Carl Icahn has used the mess at Chesapeake Energy (NYSE: CHK) to try to take four board seats. Chesapeake’s shares have cratered because of trouble involving the side-by-side investments of its CEO Aubrey McClendon in the company’s drilling locations. McClendon took out large loans to fund most of his investments. Ichan’s investment funds have taken a 7.56% stake in the energy firm.
McClendon’s behavior has been shamelessly greedy, as has that of many of his board members. Investors should hope that each is thrown out.
Icahn wrote in a SEC filing:
We are not alone in criticizing this board. Shareholders have filed lawsuits, withhold campaigns and have otherwise voiced disapproval and all three major proxy advisory firms (i.e., ISS, Glass, Lewis and Egan-Jones) have advised shareholders to withhold votes from directors at the 2012 annual meeting. Chesapeake shareholders will benefit neither from a constant stream of negative news reflecting upon the companies troubled past, nor from a half hearted attempt by the board to make the minimum possible number of changes to skate by for one more year. The board must not only find a way to eliminate the enormous funding gap, but also the more substantial creditability gap.
To engender any meaningful credibility among shareholders, corporate governance reforms cannot, in our view, be led by directors whose irresponsible actions have brought this company to the edge of the proverbial cliff. Accordingly, we propose that at least 4 of the current directors (other than Louis Simpson) should be immediately replaced by two persons designated by us and two persons designated by another large shareholder such as Southeastern Asset Management, the company’s largest shareholder. In our opinion, only when these changes are effectuated will the board be truly independent and more importantly will investors come to believe that promises made will be promises kept; when a capital plan is agreed upon it will be maintained, not diverged from as it has in the past.