Chesapeake Energy Corp. shareholders delivered a sweeping rebuke of the company's board on Friday, withholding support for two members up for re-election in the wake of a governance crisis and poor financial performance at the U.S. oil and gas company.
The company said the two directors – V. Burns Hargis, the president of Oklahoma State University, and Richard Davidson, a former chief executive officer of Union Pacific Corp – had tendered their resignations from the board after winning the backing of just slightly more than a quarter of the shareholder votes cast.
"The vote is fundamentally a referendum on the entire board," Michael Garland, head of corporate governance for the New York City comptroller, told the annual meeting of investors.
The shareholders also soundly rejected the company's executive officer compensation program, with only 20 per cent backing the measure. However, that vote was only an advisory measure and is not binding.
"Obviously we'll be studying the result of the vote today and see what needs to be done," chief executive officer Aubrey McClendon told the investor meeting.
Shares of Chesapeake, the second-largest U.S. natural gas producer, have lost about half their value over the past year as it seeks to convince its shareholders that it is still a good investment despite steep drops in profit and a spate of corporate governance scandals centred around Mr. McClendon.
Mr. McClendon has said he will step down as chairman, and Chesapeake has said it will replace four of its current board members with directors chosen by its top shareholders – activist Carl Icahn and Mason Hawkins' Southeastern Asset Management. This would give shareholder-backed directors a majority of the board.
Chesapeake is under pressure to sell assets and cut spending to cover a $10-billion (U.S.) cash shortfall this year and reduce debt after tumbling natural gas prices have pinched profit.
Earlier on Friday, Chesapeake said it planned to sell its pipeline and related assets to Global Infrastructure Partners for more than $4-billion.