Aubrey McClendon

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Aubrey McClendon
Born Aubrey Kerr McClendon
(1959-07-14) July 14, 1959 (age 55)
Oklahoma City, Oklahoma
Nationality American
Citizenship United States
Education B.A. 1981
Alma mater Duke University
Net worth IncreaseUS$1.2 billion (2011)[1]
Spouse(s) Katie McClendon
Children Three
Parents Joe Connor McClendon & Carole Kerr McClendon

Aubrey Kerr McClendon (born 1959) is the co-founder, retired chief executive officer and former chairman of Chesapeake Energy Corporation (NYSECHK). He is an outspoken advocate for natural gas as a cleaner and safer alternative to oil and coal fuels. He was the highest-paid CEO of all S&P 500 companies in 2008, receiving a compensation package totaling $112 million.[2] In 2011, he was named "America's Most Reckless Billionaire" in a Forbes Magazine cover story.[3] On the other hand, in 2011, Forbes also named McClendon to its "CEO 20-20 Club," a group of eight chief executives (including Warren Buffett) that produced at least 20% returns over 20 or more years of service[4] and activist investor Carl Icahn called him a "genius."[5] Former Houston mayor Bill White described him as "at the forefront of those heroes" of the American natural gas industry.[6]

In June 2012, in what The Wall Street Journal writer David Benoit called a "historic revolt," Chesapeake Energy shareholders voted to rein in McClendon's leadership, rejecting two board members and approving increased proxy access.[7] He relinquished his chairman title in June 2012 but retained his CEO title.[8] In January 2013, noting "philosophical differences" with a reconstituted board, McClendon agreed to retire from Chesapeake Energy, effective April 1, 2013.[9] McClendon is now the owner of American Energy Partners with an office located less than a mile away from Chesapeake Energy.

Early life and education[edit]

McClendon was born on July 14, 1959, in Oklahoma City, Oklahoma, to Joe Conner and Carole Kerr McClendon, and is a great-nephew of Robert S. Kerr, a former Oklahoma governor, U.S. Senator and founder of Kerr-McGee Corporation (an Oklahoma City-based oil and natural gas company founded in 1927 and acquired by Anadarko Corporation in 2006).

McClendon graduated from Duke University in 1981 with a B.A. in history and was a member of the Sigma Alpha Epsilon fraternity. He met his wife Katie, a 1980 Duke graduate, while attending college there. In 1981, they married in St. Joseph, Michigan. He and his wife have three adult children and live in Oklahoma City. Kathleen Upton Byrns "Katie" McClendon is the granddaughter of Frederick S. Upton, a co-founder of Whirlpool Corporation, and cousin of U.S. Rep. Fred Upton (R-Michigan).[10] Aubrey McClendon is related to supermodel Kate Upton.[11]

Chesapeake Energy Corporation[edit]

McClendon started his first oil and natural gas investment company, Chesapeake Investments, in 1982 at the age of 23. He co-founded Chesapeake with the company's former president Tom L. Ward, the founder and former CEO of Oklahoma City-based Sandridge Energy Corporation (NYSESD), in 1989 with a $50,000 initial investment.[12] They took the company public in 1993, and today Chesapeake is the second-largest producer of natural gas, a Top 11 producer of oil and natural gas liquids and the most active driller in the United States.[13]

Focusing its operations onshore in the U.S., Chesapeake has pioneered development of unconventional natural gas and oil plays that require high-technology drilling and completion techniques and very large land positions. McClendon, who began his energy career as a landman, led the company to hold significant positions in the nation’s largest shale gas plays, the discovery of which has radically changed estimates of the U.S. supply of natural gas and reduced natural gas prices by 50% to American consumers since 2008, while providing a daily economic stimulus to the U.S. economy of approximately $300 million.[14]

In 2005, McClendon was named one of America's top-performing executives by Forbes Magazine.[15] He was the highest paid CEO at all S&P 500 companies in 2008, receiving a compensation package totaling $112 million, which included a one-time payment of $75 million in recognition of the role he played in developing multiple joint ventures with foreign industry partners, which increased the company's intrinsic value by at least $10 billion[16] and started a trend of foreign investment in the U.S. natural gas industry that has lowered natural gas costs for consumers and created thousands of new jobs in the natural gas industry.

It was announced on October 10, 2008, that McClendon sold approximately 33.4 million shares, approximately 90% of his stock in Chesapeake Energy (stock symbol CHK), for $16.52 per share to meet a margin call after the drop in the U.S. stock market that week. The stock had been worth as much as $74.00 per share in the year prior to the sale, a loss of nearly $1.92 billion.[17] McClendon was shortly thereafter awarded a controversial one-off $75 million[18] 'Well Cost Incentive Award' by the board of directors.[19] The award could only be applied toward payment of McClendon's 2.5% working-interest share of leasehold, drilling and operating costs for company wells and was subject to a five-year clawback.[20] The award was subsequently challenged by way of a shareholder proposal[19] and a number of lawsuits.[21]

In 2010, McClendon began directing the company’s transition toward more balanced production, with the goal of having 50% of its revenues come from oil production by the end of 2013. In 2010, McClendon was a finalist for the Platts Global Energy CEO of the Year Awards, with the company a finalist for awards in the categories of Deal of the Year, Industry Leadership, Energy Producer of the Year and Community Development Program of the Year.[22] Platts also awarded Chesapeake Energy with Producer of the Year and Industry Leadership awards in 2009; and Hydrocarbon Producer of the Year in 2007.

In early 2011, McClendon was named to the Forbes “CEO 20-20 Club,” a group of eight American chief executives who have a minimum of 20 years of service as CEO and produced at least 20% annual returns to shareholders during their tenure.[4]

In November 2011, McClendon was named the Ernst & Young National Entrepreneur Of The Year® 2011 Energy, Cleantech and Natural Resources Award winner. According to the Ernst & Young, McClendon was recognized for redefining Chesapeake’s focus and strategy, taking it from its small-time Oklahoma origins to its current position as the second-largest producer of natural gas and the most active driller of new wells in the U.S.[23]

On April 18, 2012, a Reuters report revealed that McClendon borrowed as much as $1.1 billion against his personal stake in thousands of company wells, raising the potential for conflicts of interest and raised questions on the corporate governance and business ethics of Chesapeake Energy's senior management.[24] On May 1, 2012, Chesapeake's board announced that an independent, non-executive chairman would be named and that McClendon would relinquish his position as chairman of the Chesapeake Energy board.[25] On February 20, 2013, Dow Jones reported that a Chesapeake board review of millions of pages of documents and more than 50 interviews of Chesapeake and third-party personnel found no improper conduct, no improper benefit to McClendon and no increased cost to the company.[26]

On June 7, 2012, Reuters reported that McClendon had used Chesapeake employees to perform $3 million of personal work, including engineering and accounting support and the repair of his house, in 2010.[27] McClendon's employment contract expressly permitted such personal services by company employees and provided the formula for reimbursement of associated salary and other company costs.[28] According to Chesapeake’s proxy statement filed with the SEC on May 11, 2012, McClendon reimbursed the company for all but $250,000 of the employee costs. [19] The Reuters account also stated that McClendon had used corporate planes for non-business-related travel for the McClendons' family and friends.[27] "For safety, security and efficiency" reasons, McClendon's employment agreement authorized the personal use of company aircraft by McClendon, his immediate family members and guests.[29]

Later in June, Chesapeake appointed Archie W. Dunham as chairman, replacing McClendon, who retained his position as CEO.[8]

McClendon retired from the company on April 1, 2013.[30]

Natural gas advocacy[edit]

McClendon is known as an outspoken advocate for the expanded use of natural gas as a cleaner alternative than oil for transportation fuel and coal-fired electric power generation. On November 14, 2010, McClendon appeared on 60 Minutes, making a case for natural gas as a clean fuel and a significant job-creating industry. He also defended the natural gas and oil industry’s use of hydraulic fracturing techniques for well completion.[31]

McClendon is a founding member of America’s Natural Gas Alliance (ANGA), a Washington, D.C.-based trade organization of independent natural gas producers.

NBA Oklahoma City Thunder[edit]

McClendon is a member of the Professional Basketball Club LLC (PBC), which owns the NBA's Oklahoma City Thunder franchise, as a 20% investor.[32]

In 2008, the NBA had fined McClendon $250,000 for comments he made in the (Oklahoma City) Journal Record about his hopes of moving the Seattle SuperSonics to Oklahoma City.[33] McClendon was fined specifically for his statement that the ownership group "didn't buy the team to keep it in Seattle." PBC Chairman Clayton Bennett stated that McClendon did not speak for the franchise in any official capacity, and therefore was simply stating his own personal opinions. Subsequently, on July 2, 2008, the PBC and the city of Seattle reached a $45 million settlement agreement. As part of the agreement, the remaining two years on the SuperSonics' lease at KeyArena was terminated, allowing the PBC to move the team to Oklahoma City for the 2008-09 season, where it was renamed the Thunder.

Saugatuck Township settlement[edit]

From 2004 to 2006, McClendon bought 400 acres of undeveloped duneland fronting Lake Michigan in Saugatuck Township, Michigan, for $39.5 million with plans to build luxury homes, 28 condos, a hotel, a marina and a golf course. In 2006, prior to McClendon finalizing the sale but after McClendon had signed contracts to purchase and without notice to McClendon, the Saugatuck Township Board rezoned the land to R-4, severely restricting the use of the land and requiring a PUD for any development, generally treating this land in a different fashion than any other land in Saugatuck Township. The Saugatuck Dunes Coastal Alliance opposes McClendon's plans, citing environmental concerns. In 2009, McClendon sold 171 acres of the land to a conservancy. In March 2010, McClendon sued the township in federal court to overturn the zoning.[34] In July 2011, McClendon and the Township Board submitted a proposed Consent Agreement to the court for approval.[35] In November 2011, Judge Maloney rejected the proposed Consent Agreement, but outlined a way for the parties to proceed toward a conclusion of the litigation.[36] In 2012, the Federal District Court in Western Michigan approved a Consent Decree that restored the zoning to the status at the time of McClendon's purchase.[37] In 2013, Saugautuck Township approved plans for the property.[38]

Since August 2011, McClendon's development company, Singapore Dunes, has provided free mooring for the Saugatuck Township Fire District's 41-foot rescue boat, reducing response times to assist Lake Michigan swimmers and boaters by about 15 minutes according to the fire chief.[39]

Other interests[edit]

McClendon has been highly involved in the architecture of Chesapeake’s headquarters campus in Oklahoma City as well as his other private building endeavors in Oklahoma City. Working exclusively with Oklahoma City-based award-winning architect Rand Elliott, Chesapeake’s 50-acre Oklahoma City headquarters campus has won more than 24 national and international design awards since 2003.

Between 2000-04, McClendon donated $700,000 to a variety of Republican candidates and conservative interest groups.[40] Most notable of these was a $250,000 donation to Swift Vets and POWs for Truth, a group whose purpose was to oppose John Kerry's candidacy for the presidency in 2004. McClendon's donation made him the eighth-largest contributor to the group.[41]

In 2007 McClendon bought several full-page ads supporting the Duke men's lacrosse team in the 2006 Duke University lacrosse case.[42] The case was ultimately dismissed, and the Durham County prosecutor who brought the case was forced to resign and was disbarred.

McClendon is one of the nation’s 100 largest land owners according the magazine Land Report.

He also is owner of the iconic POPS restaurant located on historic Route 66 in Arcadia,[43] Oklahoma, which features the world's largest collection (more than 500 varieties) of soda pops for sale at one site. POPS has won numerous architectural awards and has been featured in a wide variety of magazines and television shows since it opened in 2007.

In addition, McClendon is noted for his philanthropic generosity, having donated more than $75 million in the past 15 years to a variety of institutions, most notable of which have been Duke University in Durham, N.C.; Heritage Hall and Casady college preparatory private high schools in Oklahoma City, and the University of Oklahoma, where in 2008 the university’s Honors College was named in honor of his parents.[44]

McClendon was allowed to invest in wells drilled by Chesapeake Energy. Known as the Founder Well Participation Program (FWPP), the perk was first formalized and incorporated into the founders’ (McClendon and Ward) employment agreements in connection with Chesapeake’s IPO in February 1993.[45] The FWPP was put to a proxy vote and approved by shareholders for a period of 10 years in 2005.[46] In 2012, after investor complaints and several loans from business partners of the company were called into question, the Chesapeake board and McClendon agreed to end the program 18 months early.[47] A thorough board review of McClendon's financing relationships found no improper benefit to McClendon or increased cost to the company.[26] McClendon retains the option to continue investing in Chesapeake wells through July 2014.[48]

From 2004 to 2008, McClendon, while CEO of Chesapeake Energy, also ran a hedge fund that traded in commodities including natural gas and oil. The fund, Heritage Management Company LLC, located in New York City,[49] was undisclosed to shareholders and drew concerns and criticism over McClendon's fiduciary duty to shareholders.[50][51]

References[edit]

  1. ^ Aubrey McClendon - Forbes, Forbes.com. Retrieved May 2011.
  2. ^ "Major CEOs feeling the recession ... somewhat," Associated Press, May 1, 2009.
  3. ^ Christopher Helman (October 5, 2011). "The Two Sides Of Aubrey McClendon, America's Most Reckless Billionaire". Forbes. Retrieved October 5, 2013. 
  4. ^ a b DeCarlo, Scott (28 April 2011). "The CEO 20-20 Club". Forbes Blogs. Retrieved 27 May 2011. 
  5. ^ Ben Casselman, "Chesapeake feels Icahn's presence," The Wall Street Journal Europe. 13 February 2011.
  6. ^ Bill White, "Thanks due to McClendon, Chesapeake employees", The Oklahoman, May 26, 2012.
  7. ^ "Chesapeake Shareholders in Historic Revolt". The Wall Street Journal. 8 June 2012. 
  8. ^ a b Joe Carroll, "Chesapeake Appoints Dunham Chairman, Stripping McClendon", Bloomberg Businessweek, June 21, 2012.
  9. ^ Jonathan Fahey, "Energy founder, CEO Aubrey McClendon to retire April 1; search begins for successor," Associated Press Newswires, January 29, 2013.
  10. ^ Darren Samuelsohn, "Fred Upton finds it's good to be the chairman." Politico. March 15, 2012. http://www.politico.com/news/stories/0312/74089.html
  11. ^ Young, Royce (7 March 2012). "Thunder Upton: OKC digs out of a hole to beat Phoenix, 115-104". Daily Thunder.com. Retrieved 10 April 2014. 
  12. ^ Chesapeake Energy History
  13. ^ "Natural Gas Summary". U.S. Energy Information Administration. Retrieved 26 May 2011. 
  14. ^ "Natural Gas Summary". U.S. Energy Information Administration. Retrieved 26 May 2011. 
  15. ^ MSNBC
  16. ^ Chesapeake Energy Corporation. "Employment Agreement of Aubrey McClendon". U.S. Securities and Exchange Commission. p. Exhibit 10.2.1. Retrieved 1 November 2013. 
  17. ^ Chesapeake Energy CEO forced to sell company stock
  18. ^ "Well Cost Incentive Award". Filing. Edgar. Retrieved 26 May 2011. 
  19. ^ a b [1]
  20. ^ "Section 5 – Corporate Governance and Management". U.S. Securities and Exchange Commission. Retrieved 1 November 2013. 
  21. ^ [2]
  22. ^ "Deal of the Year Award". Oil and Gas Investor. Oil and Gas Investor. Retrieved 26 May 2011. 
  23. ^ Ernst & Young. "Redefining an industry: Aubrey K. McClendon, CEO of Chesapeake Energy Corporation, named Ernst & Young National Entrepreneur Of The Year® 2011 Energy, Cleantech and Natural Resources Award winner". Press Release. Retrieved 17 November 2011. 
  24. ^ "Chesapeake shares tumble on CEO loan worries". Reuters. April 18, 2012. Retrieved April 19, 2012. 
  25. ^ "Chesapeake Energy Corporation Board and Aubrey K. McClendon Agree to Early Termination of Founder Well Participation Program". Chesapeake Energy Corporation. Retrieved 22 June 2012. 
  26. ^ a b Dow Jones & Company. "Chesapeake Financing Review Finds No Improper Benefit to CEO." Dow Jones Top News & Commentary, Saabira Chaudhuri. 20 February 2013
  27. ^ a b "Special Report: The lavish and leveraged life of Aubrey McClendon". Reuters. 7 June 2012. 
  28. ^ Chesapeake Energy Corporation (January 7, 2009). "Second Amended and Restated Employment Agreement". Section 4.7 - "Accounting Support". U.S. Securities and Exchange Commission. 
  29. ^ "Second Amended and Restated Employment Agreement, Section 4.6". U.S. SEC. 
  30. ^ "Chesapeake Energy Corporation Announces CEO Succession Plan". Reuters. 29 January 2013. Retrieved 29 January 2013. 
  31. ^ "CBS News". CBS News. 14 November 2010. Retrieved 26 May 2011. 
  32. ^ "Aubrey McClendon Profile". Forbes. March 2012. Retrieved October 5, 2013. 
  33. ^ Seattle Times - Co-Owner Fined
  34. ^ "A Billionaire's Dune Duel"
  35. ^ View the filing.
  36. ^ Malony, Paul L. "OPINION AND ORDER DENYING MOTION FOR ENTRY OF CONSENT JUDGMENT". Court filing. Retrieved 15 December 2011. 
  37. ^ Scott Sullivan, "Judge OKs settlement, dunes suit ends," The Allegan County News. June 13, 2012.
  38. ^ Scott Sullivan, "Township signs off on revised dunes plan." The Allegan County News. July 3, 2013
  39. ^ Scott Sullivan, "Singapore Dunes new berth place for rescue boat." The Allegan County News. August 17, 2011
  40. ^ FEC Disclosure
  41. ^ Schouten, Fredreka (30 June 2008). "Price of Power: McCain accepts ex-Swift Boaters' donations". USA Today. Retrieved 27 May 2011. 
  42. ^ Oklahoma City Businessman Buys Ads Supporting Duke Team, WSOC Charlotte (accessed June 1, 2010).
  43. ^ "Bottoms Up For Pops". Blog. Route 66 News. Retrieved 27 May 2011. 
  44. ^ "McClendons give $12.5 million to support various academic and athletics projects at OU". University of Oklahoma. 8 May 2008. Retrieved 27 May 2011. 
  45. ^ U.S. Securities & Exchange Commission. Schedule 14A. Definitive Proxy Statement of Chesapeake Energy Corporation. April 29, 2005. "Voting Item #3 - Proposal to Approve Founder Well Participation Program." Page 13. http://www.sec.gov/Archives/edgar/data/895126/000119312505089782/0001193125-05-089782-index.htm
  46. ^ U.S. Securities and Exchange Commission. Form 8-K. Current Report of Chesapeake Energy Corporation, Section 1. June 15, 2005. http://www.sec.gov/Archives/edgar/data/895126/000089512605000087/0000895126-05-000087-index.htm
  47. ^ Dow Jones News Service. Mia Lamar. "Chesapeake Energy Board, CEO Terminate Controversial Contract; To Name New Chairman." May 1, 2012
  48. ^ Mark Passwaters, "McClendon receives $10M, keeps FWPP stake aspart of Chesapeake severance agreement." SNL Energy Gas Utility Week. April 28, 2013
  49. ^ Russell Gold; Daniel Gilbert (May 7, 2012). "The Many Hats of Aubrey McClendon". Wall Street Journal. 
  50. ^ Helman, Christopher (May 2, 2012). "McClendon's Secret Hedge Fund Appears To Violate His Fiduciary Duty To Chesapeake". Forbes. Retrieved May 2, 2012. 
  51. ^ "Special Report: Inside Chesapeake, CEO ran $200 million hedge fund". Reuters. May 2, 2012. Retrieved May 2, 2012.