Send us Feedback

Chesapeake Energy (CHK)
Analysis
SUMMARY
BULLS
BEARS
TOPICS
Data
DATA CENTRAL
STOCK CHART
Financials
SEC FILINGS
BALANCE
INCOME
CASH FLOW

CHK » Topics » Compensation Design

This excerpt taken from the CHK DEF 14A filed Apr 30, 2009.

Compensation Design

Our compensation program is designed to take into consideration and reward the following performance factors:

 

  •  

Individual performance—for example, the employee’s contributions to the development and execution of the Company’s business plan and strategies, performance of the executive’s department or functional unit, level of responsibility and longevity with the Company;

 

  •  

Company performance—including operational performance of the Company, with respect to our production, reserves, operating costs, drilling results, risk management activities and asset acquisitions, and financial performance of the Company, with respect to our cash flow, net income, cost of capital, general and administrative costs and common stock price performance; and

 

  •  

Intangibles—for example, leadership ability, demonstrated commitment to the organization, motivational skills, attitude and work ethic.

During its June 2008 review of executive compensation, the Compensation Committee reviewed the potential incorporation of objective performance criteria into the Company’s executive compensation program and determined that the Company’s 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 Company’s 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:

 

  •  

The weighted average wellhead price of natural gas on the last day of each fiscal year, which is the price we use for computing our reserves pursuant to SEC regulations, has fluctuated dramatically over the past eight years as shown below:

 

December 31,

    Price
per mcf		    % Change from
Prior Year		  

     2008

    $ 5.71    -7.75 %

     2007

    $ 6.19    14.42 %

     2006

    $ 5.41    -38.24 %

     2005

    $ 8.76    55.04 %

     2004

    $ 5.65    -0.53 %

     2003

    $ 5.68    32.71 %

     2002

    $ 4.28    70.52 %

     2001

    $ 2.51    -75.20 %

     2000

    $ 10.12    —    

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

 

35

Table of Contents
Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki