This excerpt taken from the CHK DEF 14A filed Apr 30, 2009.
Our compensation program is designed to take into consideration and reward the following performance factors:
During its June 2008 review of executive compensation, the Compensation Committee reviewed the potential incorporation of objective performance criteria into the Companys executive compensation program and determined that the Companys then current compensation arrangements were in the best interests of the Company. The Compensation Committee believes objective performance criteria cannot differentiate the executive officers individual and collective contributions to the Company from the impact of external factors beyond the Companys control (for example, extreme economic crises and the volatility in natural gas and oil prices). Moreover, we believe reliance on objective metrics (for example, natural gas production) may encourage the executive officers to take operational risks that could be contrary to the long-term interests of the Company based on external factors that the executive cannot control (for example, increasing natural gas production during a period of uncertain or depressed pricing). Therefore, the Compensation Committee continues to highly value the subjectivity it retains in its review of executive compensation.
The Company believes all relevant operational and financial performance metrics are contingent upon the prices we receive or expect to receive from the sale of our natural gas and oil, which are impossible to accurately predict. Over the past decade, natural gas and oil prices have been highly volatile and are generally driven by factors that are beyond the control of our executive officers, including weather conditions, supply and demand imbalances, the price and availability of alternative fuels, economic and political conditions, interruptions in transportation capacity and numerous other factors. Therefore, such financial and operational performance metrics are frequently not effective indicators of the performance of our executive officers. The following are examples that demonstrate this point:
Upon review of the year-end natural gas prices since 2000, it is clear that the year-end prices above have not been an accurate predictor of the price of natural gas in the following year or in later years. In fact, New York Mercantile Exchange natural gas prices in the near month for 2008 and 2009 to