At most public companies, it's incentive enough to give CEOs a load of stock options and grants. They usually get bonuses, too, if the company increases sales and profits.
Giving McClendon a share of gas revenue is akin to giving Steve Jobs a share of iPod sales or giving Michael Dell a percentage of computer shipments. It's outrageous, because the numbers can be so large, and the money rightly belongs to shareholders.
As CEO, McClendon is also responsible for everything at the company, not just gas production. It's conceivable that shareholders could take a bath, the company could report a loss, and the CEO would keep earning lavish royalties.
McClendon has the usual cornucopia of CEO awards: a $975,000 salary; multi-million dollar bonuses; stock awards for tens of millions of dollars; and more than $600,000 for private jets.
But his gas-royalty revenue is something else. From wells drilled in the past three years and the first quarter of 2009, McClendon's share of the gas is worth an estimated $191 million, according to the proxy.
If production costs rise and gas prices fall, he'll ultimately net less. If gas prices increase, he'll get more.
Chesapeake has defended this practice, in part, by requiring McClendon to invest his own money in the wells -- in the same percentage as his royalties. In 2009, the $75 million bonus provides the bulk of that investment.
So this time, McClendon is playing with house money.
He gets plenty of additional help, again at company expense.
Last year, Chesapeake spent $131,226 for engineering support for McClendon, so the staff could provide data and analysis on reserves in his gas-well stakes.
The company also paid $577,113 for accounting support for McClendon, a reflection of just how complex his private dealings have become.
For some perspective, those two expenses total more than the base pay for the CEO of American Airlines last year.
Chesapeake's largesse doesn't end there. The company bought McClendon's collection of maps, watercolors and photographs for $12.1 million in December. It paid $4.6 million in 2008 and '09 to sponsor the Oklahoma City Thunder, a pro basketball franchise in which McClendon has a 19 percent ownership stake.
The company even spent $177,150 on catering from the Deep Fork Grill, which is half owned by McClendon.
When Chesapeake was a Wall Street darling, such things didn't get much attention. Then last spring, McClendon was loading up on Chesapeake stock and publicly promoting the company's prospects. Turns out that he was buying shares with borrowed money, with his Chesapeake holdings as collateral.
As the recession deepened, natural prices tumbled and Chesapeake's stock price fell, prompting a margin call. McClendon had to sell 31 million shares to pay off his loans, sending the stock even lower and catching the attention of investors.
