March 29, 2011
Harrington Investments Divests Chesapeake Energy
by Robert Kropp
The investment advisory firm says the natural gas drilling company's poor environmental and
executive compensation performance are reasons for divestment.
Citing a lack of accountability to shareowners, Harrington Investments has announced that it will
divest 56,025 shares of stock, valued at approximately $1.9 million, in Chesapeake Energy, a
natural gas drilling company with extensive hydraulic fracturing operations in Pennsylvania.
In Pennsylvania, where the Marcellus Shale is estimated to contain as much as 490
trillion cubic feet of gas, "The Pennsylvania Environmental Protection Dept. has cited 47 well
operators more than 900 times for environmental health and safety violations" in the past three
years alone, according to a recent article in Bloomberg
"Chesapeake Appalachia, a unit of Chesapeake Energy, took the top spot with
109 violations," the article continued.
Hydraulic fracturing, or fracking, requires the
injection under extreme pressure of as much as 7.5 million gallons of water per well, as well as
toxic chemicals, to crack open rock and allow natural gas to flow to the surface. The practice,
which despite environmental and health risks remains mostly unregulated at the federal level, has
come under increased scrutiny by sustainable investors.
By January of this year,
shareowner resolutions addressing hydraulic fracturing had already been filed with nine oil and gas
companies, according to the Investor Network on
Climate Risk (INCR).
Regarding the decision in favor of divestment, John Harrington,
President of Harrington Investments, stated, "We have a fiduciary duty to our clients to invest in
companies that show a strong commitment to the environment. Chesapeake obviously violates our
investment criteria when it consistently and flagrantly violates environmental standards."
In addition, Harrington continued, "The board at Chesapeake Energy also has one of the worst
records when it comes to executive compensation." In 2008, a year in which the stock price of
Chesapeake Energy fell 60%, Aubrey McClendon, the CEO, was awarded a $77 million bonus.
"Such a lack of judgment by the board on executive compensation shows a complete disregard for
owners and the board’s fiduciary duties," Harrington stated.
Harrington Investments also
cited a lack of consultation with shareowners over political contributions as a reason for
Founded in 1982, Harrington Investments describes itself as "dedicated to an
investment philosophy that emphasizes socially responsible investing, sector allocation and
portfolio diversification." The firm is also active in introducing shareowner resolutions. The
minimum account size is $500,000 in liquid assets, according to its web site.