Chesapeake “significantly reducing” charitable, political expend - WOWK 13 Charleston, Huntington WV News, Weather, Sports

Chesapeake “significantly reducing” charitable, political expenditures

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In the wake of major changes to Chesapeake Energy's corporate governance policies, charitable spending is expected to be sharply reduced.

In a filing with the Securities Exchange Commission earlier this week, the natural gas giant detailed a "number of meaningful enhancements" to its governing policies. The changes include significantly reducing charitable, trade association and political expenditures.

According to the filing with the SEC, Chesapeake also hopes to reduce its overhead expenses by about $190 million.

According to its 2011 annual report, the company gave more than $31 million to charitable organizations. In that year, more than $9 million was donated to educational institutions from pre-school through higher education.

Charitable, political and trade spending will be gradually reduced.

"Further, the Board has reduced the company's aggregate annual budgeted charitable, trade association and political expenditures by approximately 30 percent for 2013, 40 percent for 2014 and 50 percent for 2015 compared to 2012 expenditures and increased the frequency with which the Governance Committee reviews reports detailing such payments and commitments from an annual to a quarterly basis," the filing states.

The company has a significant presence in West Virginia, increasingly so with the expansion of drilling in the Marcellus Shale.

Just this week, the Wellsburg City Council accepted two transportation grants from the state – more than $12,500 of the needed local match for that project was made possible with donations from Chesapeake.

In December, the West Virginia University College of Law received a $250,000 gift from Chesapeake. According to a 2010 article in The Intelligencer in Wheeling, Chesapeake donated $400,000 to communities in Marshall and Wetzel counties alone.

According to the Center for Responsive Politics, the company spent about $2.4 million lobbying over the past two years and about spent about $1.5 million in political contributions.

Chesapeake recently faced controversy for its spending and corporate governance, with much of the fuss focused on CEO Aubrey McClendon. Following media reports of questionable finances at Chesapeake, its stock price declined about 25 percent last year.

The company recently sold about $11 billion in assets in an attempt to reduce debt.

McClendon, co-founder of the company, also stepped down as chairman last year but retained his CEO position.

As a part of the deal, McClendon will not take a bonus this year and will also be limited in personal use of company aircraft.

"With regard to Mr. McClendon's personal use of Company aircraft, which is provided for under his employment agreement, the Compensation Committee has requested, and Mr. McClendon has agreed, to reimburse the Company for any such personal use in excess of $250,000 per year," the filing states. "Previously, Mr. McClendon had reimbursed the Company for such personal use in excess of $500,000 per year."

McClendon's practice of borrowing hundreds of millions of dollars from companies associated with Chesapeake to acquire small stakes in Chesapeake wells is under review by the company's board. The perk that allowed the practice is being phased out and the company did not admit to any conflict of interest as a result of the practice.

Other executives' bonuses will also be "substantially" reduced. Shareholders will also be given the ability to nominate some directors of the company.

Chesapeake also plans to tie executive pay to performance targets.  

The filing also is attempting a number of initiatives to shake up its management and to publish some of its political expenditures on the company website.

Record low natural gas prices over the past year has made Chesapeake's primary product less profitable than in the past. Despite low natural gas prices, the company has continued to drill and expand its positions in various shale gas plays.

CORRECTION: The original version of this story incorrectly stated that two grants were matched with $25,000 from Chesapeake. According to the city manager of Wellsburg, $12,500 from Chesapeake was used to match that grant.