On Nell Minow and Chesapeake…

October 9, 2009

Yesterday, I finally got a copy of the current issue of the New Yorker with the profile of Nell Minow (only the abstract is available online for non-subscribers). As footnoted regulars know, I’ve long been a fan of Nell and last year after Barack Obama won the election, strongly suggested that she would be a great choice to head the SEC.

The New Yorker profile starts out with an example about the piggishness of Chesapeake (CHK) Chairman and CEO Aubrey McClendon, who’s something of a frequent flyer here on footnoted and prominently mentions a certain map collection that we uncovered in Chesapeake’s proxy.

The article reminded me about this 8-K filed by Chesapeake last week that’s been kicking around, but which we hadn’t yet written about. In it, the company is writing new employment contracts for several top executives because the old ones expired on Sept. 30. Snore city, right?

But when we started to drill down into CFO Marcus Rowland’s new contract we nearly popped our eyeballs on this:

2008 Incentive Award. In addition to any bonus compensation under paragraph 4.2 of this Agreement, the Company hereby grants to the Executive an incentive award in the amount of Nine Million Six Hundred Twelve Thousand Five Hundred Dollars ($9,612,500.00) (the “2008 Incentive Award”) to be paid in four (4) equal annual installments.

At the top of the filing, the company tries to justify the hefty award by noting that “the Executive’s contribution to the Company and the Company’s consummation of the joint venture transactions consummated by the Company during 2008 that increased the Company’s intrinsic value by at least $10 billion”. That may be true (even if Chesapeake shareholders didn’t do quite so well in 2008 — the stock declined around 60%). But it’s still an awful lot of money. Almost enough to buy the map collection, in fact!

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