Alarm Clocks and CEOs Aubrey McClendon

Some things in life just don’t make any sense. No matter how many times you toss them around in your head, examine them from different angles and try to find the logic, they just don’t pan out.

On a small-scale, a case in point would be my wife’s sense of time. In our bedroom she keeps the alarm clock set 20 minutes ahead of every clock in the house. Somehow, she says, it makes her feel like she is getting more sleep. Now I have objectively tossed this one around in my head over and over until it's made me dizzy, and the outcome has always been fruitless. When I waken I find myself with one eye open, looking at the clock, trying to do the math to find the correct time, while the other half of my brain is still lost in REM sleep. It just doesn’t make any sense.

On a larger scale, in today’s economy, I see this happening all around us. Corporate executives receiving multi-million-dollar bonuses while shareholder value diminishes to a fraction of what it was when the fiscal year began. We saw it with AIG; we saw it with the major automakers; and it really hit home when Ford, GM and Chrysler went begging to the government for a bailout from the pampered quarters of their corporate jets.

It seems our industry has not been immune to shamelessness with the latest press headlines concerning Aubrey McClendon, CEO of Chesapeake Energy. Aubrey is taking heat from the press and common shareholders like myself for his acceptance of a 75-million-dollar bonus in a year when we watched with jaws agape at a stock that plummeted from $74 a share to just over $9. Aubrey himself had to liquidate somewhere around 30 million shares to cover ones that he had purchased on margin. Few doubt that this huge liquidation was responsible for the bottom falling even further. Since then, the stock has recovered somewhat to around $20 a share.

In defense of their actions, the Board of Directors claims Aubrey deserves this $75-million bonus for his part in several joint ventures he played an instrumental role in securing. The ventures, combined with the likes of British Petroleum, Statoil, Plains and others, were without doubt worth billions to Chesapeake Energy. The fact that he pulled it off in a time of economic crisis like this deserves the worthy attention of his peers.

Also in Aubrey’s defense is the fact that he has kept his Chesapeake Energy employees working throughout this economic crisis, while competitors are laying over iron faster than a roughneck's wife chasing an unemployment check. In an industry which those of us in it have known for its cutthroat and unappreciative approach to employees, Chesapeake Energy, as quoted by Forbes, is rated one of the best companies in America to work for. They are quick to raise wages at times of company prosperity, and slower than their competitors to drop them when times get lean. Chesapeake’s 401k and retirement benefits for employees are second to none and almost double that of other employers in the sector. The Chesapeake/Nomac Drilling Operation is the closest thing to a family atmosphere that you will find in the oil and gas industry. Chesapeake and Aubrey both have always been quick to contribute to worthy causes in the communities where they drill.

But there is always “on the other hand,” and to a common shareholder like me, this one is huge, to the tune of $75 million. When I read it in the press, I look at it like I do my wife’s alarm clock, with one eye open and wondering “What were they thinking?” I toss it around in my head, I look at it from all the angles, trying to be objective, and all I can come up with is, “That just doesn’t make any sense.”

As a Driller, if a man on my crew has an accident, I lose my bonus, regardless of whether he hit himself in the head with a hammer while walking to the porta-potty or slams his finger in the car door—I lose my bonus. The Toolpusher loses his bonus. In an industry where I believe you lead by example, you accept for yourself what you bestow on others. So when your shareholders have lost to the point that they are bleeding, you don’t grant a CEO a $75-million bonus. And as a responsible CEO, you don’t accept a $75-million bonus. To those of us shareholders who rode this $74 stock down to $9 and are now trying to ride it back up to a respectable recovery level, this is a slap in the face that leaves us feeling like the company coffer is just the Board of Directors’ personal piggy bank.

I hope for the sake of all that this is dealt with quickly. I seriously doubt any laws were violated in granting this bonus, and I doubt returning it would restore investor confidence. Maybe Aubrey/CHK could donate this money to provide CNG fueling stations along I-40 crossing the heart of America as a first step in making natural gas available as a transportation fuel. Many of us would see that as a step in the right direction and help to heal the black eye this issue has caused an otherwise great company.

Whatever we do, it would make me happier than a tornado in a trailer park if it’s resolved quickly so we can get the focus back on natural gas as a transportation fuel and away from the greed of corporate executives.