:11 PM Reply Like
  • Very selfish behavior and now arrogance too!


    Very disappointing. Maybe the price will go low enough so someone will take them over and get rid of this self serving board and management.
    18 Apr 2012, 11:35 PM Reply Like
  • What is this selfish?
    19 Apr 2012, 07:57 AM Reply Like
  • This is highway robbery. And I live in Route 50!
    18 Apr 2012, 11:36 PM Reply Like
  • unbelievable this can go on in 2012


    19 Apr 2012, 12:23 AM Reply Like
  • Another day, another CEO acting in his/her own self interest.


    The numbers involved are simply absurd. If he wants, he can resign and convince people to lend him money and he can form a private firm and pay himself all the profits!!


    Its not a surprise - after all this board bought MAPS of his when he was hard up for cash... whats a billion or so in sweetheart loans?
    19 Apr 2012, 12:29 AM Reply Like
  • unbelievable that you all act like CHK is a sparkling gem that you just now found out has some imperfections. The ONLY reason anyone should be investing in this stock is purely on the valuation of its land holdings. Get over the small gyrations and as Ocean Man says.... BUY THE DIPS. 6% intra day bounce...
    19 Apr 2012, 12:35 AM Reply Like
  • Isn't a CEO compensated in part due to the fact that the majority of their life is taken over by their job? How much time is the CEO spending running CHK?


    In this day and age, how many people would stay employed running a personal business from work?
    19 Apr 2012, 03:21 AM Reply Like
  • I might perhaps have misunderstood the entire issue here, but I do not think the financial technicalities of McClendon's loan are really the problem.
    If he gets 2.5% out of every well CHK drills, then his interest is clearly to drill as many wells as possible. The glut in shale natural gas has driving the price to yet uncharted bottoms, thus significantly hurting CHK profitability. Here is where I see the conflict of interest; he gains by hurting company revenues.
    19 Apr 2012, 04:14 AM Reply Like
  • I am shocked at the inaccuracy of these comments. It's fairly clear that you guys don't understand the situation. Read the sec filings, read the response by chk. There is no conflict.
    19 Apr 2012, 07:55 AM Reply Like
  • When he enteres into agreements pre-selling the revenue from the wells - he creates a situation where he personally may have a different incentive than shareholders.


    And lets face it - what business did the board have buying his maps???


    I know of no other similar company that offers this give-away to their CEO - I would think that getting a few million a year would be enough to ensure he concentrates on his responsibilities to shareholders.
    26 Apr 2012, 02:43 AM Reply Like
  • pre-selling revenues? I was under the impression that it was his 2.5% property to do what he pleases. If someone wants to pay him for the future payments, so be it.


    If your company offered you a 2.5% stake in the office they were building, and you sold your portion to a third party, does that hurt your company? No, there is just someone else responsible for the costs, and who gets the revenue.


    I have still yet to see a logical argument for how this creates a conflict of interest.


    The maps have nothing to do with the FWPP. That's done and over with, and you are just using it as a negative mark to prove a point.
    2 May 2012, 01:04 PM Reply Like
  • If he closes those wells due to pricing conditions - he personally suffers under the terms of pre-selling revenue (if its like any other similar type of agreement I've seen).


    So it creates a situation where he could be making decisions that benefit him/live up to his personal commitments - but that are bad for shareholders.


    And the maps have everything to do with pointing out the board is severely derelict in their duties.


    He has to go. Then he can go form his own personal company and play by his own rules.
    2 May 2012, 01:23 PM Reply Like
  • you mean like keeping his wells pumping and shutting off other wells?


    You do know that he can not cherry pick, CKH invests then he must, if he sells that doesn't mean CHK does... Since he must invest in every well, which ones stay on and off don't make a difference. There is no conflict.


    the maps are old news, get over it. So is his reckless buying stock on margin. I am not defending their past performance, I am just over it and looking forward. We all learn from mistakes.


    This was his company, he built it from scratch. His only mistake was not going the way of Facebook, Google, Groupon and keeping control of his company.
    2 May 2012, 02:48 PM Reply Like
  • No, by keeping wells running that should be capped. That keeps his contracts whole, but shareholders selling gas a reduced levels that could be sold later for more. I think you fully realize the incentive and just don't want to admit it.


    It stopped being his company when he went public.


    He is more than free to resign and start his own private firm and do whatever he'd like with it.


    He hasn't learned anything from his mistakes. And in effect all these side investments are all taking place on shareholder's dime - we aren't getting his undivided attention as CEO - but I didn't notice him giving back any money to the company for time spent elsewhere?


    And the maps are exactly what is wrong with corporate governance. The entire board should be fired for that and frankly brought up on charges of neglecting their fiduciary duties.


    I'm not fan of these folks "occupying" various cities - but I understand where the feelings stem from - and this clown is a good exhibit of why folks are fighting mad. Two sets of rules.
    2 May 2012, 03:01 PM Reply Like
  • eh, wells that aren't making money for CHK aren't making money for Aubrey. There is no need to continue running wells that lose money.


    I think you fully realize that there really is no conflict, just as for the past 20+ years shareholders haven't thought so...


    Only now with stock prices continuing to fall do they have a problem.


    You are right he is free to resign, and take his huge lifetime compensation package (I don't think the company wants this right now).


    The maps issue is done and over with, shareholders sued and won, and Aubrey bought them back. The reality is that we all knew it was more of a loan than CHK buying the maps.


    No this clown is not a good exhibit of why folks are fighting mad, the government is doing a good job of that, the 99% are too busy collecting their check to notice.
    7 May 2012, 06:01 PM Reply Like
  • You don't think the hedge fund he was running was a conflict of interest?
    7 May 2012, 06:28 PM Reply Like
  • That I don't know enough about yet, I have just learned about that a few weeks ago, and yes it does possibly lead to a conflict. I will reserve my opinion until I know more about his involvement with the hedge fund.


    Many people have two jobs, or more than one business, that are in similar fields. It sounds like media hype to me, but I will do more research.
    7 May 2012, 06:47 PM Reply Like
  • It is a founder's participation program. It has always been there.
    McClendon and his team has changed the energy picture for the US.
    The government didn't do it, XON and CVN and COP didn't do it. CHK and similar companies will blaze the trail to US energy independence.


    I don't care what he sucks out of the heating bills are a lot lower becauseof him.
    19 Apr 2012, 04:40 PM Reply Like
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