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Furious shareholders are demanding to know why directors of Oklahoma City-based Chesapeake Energy Corp. paid CEO Aubrey McClendon $112 million last year, purchased his personal art collection and co-sponsored his basketball team, even as the company’s stock price tumbled.

The directors, who include former Oklahoma Gov. Frank Keating and former Oklahoma Sen. Don Nickles, paid McClendon more than four times what he had earned the year before. In fact, the package was one of the most generous paid to any corporate executive last year.

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McClendon, 49, who had built Chesapeake into a hugely successful natural gas company until the firm hit the skids in 2008, received a one-time $75 million bonus on top of a $975,000 base salary and $20 million in stock awards, according to the company’s proxy statement.

Chesapeake also disclosed a deal to buy McClendon’s collection of historical maps of the American Southwest, together with books, watercolors and photographs, for $12.1 million. It also paid $3.5 million to sponsor the Oklahoma City Thunder, a basketball team in which McClendon has a 20-percent stake, and spent close to $200,000 with a catering company part-owned by him, according to the proxy statement.

“I have never seen a more shameful document than the Chesapeake proxy statement,” investor Jeffrey Bronchick wrote in a letter to Chesapeake’s board, according to the Wall Street Journal. “If I could reduce it to one page, I would frame and hang it on my office wall as a near perfect illustration of the complete collapse of appropriate corporate governance.”

In the proxy and other filings, the company said McClendon’s new five-year contract and bonus were intended to reward him for negotiating a series of multibillion-dollar asset sales and to keep him from pursuing “other entrepreneurial opportunities.”

But investors expressed concern that “the bonus was less a reward for outstanding service than an effort to bail Mr. McClendon out of his personal financial difficulties,” wrote Marc Gross, an attorney for the Louisiana Police Employment Retirement System, a major shareholder.

Gross has asked an Oklahoma judge to force the company to turn over records about its deliberations over McClendon’s compensation. The filing is a first step toward a possible lawsuit accusing the board of breaching its fiduciary responsibility to shareholders.

McClendon, a famous risk-taker, co-founded Chesapeake in 1989 with only ten employees and $50,000 in capital.

Once, he was Chesapeake’s largest stockholder. But in October, the company’s sinking stock price forced him to sell 31.5 million shares, or 94% of his holdings at a time when the firm’s share price was at its lowest point in four years, to meet a margin call related to loans he had taken to buy the stock.

Two months later, he and the board had negotiated a new contract. Whereas his 2007 contract had stated that he had to hold Chesapeake stock worth five times his annual salary and bonus, the new agreement lowered that requirement to only twice his salary and bonus.

McClendon is accustomed to controversy. Last year, he donated to the presidential campaigns of both Barack Obama and John McCain. But in 2004, he was one of the largest donors to Swift Boat Vets and POWs for Truth, an organization set up in 2004 to attack the military record of Senator John Kerry, the Democratic presidential candidate.

Bronchick, whose firm, Reed, Conner & Birdwell LLC, owns 1.18 million Chesapeake shares, said he would vote against the three Chesapeake directors who are up for election at the firm’s annual meeting in June – Richard K. Davidson, former chairman of Union Pacific, V. Burns Hargis, the president of Oklahoma State University which receives donations from Chesapeake, and Charles T. Maxwell, a senior energy analyst with Weeden & Co. a Ct-based brokerage firm.

Fort Worth Star-Telegram columnist Mitchell Schnurman suggests the directors might have had a self-interested agenda to sign off on the new compensation package.

“Maybe it’s a coincidence, but directors got a big pay raise last year, too,” he wrote. “Four of the eight members earned more than $700,000 each, including cash, stock, private jet flights and the ‘gross-up’ payments to cover taxes on the perks. … At those pay rates, it must be easy to hold your tongue.”

Chesapeake’s shares are down 71% from their high last July, a bigger drop than those of other large independent energy companies such as Devon Energy Corp., Anadarko Petroleum Corp. and XTO Energy Inc. But its share price has rebounded 25.4% since the start of the year, more than many of its competitors’ shares.

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• Chesapeake Energy and Aubrey McClendon, masters of the power play – July 9, 2008
• Shades of 1929 for Chesapeake’s Aubrey McClendon – October 11, 2008
• Big bonuses before the crash – August 12, 2007
• ExxonMobil’s well-paid directors – September 30, 2007
• First Marblehead gets some relief – December 21, 2007
• Directors feel First Marblehead’s pain – December 17, 2007
• Muckety trading: Blackrock pay and Southwest stock – April 29, 2008
• Lessons from Bob Simpson’s $100 million cashout at XTO – October 12, 2008
• The Dons of D.R. Horton – October 4, 2007
• Congratulations on your big promotion. . .and your cut in pay – November 25, 2008