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Chesapeake Energy (NYSE: CHK ) has made news with some big corporate governance changes. These include controversial CEO Aubrey McClendon's voluntarily forgoing his annual bonus for 2012, which was by no means a good year for the energy company.
These changes are certainly newsworthy given the company's well-publicized struggles over the last year, centered around McClendon's behavior. They're also long overdue. Some of us have suspected things were amiss at Chesapeake and in its board's treatment of management for years, but many investors shrugged off the implications.
This brings me to another observation: The creepiest thing about Chesapeake Energy is that several years ago, unless you were a major corporate governance watcher, the company might have looked like a pretty darn socially responsible energy company.
Yesterday, The Wall Street Journal reported the changes Chesapeake revealed in a recent Securities and Exchange Commission filing. For years, McClendon received a $2 million cash bonus in addition to his salary, like clockwork. He has decided to relinquish that for 2012, and his personal use of the corporate jet will be limited.
Chesapeake will cut costs like political spending (quite a good expense to cut, given the circumstances), as well as charitable contributions.
In a major victory of corporate governance proponents, Chesapeake's board also allows shareholders, which include activist Carl Icahn and Southeastern Asset Management, to nominate some directors.
Of course, longtime shareholders should wonder if it will ever be enough. McClendon's behavior at Chesapeake has long been controversial, and the company grew increasingly indebted as the situation took a downward spiral.
Last year's ultimate outrage centered on McClendon's borrowing money from companies that Chesapeake was doing business with, as well as allegations he ran a secret $200 million hedge fund, among other shady dealings.
Still, McClendon-centric behavior isn't a new development at Chesapeake. In 2008, McClendon received a whopping $75 million bonus, dubbed the "well cost incentive award," and also gained notoriety in corporate governance circles for having made an arrangement with Chesapeake through which the company would buy his collection of antique maps for $12 million. To say that's unusual is an understatement. These deals actually made McClendon whole after he lost his stockholdings due to a margin call. (He later bought back the maps.)
How could so much good go so bad?
So what was I saying about social responsibility? Well, the funny thing is, there appear to be some "nice" things about Chesapeake.
First of all, many natural proponents point out that regardless of the controversy surrounding fracking, natural gas is actually a pretty darn green energy source.
Last year, Chesapeake landed at No.18 on Fortune's annual 100 Best Companies to Work For list. Some perks employees enjoy include a child care facility on the company's headquarters, which is described as "perk-filled."
Last spring, the Journal ran a detailed article on an unexpected side of Chesapeake's issues: the impact that Chesapeake Energy under Aubrey McClendon has had on Oklahoma City. Such actions included "showering arts groups and schools with millions in donations," to the point where "charities and civic leaders are fretting about potential consequences to the city" as the controversy deepened.
Even more thought-provoking, the article describes McClendon and Chesapeake as having spread "a culture of giving," which included the company's executives making donations to worthy causes and employees having a tendency for volunteerism.
Between 2010 and 2011, Chesapeake Energy shelled out $56 million in charitable contributions. (Granted, this cost pales in comparison to the company's lobbying expenditures.)
Setting the stage
That's an awful lot of good going on for a company where some bad business was taking place behind the scenes.
Then again, from an environmental/social/governance (ESG) angle, such situations can be confusing. Take Wal-Mart's (NYSE: WMT ) forays into environmentally sound practices, which have even won over some hardcore environmentalists. In 2011, Wal-Mart proclaims that it and its foundation gave $958.8 million in cash and in-kind donations across the globe.
In fact, last year The Chronicle of Philanthropy lauded Wal-Mart and another company that's often not considered too terribly socially responsible, financial giant Goldman Sachs (NYSE: GS ) , for being the biggest of 2011's corporate cash givers. (Incidentally, Goldman Sachs came in at No. 33 on Fortune's 100 Best Companies to Work For list.)
In another example, tobacco giant Altria (NYSE: MO ) touts its $1.3 billion in donations over the last decade, and describes its focus on arts and culture, education, sustainability, and positive youth development on its website.
Peeking behind the window dressing
Those of us who are interested in socially responsible companies are faced daily by the idea that there are no perfect companies. Fortunately, many are trying to improve, and although some PR-polishing and greenwashing exists, I believe some managements' efforts are genuine or are even starting to recognize the good business sense some positive changes make.
However, cases like Chesapeake's reveal the need to do one's homework. Perhaps the better the window dressing is, the more criticism we should apply to public companies. Chesapeake Energy's veneer of good works hid a secret inner core that enriched management over shareholders, and now, this has put its previous do-gooding into danger.
Chesapeake's situation reminds us that responsible investing requires a lot of vigilance -- and a lot of thought. It's a reminder that responsible management matters as well, and negative impacts can spread much further than shareholders' portfolios.
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Check back at Fool.com for more of Alyce Lomax's columns on environmental, social, and governance issues.
Editor's note: A previous version of this article stated that McClendon used company resources to run his hedge fund. The Fool regrets the error.