Chesapeake Under Pressure to Lose McClendon

It was revealed on Monday that Chesapeake

is under increasing pressure to dump CEO Aubrey McClendon. The company has made concerted efforts over the past week to calm strong feelings from shareholders about McClendon's personal finances and management mistakes, but those moves have really only added fuel to the fire and calls for his dismissal have increased in volume. The fall from grace of McClendon is one of the more fascinating business stories in recent times. He is a co-founder of Chesapeake, and he has been an outspoken advocate for natural gas, long claiming it to be a cleaner and safer alternative to oil and coal. Those controversial opinions will have undoubtedly earned him some powerful enemies over the years, but it appears to be those within his own company who could yet provide him with his very public downfall. “He should resign or the reconstituted board should let him go,” said David Dreman, chairman of Dreman Value Management, holder of about 1 million CHK shares. “This company's got to get its credibility back. As long as you have a guy like Aubrey there, I don't think we're going to get the credibility back.” To what is Dreman referring? Well, in just six weeks, the company that was previously the largest U.S. natural-gas explorer (it is now second largest) has lowered pay packages, eliminated perks, agreed to reshape the company's board and, perhaps most damning of all, taken a loan for $4 billion in order to allow it to cope with falling gas prices and a fast-approaching cash shortfall. There has certainly been much to ponder for the company's shareholders, and the calls for McClendon's departure are not particularly surprising even if they are a little premature. The shareholders certainly don't like the fact that the CEO racked up $800 million in personal loans in order to buy stakes in the company. So what we are left with is a chief executive who is in heavy debt and owning a company that is also in heavy debt. When you look at it like that, it's hard not to agree with Dreman. Of course, any CEO is judged on performance, and the fact that CHK was the worst performing stock in the S&P 500 Oil and Gas Exploration and Production Index earlier in 2012 hammered another nail into the coffin, although since then the company has gone up 16%. No such bad luck for the Oklahoma City Thunder, part owned by McClendon through his affiliation with the Professional Basketball Club organization. That team is looking good in the NBA playoffs having beaten the Spurs 107-99 last week. At least McClendon has something to smile about. On Monday morning, CHK was trading at $18.36.