Shareholders reject Chesapeake pay plan

Chesapeake Energy Corp. shareholders on Friday rejected the company’s executive compensation plan in a nonbinding, advisory vote.

The proposal received 45 percent of the vote.

Chairman Brad Martin defended the compensation plan at the company’s annual shareholder meeting Friday, saying the firms recommending shareholders vote against the plan didn’t understand the factors the plan considers. He also credited the management team with transforming the company and protecting shareholders’ investment.

“We on the board also understand when this leadership team arrived, it was a different company built to operate as a big natural gas company with high natural gas prices,” Martin said. “That company had billions of dollars in debt and billions more in fixed contracts. That company would have failed in the 2015-2016 time period when about 150 other E&P (exploration and production) companies in the United States filed for bankruptcy.”

Martin also said Chesapeake’s compensation is based on performance targets. The company’s executives received about one-third of the targeted pay over the past year.

“All of us would love to pay that full compensation,” he said of the directors. “Unfortunately, because of the difficult times, we’ve not been able to do that. Our leadership has done an extremely good job of preserving value at Chesapeake, building a foundation that will create significant incremental value for the company.”

Also on Friday, Chesapeake directors reached agreements with shareholders on a pair of proposals calling for increased disclosure.

One proposal called for the company to reveal additional information about the money it spends on certain lobbying and political spending efforts, and the other asked for an assessment of the long-term effect of climate change and how the company’s actions affect the environment.

The shareholders who proposed the plans with drew both actions Friday, stating

that the company agreed to meet their demands.

“We are delighted the work, engagement and process has resulted in our recognition that we are working together on this issue,” said Julie Skye, principal of Tulsabased Skye Advisors. She proposed the spending disclosure on behalf of the Boston-based Unitarian Universalist Church.

Larry Mitchell presented the environmental proposal on behalf of the New York state comptroller.

“In dialogue leading up to this meeting, Chesapeake

has agreed to produce this report,” Mitchell said. “The Office of the Comptroller is pleased to withdraw the proposal. This is a positive first step from the company. We look forward to closely reviewing the report when it is completed.”

Martin thanked the shareholder groups for their willingness to discuss their concerns with the Chesapeake directors.

“We appreciate the constructive dialogue,” he said. “We take seriously our responsibility as stewards

of the environment.”

Some of what the shareholders asked for already is included in Chesapeake’s upcoming Corporate Sustainability Report, and the rest will be disclosed in a later report, Martin said.

“This will be an incremental step to share with investors how we look at this particular topic,” he said. “It’s one we discuss regularly in our board meetings and among our management. I think you’ll like not just the quality of our discussions, but the position Chesapeake is in.”