Chesapeake Energy chk on Monday again defended the $112.5 million payout for its CEO, calling it a "carefully tailored" incentive package that tied executive compensation to company performance.
The defense came the same day Chesapeake posted a nearly $6 billion loss for the first quarter because of tumbling natural gas prices.
Chesapeake, one of the nation's largest gas producers, said it lost $5.7 billion, or $9.63 a share, for the quarter ended March 31 compared with a loss of $132 million, or 29 cents a share, in the year-ago quarter.
Excluding special charges, Chesapeake recorded profit of $277 million, or 46 cents a share, for the quarter.
Analysts surveyed by Thomson Reuters expected Chesapeake to report profit of 49 cents a share. Those estimates typically exclude charges.
At least two investor groups have challenged the package awarded to co-founder Aubrey McClendon at a time when Chesapeake, one of the largest natural gas producers in the United States, has seen its share price decimated.
Chesapeake stock fell 58% last year.
In a regulatory filing, Chesapeake said McClendon was rewarded for personally closing four deals that amounted to $10.3 billion in proceeds and $8.7 billion in economic gain.
McClendon's pay package was tops on an Associated Press calculation of pay packages for CEOs in the Standard & Poor's 500, even though energy companies saw profits plunge along with oil and natural gas prices.
"Late last year, after weeks of careful consideration and deliberation, Chesapeake's board amended Aubrey's employment agreement and provided a carefully tailored incentive award with the understanding it was an unusual action during a period when collapsing natural gas prices forced Chesapeake's stock price to decline, liquidity challenges were negatively impacting the industry and the country faced the worst economic crisis in at least 50 years," according to the filing.
The board, as part of the amended pay packaged, required McClendon to invest in the company's drilling programs so that he takes risks alongside the company.
Company shares have rebounded from $9.84 in early December, the lowest level in more than five years. Shares rose 9% Monday to $22.82.
The contract was awarded two months after McClendon was forced to sell more than 31 million shares of Chesapeake stock — valued at $550 million and down from a peak of $2.2 billion only three months earlier — to cover bank demands for repayment of loans. The huge sale helped further drive down the stock price last fall.
Shareholders are now trying to force Chesapeake to release more details about the package, which included a $75 million bonus.
For 2008, Chesapeake's net income fell to $623 million, about half of the $1.2 billion it earned in 2007. Revenue jumped 49% to $11.6 billion, buoyed by a first-half surge in natural gas prices.
Natural gas have tumbled 73% since last summer. Like other energy companies, Chesapeake has been cutting drilling and capital expenditures.
The letter also defended the decision to pay McClendon $12.1 million in December for a collection of historical maps of the American southwest that are on display at the corporate offices.