Chesapeake Energy Corp.'s shares jumped in trading Monday after the natural gas and oil company vowed to cut the pay and perks for its outside directors as it clamps down on its leadership.
THE SPARK: Chesapeake announced Friday that it will cut the pay of outside directors by 20 percent and eliminate their use of the company aircraft to bring their compensation in line with packages offered by peer companies. This follows the company's prior commitment cut its CEO's pay package and name an outsider as chairman of the board.
THE BIG PICTURE: Chesapeake was already in a squeeze due to plunging natural gas prices this year and has been aggressively selling oil and gas assets to raise money to reduce debt and fund its operations.
Then it came up against major criticism of its leadership and oversight when it was revealed that the company's CEO Aubrey McClendon took out personal loans from a company that planned to buy Chesapeake assets.
Chesapeake plans to cut McClendon's pay by 15 percent, to under $20 million a year. The company also has stripped McClendon of his board chairmanship. It said Friday that it is still searching for an independent, non-executive chairman of the board.
The Oklahoma City company brought in an outside compensation adviser and in turn decided to put further restrictions in place on its board.
THE ANALYSIS: Raymond James analyst John Freeman said the cut to board compensation is clearly a step in the right direction given the investor concerns. He anticipates pay for other executive management will likely come down soon as well.
SHARE ACTION: Chesapeake Energy's shares rose 84 cents, or roughly 6 percent, to $15.20 in early afternoon trading. The stock has traded between $13.32 and $35.75 over the past year.