Investors: Chesapeake Lost its Luster Long Before CEO Fiasco
A group of New York City pension funds are calling on Chesapeake Energy (NYSE:CHK) shareholders to vote out two board members. The custodian of the group has said that the board members failed to monitor financial activities of the company’s chief executive that have engulfed the natural-gas giant in controversy.
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The City of New York Office of the Comptroller represents pension funds that own 1.9 million shares of Chesapeake. The agency opposed the only two directors up for election, who both serve on the company’s audit committee: V. Burns Hargis and Richard K. Davidson. Both are running unopposed.
In recent weeks, Chesapeake (NYSE:CHK) has come under intense scrutiny regarding the revelations that co-founder and Chief Executive Aubrey McClendon used his stakes in the company’s wells to borrow up to $1.4 billion from financial firms that do business with Chesapeake (NYSE:CHK).
Investors have been rattled by the company’s shrinking cash flow and heavily leveraged balance sheet. Chesapeake stock has fallen 35.58 percent this year, dropping to a 52-week at $13.32 on Thursday, its lowest level since March 2009. In the first quarter, several large hedge funds and investment-advisory firms sold large positions in Chesapeake, according to recent regulatory filings. This was the first time that Chesapeake was losing some of its appeal with key investors even before the corporate-governance controversy.
New York City’s comptroller is also calling for shareholders to support the pension funds’ proposal that the company include candidates for the board nominated by big shareholders, which it argues would make the board more responsive to their concerns. In its response filed with regulators, Chesapeake said that the proposal would encourage the wrong type of board responsiveness and empower special interests.
Shares of Chesapeake Energy (NYSE:CHK) rebounded 5.98% on Friday to close at $14.36 per share.
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