Chesapeake Energy Corp will find an independent, non-executive chairman to replace current Chairman Aubrey McClendon, who will retain his position as chief executive of the natural gas producer, the company said on Tuesday.
McClendon, who is Chesapeake's founder, also agreed to an early end to a controversial program that grants him minority stakes in Chesapeake's wells, a perk that had sparked investor anger and inquiries from federal regulatory and tax agencies.
The move came less than two weeks after Reuters reported that McClendon had taken out as much as $1.1 billion in personal loans using his well stakes as collateral, an arrangement that analysts said posed potentially serious conflicts of interest.
Most of the money was lent by an investment management company, EIG Global Energy Partners, that is also a major investor in Chesapeake itself.
McClendon will receive no compensation of any kind in connection with the termination at the end of June 2011 of that program, known as the Founders Well Participation Program, the company said. It had been scheduled to run through 2015.
"We believe separation of the chairman and CEO roles will improve Chesapeake's corporate governance and the early termination of the FWPP will eliminate a source of controversy, both of which should send a positive signal to the market and improve shareholder value," Merrill "Pete" Miller, Jr., Chesapeake's lead independent director, said in a statement.
Board members contacted by Reuters referred queries to Chesapeake.
The news came a day after Chesapeake, the nation's second largest natural gas producer, said the U.S. Internal Revenue Service was reviewing issues related to McClendon's well ownership.
The program had also come under the scrutiny of the U.S. Securities and Exchange Commission and the company's board of directors had said last week it planned to negotiate an early termination of the plan.
The move to replace McClendon as chairman was backed by the company's largest stakeholder, Chesapeake said.
"We are pleased that the Board has listened to our input and believe it has made the right decision by ending the FWPP early and seeking an independent chairman," O. Mason Hawkins, head of Southeastern Asset Management, the company's largest shareholder, said in the statement released by the company.
The comment was the first on the controversy from Hawkins, a reclusive investor based in Memphis, Tennessee, whose firm owns 13 percent of the company.
"Finally, he's coming to the forefront. This points to a very significant shareholder pounding the table," said Mark Hanson, oil and gas industry analyst at Morningstar Inc.
Another investor who has been critical of the board said it could have ended the FWPP immediately.
"They're (the board) bending to the winds of the IRS and the SEC, but they're certainly not taking the lead internally in making significant changes," said David Dreman, chairman of Dreman Value Management LLP, which owns about 1 million Chesapeake shares.