Chesapeake Announces Major Board Changes - News9.com - Oklahoma City, OK - News, Weather, Video and Sports |

Acceding to growing demands from shareholders, Chesapeake Energy announced Monday that four members of its board of directors will resign, to be replaced by four independent directors.

In a news release, the Oklahoma City-based company explained that the move is the result of extensive discussions with Chesapeake's two largest shareholders, Southeastern Asset Management and Carl Icahn. 

Three of the new directors will be proposed by Southeastern, which owns 13.6 percent of Chesapeake common stock, while Icahn or a person designated by him will claim the other vacancy.

It was just over a week ago that Icahn, long known for his corporate activism, disclosed that he had increased his stake in Chesapeake to 7.6 percent, making him the company's second largest shareholder.  In that filing, Icahn made clear that he felt that Chesapeake shares were significantly undervalued, and that, in order to regain "meaningful credibility among shareholders," as least four current directors had to be removed from the board.

Chesapeake History Timeline

Chesapeake and its board have been the subject of fierce criticism in recent weeks, due to media reports suggesting a lack of oversight of CEO Aubrey McClendon, and even a breach of fiduciary duty to shareholders.  Chesapeake stock had fallen almost 60 percent from its 52-week high until word of Icahn's involvement seemed to act as a safety net, and shares began to rebound.

This is not the first time that Icahn has taken a large stake in Chesapeake.  In late 2010, an SEC filing disclosed that he had accumulated nearly 6 percent of Chesapeake common stock, believing that the company was undervalued.  The move preceded the announcement of several major asset sales, as Chesapeake began a campaign of reducing its massive debt-load.  Share prices rose steadily and, within six months, Icahn had sold off all of his Chesapeake stock.  It's believed he pocketed several hundred million dollars in profit.

5/25/3012 Related Story: Billionaire Investor Blasts Chesapeake Energy Board Of Directors

In addition to Icahn and Southeastern, other shareholders, including the comptrollers of both New York and New York City, which manage funds representing millions of Chesapeake shares, have been agitating for board changes.  None, however, seemed to carry the same weight as Icahn.

"We cannot stand idly by," Icahn wrote in his 13D filing, "and allow [the value of Chesapeake shares to continue to be destroyed]."

Chesapeake has not disclosed which four board members will resign, once their replacements have been appointed.  The company says only that the new make-up of the board will be announced no later than June 22.

The company says it also plans to seek relief from the Oklahoma statute that requires certain corporations to have classified boards.  Under the law, directors serve staggered terms.  Chesapeake stated in today's news release that it intends, in 2013, to return to a system where all board members are up for election annually.

CEO Aubrey McClendon says he fully supports all the changes. "Today's announcement is the culmination of a continuing effort by Chesapeake's Board to address shareholder concerns and better position the company for the future," McClendon stated.