From use of the company's fractionally owned aircraft to more
than $150,000 in fees and hefty stock awards to attend a handful of
meetings each year, members of Chesapeake Energy Corp.'s board of
directors receive unusually generous compensation packages when
compared to their counterparts at other companies.
Most of Chesapeake's directors were awarded pay packages worth
more than $500,000 for attending just four in-person meetings and up
to six telephone meetings in 2011, according to the company's annual
proxy statement filed Friday.
Last year, Chesapeake's directors reaped pay packages ranging in
size from $647,739 to former Geico executive Louis A. Simpson to a
$345,478 compensation package for 81-year-old director emeritus
Frederick B. Whittemore, who retired halfway through the year.
Oklahoma State University President Burns Hargis, who has served
on Chesapeake's board since 2008, made $565,465 last year in
director's fees, stock awards and perks such as airplane usage.
That's considerably more than the $350,000 annual salary and $20,000
car allowance Hargis is paid at OSU. Hargis' 2011 pay from
Chesapeake included $154,194 classified as other compensation, which
included use of the company's fleet of fractionally owned airplanes.
Other directors reaped similar benefits.
Members of Chesapeake's board earned significantly more last year
than directors at Devon Energy Corp., who were awarded pay packages
ranging from $63,500 to $357,812 in 2011. Ditto for Exxon Mobil
Corp., where directors received compensation packages ranging from
$285,958 to $295,958.
Google Inc., a company with an estimated $200 billion market
capitalization that is nearly 20 times the size of Chesapeake's,
compensated its directors to the tune of $427,267 each in 2011.
Chesapeake's lucrative directors' pay could raise issues about
whether the company's board is truly independent, said J. Robert
Brown Jr., a law professor who specializes in corporate governance
at the University of Denver Sturm College of Law.
"I think what independence is supposed to mean is people who are
free from the influence of executive management and who can make
independent decisions," Brown said. "The question is, if you are
making $500,000 a year in compensation, are you so vested in the
company and working with management that you are less able to act in
a way that is beneficial to shareholders?"
The New York Stock Exchange, where Chesapeake is listed, bars
directors from receiving more than $120,000 per year in director
compensation to be considered independent, but that benchmark
doesn't include directors' fees.
"I view that as a weakness in the rules," Brown said.
The board has come under fire in recent weeks for governance
decisions that include allowing Chesapeake CEO Aubrey McClendon a
corporate perk that permitted him to claim a 2.5-percent stake in
each well the company drills. The board later announced that it
would strip McClendon of the title of chairman after it was revealed
that McClendon had mortgaged his wells with some of the same lenders
that had business agreements with Chesapeake. From Jan. 1, 2011
through April 26, 2012, McClendon said he realized about $108.6
million from sales of his stake in company wells. …