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Chesapeake Energy (NYSE: CHK) CEO Aubrey McClendon Must Go

There have been a number of calls in recent days for Chesapeake Energy (NYSE: CHK) CEO Aubrey McClendon to resign in the wake of two highly questionable schemes.

The first, revealed two weeks ago, is that McClendon took roughly$1.1 billion in personal loans against his stake in Chesapeake wells.

If that wasn't enough to shake confidence, Reuters reported yesterday (Wednesday) McClendon ran a lucrative business on the side.

But not just any side business. McClendon was running a $200 million hedge fund that traded in the same commodities Chesapeake produces.

This is a serious conflict of interest to say the least, because one has to ask just whom McClendon was looking out for at all times: his shareholders or himself?

The answer should be easy to discern.

The reactions have included calls for more responsibility to shareholders.

"An executive's first responsibility is to shareholders and the betterment of their investment," said Carl Holland, who ran the trading-compliance department at former U.S. oil major Texaco. "Personal trading in the commodity around which the CEO's business is based would be a clear no. We would never have tolerated that, ever."

There have also been brutal rants by private investors slamming the fact that McClendon recently hired PR spin doctor George Sard, who has represented a number of fallen, humiliated high-profile clients. They include the Madoff brothers, Eliot Spitzer, former Lehman Brothers CEO Dick Fuld, and executives at Enron and Fannie and Freddie Mac.

"I don't blame you for keepin' this a big secret from your shareholders; can't let all them little guys in on action this good," writes Richard Finger of Ariadne Capital. "I know it's all causing quite a stir, but please get back to me ASAP. It's not fair that you get to do this and I can't."

Right now, everyone's talking about trust. Can investors trust him? Should suppliers trust Chesapeake?

And, yes, trust is an important point. Chesapeake is a strong company, one poised to make immense profits in the coming years given its position in the natural gas markets.

But let's explore a greater point about corporate behavior and human rationality in the pursuit of profit.

The Fate of Aubrey McClendon

While McClendon resigned as Chairman of the Board, he still remains CEO of the company.

He's spotlighting himself as a poster child for corporate greed at a time when the oil and gas industry is going through immense changes and facing new rounds of government regulation.

He's drawing attention to his bank account in an election year where the left is bludgeoning anyone who's ever risen from nothing to just a $250,000 salary (those are called millionaires by the California tax code).

In 2008, McClendon was the highest paid CEO of any S&P 500 executive, earning a total compensation package valued at approximately $112 million. But he goes on to take out company loans and run a hedge fund on the side, when his job is to be responsible to the shareholders of the organization.

You can already picture it now, two to three years down the road when the price of natural gas begins to rise again. A member of Congress begins talking about how "ordinary Americans are struggling to heat their homes, but CEOs in energy companies are making nine figures." Congress will call for more regulation, which will put the screws on the market even more.

That'll be a great way to start yet another round of class warfare for the 2016 election, since natural gas prices will likely return to much higher levels by late 2014/early 2015.

McClendon has clearly placed himself above the shareholders. Above the market. Above the system.

He's giving everyone else in this industry a bad name, inviting criticism, and potentially dragging the government regulators from Wall Street all the way to Cushing, Oklahoma, a place where less government would be far more beneficial in the wake of our technological boom in fracking and shale.

For the sake of capitalism, Aubrey McClendon must go.

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