Chesapeake's McClendon Nominated for Worst CEO of the Year

From The Motley Fool:
Why Aubrey McClendon?
  • A $1.1 billion conflict of interest: The market reacted with shock earlier this year when Reuters reported that McClendon borrowed $1.1 billion from three third-party institutions, $500 million of which came from EIG Global Energy Partners, which had also been a large financer for Chesapeake. In securing personal loans from his company's business associate, McClendon exposed himself to a potential conflict of interest, as it's reasonable to expect him to feel pressure to serve EIG's interests in future corporate transactions, potentially at the expense of the best interests of shareholders. For the CEO of a company to put himself in such situation is not a shining example of corporate governance, even if no actual conflict arises. 
  • Failed to anticipate a shift in energy trends: It wasn't a secret that natural gas prices had been falling precipitously in the past year, yet it took McClendon and Chesapeake months to scale back their natural gas production and gear themselves up to produce greater volumes of natural gas liquids and oil. Royal Dutch Shell (NYSE:RDS-A  ) (NYSE: RDS-B  ) , Chevron (NYSE: CVX  ) , and EnerVest agreed topurchase Chesapeake's Permian Basin assets in mid-September for $3.3 billion as part of $6.9 billion in total asset sales, but it's still late to the game. Canada's largest natural gas producer, EnCana (NYSE: ECA  ) , has been reducing its natural gas asset exposure since February, when it sold a 40% stake in its undeveloped British Columbia assets to Mitsubishi for $2.9 billion.
  • Poor stock performance: Another factor that'll get you nominated to this list of dunce caps is poor stock performance. Mired in scandal and scrambling to sell assets to cover what is usually a robust capital expenditure budget, Chesapeake has seen its share price hammered in 2012, down more than 13%. The broad-based iShares Dow Jones Oil & Gas Index, which includes Chesapeake Energy, is up more than 5% in comparison.
  • Focused on his own interests: We learned in May, again from Reuters, that McClendon was running a $200 million commodities hedge fund on the side from 2004 through 2008 that traded the same commodities that Chesapeake produced. Keep in mind, McClendon was forced into a $552 million margin call and forced to liquidate more or less his entire stake in the company in 2008 because of his personal gambles. Again, can we say conflict of interest?
  • Used the company as a personal piggy bank: If you're an Aubrey McClendon fan, turn away now, because we're going to look at some of the absurd ways McClendon's company has spent money in recent years. According to Reuters, a unit of Chesapeake Energy known as AKM Operations spent some $3 million on personal work for McClendon in 2010, including accounting and engineering work, taking up 15,000 working hours. This is on top of other questionable expenditures, including private use of the company jets as well as a corporate deal worth $36 million to sponsor the Oklahoma City Thunder, the basketball team in which he owns a 19% interest.
Read the rest of the article here.

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