Burns Hargis

In this Nov. 18, 2011 file photo, Oklahoma State University president Burns Hargis speaks during a news conference in Stillwater, Okla. Chesapeake Energy Corp. shareholders showed their displeasure with the company's board by withholding support for two directors up for re-election at Friday's annual meeting. Both directors have tendered their resignation. Hargis is one of the two directors who resigned Friday.

AP Photo/Sue Ogrocki
Associated Press

Oklahoma State University President Burns Hargis is one of two members of Chesapeake Energy Corp. Board of Directors who resigned Friday amid shareholder anger.

Hargis and Richard Davidson were up for re-election at Chesapeake’s annual meeting and were the first board members to face re-election since reports surfaced that CEO Aubrey McClendon was allowed to borrow money from a company that Chesapeake was doing business with. Both Hargis and Davidson tendered their resignation after shareholders withheld support for their re-election.

The biggest complaint about the board has been a perceived lack of oversight of McClendon. Reports about his personal business dealings sparked a drop in the company's shares in April and painted a picture of a board that accepted better-than-average pay and perks in return for keeping a loose rein on the CEO.

Shareholders began calling for a shake-up of the board after Chesapeake acknowledged that directors hadn't fully scrutinized the details of McClendon’s loans.

Chesapeake has agreed with Carl Icahn and Southeastern Asset Management, its largest shareholder, to replace four of nine board members with directors they choose. The company also stripped McClendon of the chairman title. It plans to name a new independent board chairman by June 22.

Chesapeake shares are worth about 40 percent less than a year ago. The nation's second-largest natural gas producer still has big spending plans even though it's taking in less cash because of a plunge in natural gas prices. And it needs to sell off billions of dollars in assets to service a huge debt load.

Shares have rallied 14 percent this week, easing some but not all of shareholders' pain. At Thursday's close of $17.85, the shares are still down 20 percent for the year. A number of analysts have welcomed the board shake-up and boosted their rating of the stock. A few, however, are calling for McClendon to be ousted.

Chesapeake is making progress on asset sales. Earlier Friday, it announced the sale of its pipeline assets in three deals that will bring it $4 billion. Half of that amount will be in its coffers before the end of the month. These deals would bring asset sales so far this year to $6.6 billion. Biju Perincheril, an analyst at Jeffries & Company, has estimated the company needs to sell at least $7 billion worth of assets this year or risk violating the terms of some of its loans.

Chesapeake has outlined plans to sell as much as $14 billion of assets in 2012.

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