NY pension fund urges no vote on Chesapeake directors

Tue May 29, 2012 11:45am EDT
 
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By Anna Driver and Matt Daily

HOUSTON/NEW YORK (Reuters) - The head of New York's state pension fund urged shareholders of Chesapeake Energy Corp (CHK.N: Quote) to withhold votes to re-elect two members of the natural gas producer's board.

Chesapeake's board is under increasing fire from investors who want to see tougher oversight of Chief Executive Officer Aubrey McClendon. The company, in the midst of governance crisis, is also struggling financially as low natural gas prices take a toll.

In a letter on Tuesday, New York State Comptroller Thomas DiNapoli said withholding votes from board members V. Burns Hargis and Richard K. Davidson was a "necessary first step toward reconstituting a board that is currently entrenched and unaccountable to shareholders."

On Friday, activist investor Carl Icahn disclosed that he had taken a 7.6 percent stake in Chesapeake and called on the company to replace at least four directors.

Icahn asked the company for two board seats for his own representatives and two for another large shareholder such as Chesapeake's largest, Southeastern Asset Management.

Icahn's investment "will put increased scrutiny on both the board and management's activities, as he specifically criticized the board with respect to corporate governance ... ," analysts at Simmons & Co told clients on Tuesday.

Shares of Chesapeake rose nearly 6 percent, bolstered by news of Icahn's stake.

DiNapoli said Hargis, who has been on the board since 2008, and Davidson, a director since 2006, are both on the audit committee, which has failed to monitor McClendon's mortgages on his stakes in company wells.   Continued...