- Cheniere Energy’s LNG terminal in Louisiana last year.
- Cheniere Energy/Bloomberg News
As the WSJ reported last week, Houston-based Cheniere Energy hasn’t made an annual profit in 18 years, pulled in just $267 million in revenue last year, and paid its CEO Charif Souki $142 million in 2013, making him one of America’s best paid executives.
That pay package, and plans to ask shareholders at next week’s annual meeting for permission to issue another 30 million shares for employee compensation over the next five years (valued at about $2 billion based on Friday’s closing price), led to quite a few raised eyebrows among investors.
“The management team has done a phenomenal job,” a large shareholder opposed to the company’s pay plan told the WSJ last week. “The current proposal is beyond what is reasonable.”
And now, it seems, those raised eyebrows have translated into a lawsuit, and postponement of next week’s annual meeting. Via an announcement from Cheniere this morning:
The 2014 Annual Meeting of Stockholders of Cheniere Energy, Inc. (the “Company”), scheduled to be held at 9:00 a.m., Central Daylight Time, on Thursday, June 12, 2014, has been postponed and will now take place on Thursday, September 11, 2014. A formal notice setting forth the exact location and time of the rescheduled meeting will be mailed to you in due course.
We have decided to postpone the Annual Meeting in light of a complaint that has been filed in the Delaware Court of Chancery of the State of Delaware styled Jones v. Souki, et al., C.A. No. 9710-VCL (Del. Ch.) and plaintiff’s request to expedite proceedings before the June 12th Annual Meeting.
Cheniere provided a copy of the lawsuit in another SEC filing. The plaintiff is an individual shareholder, James B. Jones, seeking class action status. His claim, according to the filing:
Plaintiff, on behalf of himself and all other similarly situated stockholders of Cheniere, brings this action both directly and derivatively to recover 25 million shares of Cheniere stock that were improperly awarded to Cheniere’s employees, consultants and directors under the Cheniere Energy, Inc. 2011 Incentive Plan (the “2011 Plan”) despite the fact that the stockholder vote to permit such awards did not receive the required majority vote. Defendants improperly failed to count abstentions as “no” votes, as was required by Delaware law, and as a result, Defendants falsely claimed the vote passed with a majority vote. Beyond being wholly irrational and in contravention of Delaware law, the awarding of these restricted stock awards was an unauthorized act by the Board that exceeded the Company’s own authority under its own bylaws and is thus ultra vires.
(Cornell University’s handy legal dictionary defines ultra vires, meaning “beyond the powers,” as “actions taken by government bodies or corporations that exceed the scope of power given to them by laws or corporate charters.”)
With next week’s annual meeting postponed until September, the company and it’s dissatisfied shareholders have a few more months to fight out the dispute over pay. As the WSJ’s Daniel Gilbert reported last week, shareholder advisory services made their opposition to the plan known ahead of the now-postponed meeting:
“Shareholders should be deeply concerned with the structure of the company’s compensation program,” says advisory firm Glass, Lewis & Co.
While recognizing that executives have created substantial value for shareholders—Cheniere’s stock price doubled last year as its first gas export plant began to materialize on Louisiana’s coast—Glass Lewis says that the proposed compensation plan could be excessive and dilute existing shareholders’ stake by 12%.
Egan-Jones Proxy Services recommends that shareholders reject the compensation plan and vote against compensation-committee chairman David Kilpatrick at the company’s annual meeting on June 12. Mr. Kilpatrick, in a message to The Wall Street Journal, credited Mr. Souki and other executives with adding billions of dollars to the company’s market value. “With the amazing value they have created for the stockholders through their fine work, they deserve a share of the wealth creation.”
We’ve reached out to Cheniere to see if it has anything more to say about the lawsuit, and will update here if we hear anything back.
See also:
Cheniere Energy Pitches Big Boost in Employee Compensation – WSJ
18 Years, No Profit, $1.9 Billion in Stock for Employees: Which Dot-com? – Corporate Intelligence
I’m sick & tired of hearing about excessive CEO pay & then these greedy SOB’s have the nerve to turn around & complain about their tax’s. Not only should this guys pay be cut drastically (not more then 2 million). but the stupid greedy board of directors should be penalized, too. If he’s so confident in his management skills then let him take part of his 2 million salary & go buy company stock himself. He can buy more stock next year when he gets paid again. These egregious pay plans are not helping his work ethic. They’re just feeding the ego of a greedy scumbag. Shame & scorn on this man & this board! The board is as much at fault!
Shame on anyone that replies to my post that thinks the CEO should make this much just because the stock has done well in recent years. The company hasn’t made a profit in 18 years. Does that mean the CEO wasn’t paid for 18 years? Lol. There is natural gas boon going on in this country but this CEO didn’t magically invent the boon. He has no right to take all the profit for himself.