Investors Sue CEO of Oklahoma-Based Chesapeake Energy over 2008 Pay
Bailey, Brianna, THE JOURNAL RECORD
Two investors have filed shareholder derivative actions against Chesapeake Energy Chief Executive Aubrey McClendon and the company's board of directors over McClendon's controversial $112.4 million compensation package in 2008.
M. Lee Arnold of Missouri and California resident James Clem filed separate lawsuits last week in U.S. District Court for the Western District of Oklahoma over McClendon's pay. The lawsuits claim Chesapeake's board of directors awarded McClendon an overly generous compensation package to bail him out of his personal financial problems after he was forced to sell off most of his Chesapeake stock to make margin calls in October 2008. The alleged bailout also allowed McClendon to continue paying into Chesapeake's Founder Well Participation Program, a lucrative corporate perk that gives him the right to claim a 2.5-percent stake in every well that Chesapeake drills, as one of the founders of the company, the lawsuits claim.
McClendon's compensation package in 2008 included a $76.9 million bonus and a $32.7 million stock award, drawing the ire of many investors in a year the company's stock price fell 60 percent. His 2008 earnings made McClendon the highest-compensated CEO in the country that year.
This isn't the first time McClendon and Chesapeake have caught legal heat over the company's compensation practices. A group of investors sued McClendon and Chesapeake's board in Oklahoma County in 2009 over the supersized 2008 pay package. Judge Twyla Mason Gray tossed the suit out of court in February 2010, ruling that the shareholders hadn't asked Chesapeake's board of directors to return McClendon's 2008 pay package to the company before suing. The 2009 lawsuit remains on appeal to the Oklahoma Court of Civil Appeals.
Unlike plaintiffs in the 2009 lawsuit, both Arnold and Clem put their demands in writing in letters to the Chesapeake board before moving to file the derivative actions, according to exhibits filed with the court. …