Energy Company Awards $75 Million Bonus to CEO
Chesapeake Energy Corp. Chief Executive Officer Aubrey McClendon has been awarded a $75 million bonus as part of a new 5 year agreement to remain at the helm of the U.S’s largest independent producer of natural gas, despite the tremendous decline in the company’s shares during 2008.
Speculation arose that McClendon would be parting ways with the company, after he was forced to sell 31.5 million shares — nearly all of his 6 percent stake in the company — to meet margin loan calls. His shares were worth more than $2 billion at their peak.
Other than the one time bonus, he will also receive an annual salary of $975,000 and yearly bonuses as part of the 5 year package.
The company lost 60% of its value in 2008, under-performing the natural gas sector by a wide margin. Chesapeake’s was trading as high as $74 per share during the summer but dipped below $10 in December. It has since gained some of its losses back, and has been trading above $18 for the past few days.
The large bonus comes in contrast to the many CEO’s and executives forgoing their bonuses for 2008 because of the economic recession.
Bank of America Corp. Chief Executive Officer Kenneth Lewis recently recommended that he and other senior executives not receive bonuses after five straight quarters of declining profit.
“This was a difficult decision because we have worked hard and made progress on many projects that will create value for our company in future years,” Lewis said in an e-mail to executives. “Nonetheless, we are a pay-for-performance company.”
The bonus will net McClendon, who also serves as company chairman, $43.5 million after taxes, according to documents filed with the Securities and Exchange Commission.
The company offered the incentive because of “other entrepreneurial opportunities” available to Mr. McClendon, and because of the role he played in several major transactions including the selling of a 25 percent stake in its Fayetteville Shale holdings to BP America for $1.9 billion.
It also reached an agreement with Norway’s StatoilHydro in November, for a $3 billion stake in some of Chesapeake’s shale gas assets.
The sales have helped shore up the cash position of the heavily leveraged company.
Mr. McClendon co-founded the company, which is currently the most active driller of new wells in the US, in 1989.
Citigroup Chief Executive Officer Vikram Pandit and Chairman Win Bischoff will also forgo their 2008 bonuses after the bank lost three-quarters of its market value and received a $45 billion bailout from the federal government.