This excerpt taken from the CHK DEF 14A filed Apr 29, 2008.
Our Board of Directors believes that the current classification structure of the Board remains in the best interests of our shareholders for the following reasons:
The stated basis of Mr. Armstrongs proposal is that our Companys management and Board are being more strongly tested due to economic conditions, so our Companys election process should be changed to declassify the Board so that all of the directors could be voted off the Board as a group. The proposal is based on an unsupported assumption that such an arrangement provides greater shareholder accountability. As discussed below, it is not clear that such an arrangement increases accountability.
In an indication that the proposal is a mass produced proposal that does not fit the current status of your Company, the economic conditions in the oil and gas exploration and production industry are the best they have been in years. However, current industry conditions alone do not explain the outstanding performance of your Company. The success of your Company is based on a number of actions taken by the management team and the Board. In the late 1990s, the oil and gas industry experienced extremely difficult times due to a severe retraction in oil and gas prices. During that time our Companys stock price decreased to less than $1.00 per share. As a result of the experience and insight of the directors and the management team, our Company purchased valuable oil and gas leases at fire sale prices when the outlook for the industry and our Company was very negative. The experience and continuity of our directors and management team continue to provide significant enhanced performance in our Companys stock price by, among other things, implementing a first class hedging program and identifying industry leading leasehold positions in emerging shale plays.
Mr. Armstrongs stated objective is to provide a mechanism to inform the Board that the shareholders are unhappy with their actions, the management team or the direction of the Company. The more effective method of achieving that objective is to advance this proposal or propose an alternate slate of director nominees at that time.
Given the consensual nature of the decision process of an effective board of directors, such actions would send a clear message to the Board without the negative effect to the Company and its shareholders of removing all of the members of the Board at one time.
In addition, approval by our shareholders of Voting Item 4 will not declassify the Board of Directors. The elimination of the classification structure of our Board can only be accomplished through an amendment to our Certificate of Incorporation, which would require a vote of 66.67% of the issued and outstanding shares of the Company in favor of such an amendment.