Exclusive: Chesapeake board changes could trigger bonus windfall for many

Tue Jul 17, 2012 7:03am EDT
 
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By Anna Driver and John Shiffman and Brian Grow

(Reuters) - Chesapeake Energy Corp often boasts that it's one of America's best workplaces, offering its 13,500 employees such benefits as Botox injections, NBA tickets and a fitness center with an Olympic-sized pool and a rock-climbing wall.

What the company hasn't disclosed is perhaps the most extraordinary perk of all: A group of about 1,600 employees is guaranteed a unique type of payment if the company changes hands, internal Chesapeake documents reviewed by Reuters show.

The provision is included as boilerplate contract language for almost 12 percent of the company's workforce, mainly mid-level employees. If control of the company changes, the change obligates Chesapeake to pay the group a total of at least $100 million and as much as $140 million in cash.

The 1,600 employees represent positions across the company and its subsidiaries, the documents show. They include title attorneys, land men, lab technicians and senior security officers - not simply top executives who typically receive so-called golden parachutes.

Perhaps most unusual, the Chesapeake employees would be entitled to these "change-of-control" payments even if they kept their jobs at Chesapeake after the company changed hands. For some employees, that means cash payments of 50 percent of their salary plus 50 percent of their most recent annual bonus, according to contracts examined by Reuters.

The scope and particulars of Chesapeake's change-of-control payments program - like some of the perks offered to its embattled CEO, Aubrey McClendon - surprised industry analysts, who say the percentage of employees eligible for the perk is unusually high. The company is under no obligation to disclose the information to shareholders because most of those with the provision are not top executives.

Some company employees and analysts have begun to ask whether board changes in June already have triggered the change-in-control provision in their contracts. Chesapeake spokesman Michael Kehs said they do not.

Kehs would not discuss the rationale behind the contract provisions - or why the approximately 1,600 workers have the clause in their contracts. But he did say it "dates back to 2003."   Continued...

 
Chesapeake Energy Corporation's 50 acre campus is seen in Oklahoma City, Oklahoma, on April 17, 2012. REUTERS/Steve Sisney