Investors Are FURIOUS With Chesapeake
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Shareholders succeeded in pushing through changes in the company’s bylaws that determined the manner of election of the board of directors, paving the way for a significant dilution of concentration of power in the hands of the board.
The company agreed to the shareholders’ demand that directors, in order to be elected, must receive the majority of the votes cast. Technically, this change could have been made effective only with the support of two-thirds of the outstanding shares, but the board agreed to the change seeing that 97 percent of the voters were in favor.
In another significant move, 86 percent of shareholders voted to scrap an existing regulation that required two-thirds of outstanding shares in order to change a bylaw.
Large, long-term investors in the company can now look forward to nominating their representatives on the company’s board – 60 percent of votes at the meeting were in favor of this proposal.
The above changes apart, following an agreement announced this week, activist investor Carl Icahn will get to nominate a director on the board by June 22. Long-time investor Southeastern Asset Management, also a party to this agreement, gets to appoint three berths.
In another damning indictment of the company’s existing board, shareholders voted with their feet on the re-election of directors V Burns Hargis and Richard K Davidson, each receiving only 30 percent of votes. The two are engaged in a probe of CEO Aubrey McClendon’s controversial financial dealings, and offered to resign after the verdict. However, the board will decide on this later.
The vote “represents a total and complete collapse of investor confidence,” said Michael Garland, governance expert for the New York City Comptroller’s Office that controls pension funds invested in Chesapeake, referring to Hargis and Davidson.
“Something is out of whack here at Chesapeake,” Gerald Armstrong, a Denver-based shareholder said. “The absence of good governance practices has become more apparent. Accountability is what it’s all about.”
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