Chesapeake Energy’s shareholders speak __»

June 18, 2010

Of all this blog’s frequent fliers, Chesapeake Energy (CHK) has won a special place of late here at footnoted: The company may have paid its CEO $12.1 million for his antique map collection, winning it the dubious distinction of worst footnote of 2009, but Chesapeake keeps giving investors more to ponder — and its shareholders more to wince at.

Now, those shareholders have spoken up, and a hefty chunk of them want some say on how Chesapeake shells out executive pay, judging from the 8-K the company filed on Thursday. On not one, but two say-on-pay proxy proposals, more shareholders voted “yea” than “nay.”

It wasn’t a majority of shares outstanding, thanks to some 122 million broker non-votes. But on the standard that matters — passage requires a majority in favor, ignoring broker non-votes — the first of the measures squeaked by at 50.2%. (The other got a 49.4% plurality.) Counting just those voting yes or no, of course, both measures won handily.

Here are the totals, as Chesapeake presented them:

The two proposals were pretty mild, in our view, as say-on-pay proposals tend to be: They’re non-binding “and would not affect any compensation paid or awarded,” as the first one put it. (For what it’s worth, that one was put forward by the Nathan Cummings Foundation, founder the former head of Sara Lee Corp., and describes its mission as seeking to “build a socially and economically just society that values nature and protects the ecological balance for future generations; promotes humane health care; and fosters arts and culture that enriches communities.”) The other proposal rattled off a laundry list of goodies that Chesapeake execs have gotten — from home security and plane rides to country-club dues and golden coffins, all of which got the company unflattering attention last year.

Unsurprisingly, Chesapeake’s board and management opposed both measures — but without any substantive arguments against giving shareholders an annual voice on executive pay. Rather, it noted in the proxy that the U.S. Congress was considering legislation on this front.

“Because the Board is unable to predict whether federal legislation will be enacted or the form it might take, the Board believes that it would be premature for the Company to implement an advisory shareholder vote on executive compensation prior to knowing the ultimate disclosure requirements — federal legislation pertaining to say-on-pay.”

Maybe so. Then again, now that the shareholders have spoken, the company could also take the lead.

Just don’t hold your breath.

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