A report by Reuters alleged the loans and the intricacies of the deals were not revealed in full to shareholders and could pose a conflict of interest.
Chesapeake shares dipped by as much as 10 percent before closing down more than 5 percent at $18.06 for the day. After the markets closed, Chesapeake fired back with a statement from the board issued by Henry J. Hood, general counsel. It also picked apart the story responding to specific segments.
Hood said the Founders Well Participation Program has been in place since the company was founded and reapproved by shareholders in 2005. He said it showed that McClendon’s interests and those of Chesapeake are aligned. The program allows McClendon to invest in the company’s wells, but without the opportunity to only invest in the most lucrative wells. The report showed McClendon has used his investment in the wells as collateral for the loans.
“The board of directors is fully aware of the existence of Mr. McClendon’s financing transactions and the fact that these occur is disclosed in the proxy,” he said in a prepared statement. “Additionally, the total amount of his cost obligations and revenue attributable to the FWPP for each year are detailed in the proxy. The FWPP fully aligns the interests of Mr. McClendon with the company, and the board of directors supports this program, as does the majority of its shareholders.”