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Aubrey McClendon disgusts me...Boards of Directors have evolved into nothing more than rubber stamps



April 24, 2009 – Comments (7) | RELATED TICKERS: CHK

Let me begin by saying that I am against official limits on CEO pay, especially government mandated ones, but as a shareholder of Chesapeake Energy preferred stock the following news about the company's CEO Aubrey McClendon makes me absolutely the point that I may send a letter or e-mail to the Board of Directors that I am sure they will promptly throw in the garbage.

Chesapeake Energy CEO gets $112.5M pay in 2008

While he has no control over the price of natural gas, McClendon did nothing in 2008 to justify his a quadrupling in his compensation from the prior year.  In 2007 he made $25.5 million as CEO of the company.  That's nothing to sneeze at, but nothing compared to the total compensation of $112.5 million that he received in 2008...a year in which the company's profits were cut in half and the value of its stock declined by 58%.  It is just me, or is that pretty darn annoying.

I'm sure that McClendon was trying to make back some of the $600 million that he pissed away when he was forced to sell virtually all of his stock in a massive margin call last year, but the fact that he's an idiot and levered up his personal portfolio like that should have no impact upon what he gets paid to do his job.  How can the Board of Directors allow him to get away with this?

The guy was given a $75 million bonus on December 31st.  I'll repeat that...$75 million bucks.  For what?!?

Do Boards of Directors have any power any more or have the evolved into nothing more than a bunch of fat cats that collect pay and options for rubber stamping whatever management wants?  The number of boards that have been found completely asleep at the wheel these days is absolutely astounding (see most major banks). 

How can the board approve a quadrupling of McClendon's compensation? Were they afraid that he was going to leave.  HA fat chance of that after he just lost most of his money.  Even if he did want to go if I was on the board and was truly independent (an unlikely event) I would have told him "Good.  Don't let the door hit your arse on the way out.  I'm sure that there are a lot of trained chimps out there who will gladly preside over a halving of the company's stock price this year."

This is absolutely nuts.  If the yields on the company's preferred stock weren't so juicy, my stake has risen by 20-something percent since I acquired it and it still yields 9%, I'd dump it out of principle.  Of course, I'm for sale so I won't do that...but this whole thing is infuriating.


7 Comments – Post Your Own

#1) On April 24, 2009 at 7:42 AM, btown819 (87.07) wrote:

Don't worry, the large investors in this company have a say in electing the directors on the board and the CEO.  They are protecting the shareholder interests.

(Check my recent blog to try and see the humor in this...)

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#2) On April 24, 2009 at 1:10 PM, WillSurfForFood (61.65) wrote:

Very much agree with you on this one Deej. I thought it was interesting that he believed so much in his company that he would go heavily into margin to bet on his stock, but he lost his bet. Now is being given a do-over at the expense of the shareholders. I would not invest in Chesapeak for this reason. There are other natural gas producers that are better run such as Devon Energy. 

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#3) On April 24, 2009 at 2:32 PM, OleDrippy (< 20) wrote:

THAT is why I'm slowly becoming a liberal.. I really am starting to feel the game is rigged and the good old boys network is in full effect. CEOs, boards of directors, politicians. They all pay each other and switch jobs among themselves. They pay each other ridiculous salaries that they KNOW will come around full circle when it is their turn.

 I know we are supposed to live in a meritocracy and "fairness" is not a right. But I am starting to feel we are NOT in a meritocracy. On what planet does it makes sense for someone to command a 100 million / year compensation package? What makes them so special? What special skill does a CEO have that justifies a salary 3,500 X that of a regular Joe employee?

 Something really is amiss.

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#4) On April 24, 2009 at 3:15 PM, RonChapmanJr (30.14) wrote:

TMFDeej wrote: "This is absolutely nuts.  If the yields on the company's preferred stock weren't so juicy, my stake has risen by 20-something percent since I acquired it and it still yields 9%, I'd dump it out of principle.  Of course, I'm for sale so I won't do that...but this whole thing is infuriating."

It apparently is not infuriating enough to actually do anything substantial about it.  If you were really mad, you would.  Basically you are saying your desire for money overrides your principles. 

Isn't that how Wall Street got to where it is now?


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#5) On April 24, 2009 at 4:48 PM, TMFDeej (97.45) wrote:

You're right, Ron.  My desire to make enough money to protect my family in the event that something terrible happens (I get sick, I lose my job, etc...) absolutely overrides my principles.

Principles are expensive my friend.  You're kidding yourself if you believe that me selling my measley stake in the company would have any impact upon their actions.  They'd still be laughing all the way to the bank. 

That's why I own Goldman Sucks bonds and preferred stock as well.  They're a bunch of scumbags.  As an individual I am powerless to stop their behavior so I'll be darned if I don't come along for the ride.

I'm sure that this line of thought disgusts you.  If so that's fine.  You're not the ones that I have to put food on the table for or put through college. 

Besides it's not like I did absolutely nothing about the situation.  I did a lot more than many others have done by writing this post.  With 13 recs I'd guess that at least 20 people read it and now know what a Johnson McClendon is.  Not that it will make any difference, but it's more than most shareholders have done.


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#6) On April 24, 2009 at 9:52 PM, ikkyu2 (98.18) wrote:

Hey, do you hear something?
Sort of like a high squeaking sound?
Hey!  Hey?  Aubrey, can you hear them?  They're squeaking again. Who?  The little mousies, that's who.  What?  You don't hear them now?  Oh, OK. 

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#7) On May 02, 2009 at 6:39 AM, derrickhand300 (< 20) wrote:

Could Not  agree with you more! I also own CHK and have been an Aubrey fan forever, but there is no selling this one...please come have a look at my bolg

Lets keep the pressure on

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