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Chesapeake ends country club dues…

Now that Qwest Communications no longer exists, we here at footnoted need a new company to serve as that “Shining City On a Hill” to paraphrase Ronald Reagan — a company that stands for everything that is wrong about the disclosure that public companies make to their investors in 2012.

Thankfully (especially since we’re still mopping up after last week’s 10-K filing deadline) we didn’t have to wrack our brains too much. There in the 10-K that Chesapeake Energy (CHK) filed just 12 minutes before the deadline on Feb. 29 was this exhibit. First, the positive: unlike some other companies last week, like Metlife (MET), whose 10-K included 21 separate exhibits designed for the typical investor’s reading pleasure, Chesapeake’s 10-K only had one exhibit.

Unfortunately, that one exhibit told investors essentially nothing. Indeed, it only told investors that this latest amendment to the company’s employment contracts deleted subparagraph 4.4.2 “in its entirety”. What exactly was subparagraph 4.4.2 and how many Chesapeake executives were affected by this? Let’s just say that wasn’t the easiest question to answer.

So we began searching through Cheaspeake’s filings for any reference to that clause, which reads in its entirety:

Membership Dues. The Company will reimburse the Executive for: (a) the monthly dues necessary to maintain a full membership in a club in the Oklahoma City area selected by the Executive; and (b) the reasonable cost of any approved business entertainment at such club. Such reimbursement shall be made within thirty (30) days of the date such costs are incurred and submitted for reimbursement. All other costs, including, without implied limitation, any initiation costs, initial membership costs, personal use and business entertainment unrelated to the Company will be the sole obligation of the Executive and the Company will have no liability with respect to such amounts.

We found this same language in at least 5 different employment contracts (for several executives monthly dues were limited to $750 per month) and it appears to be a standard part of the contract dating all the way back to 1997. Indeed, everyone but Chairman and CEO Aubrey McClendon seemed to have the same language in their contracts.

Now, here’s the thing that really puzzled us. Given Cheaspeake’s past — footnoted regulars probably remember McClendon’s infamous map collection and McClendon’s subsequent decision (prompted by a lawsuit) to reimburse the company for those maps — why wouldn’t the company want to let investors know that it’s actually doing something positive here? Instead, they make investors dig through a pile of filings just to figure out exactly what subparagraph 4.4.2 covers.

Clearly, there has to be a better way!

Image source: Country Club via Shutterstock

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Last week, we provided some other details about Chesapeake’s 10-K to subscribers of footnotedPro. To find out what you’re missing contact us. footnotedPro: Interesting, Actionable. Profitable.