Chesapeake CEO Aubrey McClendon May Have To Be Compensated in the Future on His Performance

Another Blow to the Free Enterprise System

The Wall Street Journal is reporting that Chesapeake Energy Company has told the SEC that the company will be implementing a new executive compensation program for its CEO, Aubrey McClendon, that includes, if you can believe this, “objective performance criteria”. 

Chesapeake CEO Faces Storm

The Dismal Political Economist has already reported on how some corporate executives that were forced out of their jobs by various issues still managed to collect huge sums and have lucrative Board seats .In the Chesapeake case we found something even the normally cynical would have difficulty believing, namely this.

Unlike many executives in the country, Mr. McClendon's compensation is set solely at the nine-member board's discretion and hasn't been tied to stated performance standards.

Now one would expect that in the event a CEO’s compensation was not tied to performance that it is likely the CEO received a high amount of pay even when the Company did not do well.  One would be correct.

Mr. McClendon has made more than $152 million in cash, stock and perquisites since 2008, according to federal filings, making him one of the nation's highest-paid chief executives in any industry.

Most of that total—$112.5 million—came in 2008, when the company's finances were battered by falling gas prices and frozen credit markets

And like every employee of a public company can also do, the CEO sold his map collection to the Company.  The article does not disclose the price Chesapeake paid, but one can assume Mr. McClendon made a nice profit, can’t one.

Oh, and how has Chesapeake done lately?

Chesapeake's stock price has rebounded from as low as $16.52 in October of that year, but it is still down about 25% since the start of 2008, even as the shares of many of its competitors, such as Apache Corp., have risen in value.

Well Mr. McClendon, for setting a criteria for determining compensation, namely a standard that it should not be tied to performance, which is something that all of the rest of us aspire to with respect to our compensation, this Bud’s for you.