June 21 (Bloomberg) -- Chesapeake Energy Corp. named former ConocoPhillips Chairman Archie Dunham to lead its board as the second-largest U.S. natural-gas producer struggles with falling energy prices and mistrust of its management.
Dunham, 73, fits Oklahoma City-based Chesapeake’s tradition of choosing leaders in sync with its culture. The Oklahoma native attended the University of Oklahoma and spent almost five decades in the Oklahoma oil patch where Chief Executive Officer Aubrey McClendon got his start. McClendon will remain on the board as CEO after losing the chairman’s post amid scrutiny of his personal finances and potential conflicts of interest.
Chesapeake is racing to sell $7.4 billion in assets by the end of December to avoid a cash crunch that could cripple its drilling program. The company appointed four other directors today picked by major investors including Carl Icahn, with a mandate to rein in spending and risk-taking by the CEO.
“Now strong governance is essential to restoring trust,” Bill George, a director at Exxon Mobil Corp. and Goldman Sachs Group Inc., and a Harvard Business School professor, said in an interview before Dunham’s appointment was announced. “McClendon is such an entrepreneur, and he seems to have gotten confused and acted like he still owned the company after he took it public.”
Chesapeake named Bob Alexander, R. Brad Martin, Frederic Poses and Vincent Intrieri to its board, according to a statement today from the Oklahoma City-based company McClendon co-founded 23 years ago.
Chesapeake declined 2.6 percent to $18.55 at 10:19 a.m. in New York. The shares have fallen 17 percent this year as the impact of falling gas prices and soaring debt compounded the controversy over McClendon’s use of personal stakes in company- owned wells to obtain loans.
Dunham takes charge of a board reconstituted at the insistence of its two largest shareholders, Icahn and Southeastern Asset Management Inc. The company agreed on June 4 to let Icahn and Southeastern pick four new directors after Icahn likened the board to a fox that had “plundered the hen house.”
McClendon, who co-founded Chesapeake in 1989, was forced to surrender the role of chairman after revelations that he took personal loans from entities that also were involved in financial transactions with the company.