Chesapeake moves to quell shareholder anger on pay

NEW YORK, (Reuters) – Chesapeake Energy said it had hired an independent compensation consultant, disclosing the move less than a day before the natural gas producer faces a shareholder vote on executive pay.

In a two-sentence filing to the U.S. Securities and Exchange Commission after 5 p.m. EDT Thursday, the company said it had brought in Cogent Compensation Partners to review its payment practices.

Last month, influential proxy advisory firm ISS recommended removing Chief Executive Officer Aubrey McClendon from the board at the shareholder meeting scheduled for Friday. It cited the company’s failure to link pay to any type of performance incentives, and relied only on the discretion of its compensation committee.

One analyst said it appeared unlikely that shareholders would push McClendon off the board, but that the company’s management needed to do a better job of aligning its priorities with shareholders.

“You’re looking for management to be good stewards of corporate capital, and allocate it effectively, and it looks like it’s too much of a piggy bank (for management) and not in the best interest of shareholders,” said Phil Weiss, analyst with Argus Research.

Chesapeake’s board angered investors in 2008 when it awarded a $75 million bonus to McClendon in a year when the company’s stock fell 60 percent.

There was also criticism in 2008 when the company bought a $12 million antique map collection from McClendon, which led to a $4 million profit for him.

“The Compensation Committee is committed to implementing an executive compensation system that includes objective performance criteria,” Chesapeake said in the filing.

In addition to recommending shareholders vote down the company’s compensation plan and vote McClendon off the board, ISS opposed the re-election of former U.S. Senator Don Nickles, who is chairman of the governance committee.

Chesapeake’s shares had surged early this year after it was disclosed that activist investor Carl Icahn had taken a 5.8 percent stake by the end of 2010.

Chesapeake quickly moved to cut its debt and sold some shale gas reserves to BHP Billiton for $4.75 billion in February.

Icahn cut his stake in the company by 43 percent in the first quarter, and further reduced it in the second quarter.

The shares are up about 15 percent so far this year, but have slumped dropped by 17 percent from their February 28 high.

Those shares were down 0.2 percent at $29.68 in early trading on the New York Stock Exchange. (Reporting by Matt Daily; Editing by Lisa Von Ahn, editing by Dave Zimmerman)