Joe Carroll
Bloomberg News

Shareholder confidence in Chesapeake Energy Corp. sank to its lowest point since the 2008 global economic meltdown as company directors reversed course on the need to examine Chief Executive Officer Aubrey McClendon’s personal financial transactions.

Chesapeake’s board, propelled by a plunging stock price and potential conflicts between McClendon’s personal finances and corporate duties, said Thursday it would end a program allowing its chairman and CEO to buy personal stakes in the company’s wells and review loans McClendon obtained by using those investments as collateral.

“Simply letting the Founders Well Participation Program expire is too little, too late,” said New York State Comptroller Thomas P. DiNapoli, who oversees 3.1 million Chesapeake shares held by the $140 billion New York State Common Retirement Fund. “Much more needs to be done to restore investor confidence.”

On Friday, it was learned the company prohibits other senior managers from the same practice.

Executives who oversee finance, operations and acquisitions for Oklahoma City-based Chesapeake have employment contracts that bar them from any investment or involvement in the oil and gas industry outside of their duties for the company, a review of Securities and Exchange Commission filings showed.

“As a shareholder, I’d want to know why the CEO is allowed to invest in these properties, but these other executives are not,” said Don Delves, president of The Delves Group, a Chicago-based corporate-governance advisory firm. “This has the potential to create differentiated interests within the company and its management team.”

Chesapeake shares have tumbled 25 percent since the end of March, heading for the worst monthly performance since 2008. A growing number of investors are betting the stock will continue to drop.

One out of every 13 shares available for trading was traded in what is called short selling as of April 24, close to the 8.5 percent level reached last month that was the highest in 3½ years, according to New York-based research firm Data Explorers. That’s more than double the average for energy producers in the Standard & Poor’s 500 Index.

Short investors bet a stock will fall by selling borrowed shares with the expectation of repurchasing them at a lower price.

Seeking to counter criticism that its oversight was too lax, the company said in a statement Thursday that its board would review all financing transactions between McClendon and “any third party that has had or may have a relationship with the company in any capacity.”

The U.S. Securities & Exchange Commission has opened an informal inquiry into the loans, news agency Reuters reported Thursday, citing an unidentified source said to be familiar with the matter. SEC spokesman Kevin Callahan declined to comment.

Jim Gipson, a Chesapeake spokesman, didn’t respond to a phone message or email requesting comment.

Controversy over McClendon’s personal portfolio has compounded the impact of collapsing gas prices on Chesapeake’s shares, said Sean Sexton, managing director at Fitch Inc., the Chicago-based credit-rating company. U.S. natural-gas futures, pressured by a supply glut from new wells in shale formations, have lost 54 percent of their value in the past year.

The turmoil could hamper Chesapeake’s ability to meet its “massive” funding requirements stemming from its aggressive spending and weak cash flow, said Scott Sprinzen, a debt analyst at S&P in New York, in a Thursday note to clients.

As shares decline, there is concern about the company’s ability to pay a quarterly dividend.

Questions about potential conflicts of interests involving McClendon’s personal finances stirred debate over his continued role at the company. Mark Hanson, a Chicago-based analyst at Morningstar Inc., said the board should separate the chairman and CEO positions to minimize McClendon’s influence over a panel that is supposed to watch over him. Philip Weiss, an Argus Research analyst in New York, said McClendon and the entire board should be fired.

“The decision ... ought to be left to a board that is able to operate independently ... ’’ said Michael Garland, director of corporate governance for New York City Comptroller John C. Liu, in an interview Thursday.