Two large shareholders of Chesapeake Energy (NYSE: CHK) have managed to push out four of the company’s nine directors, as Carl Icahn and Southeastern Asset Management overhauled the governance structure of the big energy firm. A fifth director is likely to leave. Chesapeake’s largest shareholders have effectively engineered a board coup. Among the directors who almost certainly will leave are former Senator Don Nickles and former governor Frank Keating, both of whom represented Chesapeake’s home state of Oklahoma. Neither has any qualifications to be a public company director, which brings up the possibility that their seats on the board were effectively given to them to help the company lobby the state and national governments.
Nickles is a fine example of how quickly Chesapeake added politicians to its board. He left the Senate in 2005 and became a director the same year. Keating became a director in 2003. He left the job as Oklahoma’s governor that year because he could not run again due to term limits.
Nickles serves as the chairman of the Nominating & Corporate Governance committee, the body that oversees, among other things, many of the activities of CEO Aubrey K. McClendon. Keating serves as chairman of the Compensation committee, which takes the lead in setting the pay for McClendon and other senior officers. Again, neither politician has any experience that would qualify him to serve in either job. Their roles are cronyism as its worst.
Nickles and Keating have been paid well for their services — certainly more than they received in their public office roles. Keating made $559,232 last year. Nickles made $569,341. That puts them at the high end of what directors at large publicly held American companies make.
No one needs look any further than Nickles and Keating to see why most of the Chesapeake board needed to be replaced.
Douglas A. McIntyre
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