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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

Filed by the Registrant x     

Filed by a Party other than the Registrant ¨

Check the appropriate box:

CHESAPEAKE ENERGY CORPORATION

(Name of Registrant as Specified in its Charter)

(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

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6100 North Western Avenue

Oklahoma City, Oklahoma 73118

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

To Be Held On June 10, 2011

The 2011 annual meeting of shareholders of Chesapeake Energy Corporation, an Oklahoma corporation (the “Company”), will be held at Chesapeake Energy Corporation, 6100 North Western Avenue, Oklahoma City, Oklahoma, on Friday, June 10, 2011 at 10:00 a.m., Central Daylight Time, to consider and act upon the following matters:

Holders of record of the Company’s common stock at the close of business on April 15, 2011 are entitled to notice of and to vote at the meeting. A complete list of shareholders of record entitled to vote at the meeting will be available for examination by any shareholder at the meeting and at the Company’s executive offices during ordinary business hours for a period of at least ten days prior to the meeting.

To attend the meeting you will need a form of photo identification. If your shares are held in street name, you will also need to bring proof of your ownership of our common stock, such as your most recent brokerage statement. A map of our Oklahoma City campus and parking instructions are available on our website at www.chk.com/proxy.

YOUR VOTE IS IMPORTANT. YOU MAY VOTE IN ANY ONE OF THE FOLLOWING WAYS:

SHAREHOLDERS OF RECORD WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND VOTE IN PERSON IF THEY DESIRE. IF YOU ARE UNABLE TO ATTEND, YOU MAY LISTEN TO A LIVE AUDIOCAST OF THE MEETING ON OUR WEBSITE AT www.chk.com.

BY ORDER OF THE BOARD OF DIRECTORS

Jennifer M. Grigsby Senior Vice President, Treasurer and Corporate Secretary

Oklahoma City, Oklahoma

May 12, 2011

Important Notice Regarding the Availability of Proxy Materials

For the Shareholder Meeting to be Held on June 10, 2011:

This Proxy Statement and the Company’s Annual Report for 2010 are available at:

http://www.chk.com/proxy

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Corporate Governance Highlights

The Board believes that effective corporate governance should reinforce a culture of corporate integrity, foster the Company’s pursuit of long-term strategic goals of growth and profit and ensure quality and continuity of corporate leadership. In light of this belief, the Board has recently implemented several enhancements in the corporate governance of the Company. Specifically, the Board has:

 

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appointed a Lead Independent Director who participates in the process of preparing meeting agendas and schedules and presides over executive sessions of the Board of Directors;

 

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engaged Cogent Compensation Partners, an independent compensation consultant;

 

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eliminated excise tax gross-ups from awards granted under our Long Term Incentive Plan (“LTIP”);

 

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prohibited certain derivative and speculative transactions involving Company stock by executive officers and directors;

 

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enhanced shareholder outreach on corporate governance matters;

 

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committed to enhanced sustainability disclosures;

 

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encouraged the Company’s recent adoption of operational principles implementing progressive operational, environmental and safety standards for employees, contractors, suppliers and vendors to guide our natural gas and liquids exploration and production operations; and

 

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encouraged the Company’s recent participation in a national, publicly accessible, web-based registry to report the additives used in the hydraulic fracturing process.

 

In addition, the Board has determined after careful consideration that it is in the best interest of the Company to introduce a management proposal at the 2012 annual meeting of shareholders which, if passed, will implement majority voting in director elections beginning with our 2013 annual meeting of shareholders.

Auditors

As a matter of good corporate governance, we are asking our shareholders to ratify the selection of PricewaterhouseCoopers LLP (“PwC”) as our independent registered public accounting firm for 2011.

Executive Compensation Advisory Vote and Its Frequency

We are asking our shareholders to approve on an advisory basis our named executive officer (“NEO”) compensation. The Board recommends a FOR vote because it believes that our compensation policies and practices are effective in achieving the Company’s goals of (i) attracting, retaining and motivating executive officers who perform at a high level, (ii) aligning the executives’ interests with those of our shareholders and (iii) encouraging a short-term and long-term focus, with an emphasis on avoiding excessive risk taking. NEO compensation reflects amounts of cash and long-term incentive compensation consistent with the strong operational results and performance of the Company despite continued market challenges impacting the natural gas and oil industry.

The Board recommends that shareholders vote in favor of holding the advisory vote on executive compensation EVERY YEAR.

Executive Compensation Elements

 

Type		Form		Awards and Terms
Cash		•Base Salary		•Adjustments considered semi-annually based on performance review
		•Bonus		•Awards considered semi-annually based on performance review
Equity		•Restricted Stock		•Awards considered semi-annually based on performance review; vests ratably over period of four years to incentivize future performance
Retirement		•401(k) Plan Matching Contributions		•Company matches up to 15% of employee contributions in Company stock; employee vests in Company matches over a five-year period
		•Deferred Compensation Plan Matching Contributions		•Company matches up to 15% of eligible employee contributions in Company stock; matches vest ratably over five years
Other		•Perquisites and Benefits		•Life insurance, financial services, transportation, home security, club dues

2010 Executive Compensation Mix

 

 

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CHESAPEAKE ENERGY CORPORATION

PROXY STATEMENT

ANNUAL MEETING OF SHAREHOLDERS

To Be Held On June 10, 2011

GENERAL INFORMATION

This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors of Chesapeake Energy Corporation, an Oklahoma corporation (“Chesapeake” or the “Company”), for use at the annual meeting of shareholders of the Company to be held on the date, at the time and place and for the purposes set forth in the accompanying Notice of Annual Meeting of Shareholders, and any adjournment of the meeting.

This proxy statement, the accompanying form of proxy and the Company’s 2010 Annual Report will be mailed on or about May 12, 2011 to shareholders of record as of April 15, 2011. Shareholders are referred to the Company’s 2010 Annual Report for information concerning the activities of the Company.

Who Can Vote

Only holders of record of Chesapeake common stock as of April 15, 2011, the record date for the meeting, are entitled to notice of and to vote at the meeting. At the close of business on April 15, 2011, there were 659,021,552 shares of our common stock outstanding and 634,563,780 shares entitled to vote at the meeting. Each outstanding share of common stock is entitled to one vote, except unvested shares of restricted stock issued to our directors, employees and consultants do not have voting rights.

Establishing a Quorum

A majority of the shares of common stock entitled to vote, present in person or by proxy, will constitute a quorum for the transaction of business at the meeting.

How to Vote

Most shareholders can vote their shares one of three ways:

The telephone and internet voting procedures are designed to authenticate shareholders’ identities, to allow you to vote your shares and to confirm that your instructions have been properly recorded. Please refer to your proxy card or the information forwarded by your bank, broker or other nominee to see which options are available to you.

If you are a Chesapeake employee and you participate in the Chesapeake Energy Corporation Savings and Incentive Stock Bonus Plan (the “Company 401(k) Plan”), you will receive a proxy via email so that you may instruct the trustee of the Company 401(k) Plan how to vote your Company 401(k) Plan shares. If you also hold shares directly, you may receive one proxy for both your Company 401(k) Plan shares and shares in accounts that are registered in the same name as your Company 401(k) Plan participant name. This single proxy will allow you to simultaneously vote all of your Company 401(k) Plan and directly-held shares as one block. To allow sufficient time for the trustee to vote the Company 401(k) Plan shares, your voting instructions must be received by 11:00 p.m. (CDT) on June 8, 2011. Please note, however, that since you only vote one time for all shares

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you own directly and in the Company 401(k) Plan, your vote on each voting item will be identical across all of those shares. If you do not vote your proxy, the trustee will vote the Company 401(k) Plan shares credited to your Company 401(k) Plan account in the same proportion as the Company 401(k) Plan shares of other participants for which the trustee has received proper voting instruction.

Votes Needed

The election of the director nominees and advisory vote on the frequency of the advisory vote on executive compensation (every one, two or three years) will be by plurality vote (that is, the four director nominees receiving the greatest number of votes will be elected and the frequency option that receives the most favorable votes will be considered the non-binding preference of the shareholders). You may not cast more than one vote per share for each director nominee. The affirmative vote of holders of a majority of shares of common stock present at the meeting in person or by proxy and entitled to vote will be required to approve the amendment to our LTIP (provided that the total votes cast on this proposal represent over 50% of all shares of common stock outstanding), the ratification of our independent registered public accounting firm, the Company’s executive compensation and, if properly presented at the meeting, the shareholder proposals.

How Votes Can Be Revoked

You may revoke your proxy at any time before it is voted by:

In the absence of a revocation, shares represented by the proxies will be voted at the meeting. Your attendance at the meeting will not automatically revoke your proxy. If you do not hold your shares directly, you should follow the instructions provided by your broker, bank or nominee to revoke your previously voted proxy.

How Votes Are Counted

Each proxy properly completed and returned to the Company in time for the meeting, and not revoked, will be voted in accordance with the instructions given. If there are no contrary instructions, proxies will be voted FOR the election of the nominees as directors, FOR the approval of the amendment to our LTIP, FOR the ratification of our independent registered public accounting firm, FOR the approval of the advisory vote on the Company’s executive compensation, FOR the approval of an annual advisory vote on executive compensation and AGAINST the shareholder proposal. The Company will appoint an inspector of election to tabulate all votes and to certify the results of all matters voted upon at the meeting.

It is the Company’s policy (i) to count abstentions and broker non-votes for purposes of determining the presence of a quorum at the meeting; (ii) to treat abstentions as shares represented at the meeting and voting against a proposal and to disregard broker non-votes in determining results on proposals requiring a majority or higher vote; and (iii) to consider neither abstentions nor broker non-votes in determining results of plurality votes.

Under the rules of the New York Stock Exchange (“NYSE”), brokers who hold shares on behalf of their customers have the authority to vote on certain proposals when they have not received instructions from beneficial owners. A broker non-vote occurs when a broker holding shares for a beneficial owner does not vote on a particular proposal because the broker does not have discretionary

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voting power with respect to that item and has not received voting instructions from the beneficial owner. Your broker has discretionary authority to vote your shares in the ratification of our independent public accountants. In the absence of specific instructions from you, your broker is not empowered to vote your shares in the election of directors, on the proposal to approve the amendment to our LTIP, on the advisory votes on executive compensation and frequency of advisory votes on executive compensation or on the shareholder proposal.

When the Voting Results Will Be Announced

We will announce preliminary voting results at the meeting and publish final results in a current report on Form 8-K within four business days after the meeting.

Cost of Proxy Solicitation

We will pay the cost of soliciting proxies. We have retained The Proxy Advisory Group, LLC to assist in the solicitation of proxies for a fee of $10,000, plus out-of-pocket expenses. In addition, employees and representatives of the Company may solicit proxies by mail, personally, or by telephone, facsimile transmission or email communication. We will request banks and brokers or other similar agents or fiduciaries to transmit the proxy material to the beneficial owners for their voting instructions and will reimburse their expenses in so doing.

Electronic Access to Proxy Materials and Annual Report

This proxy statement and the Company’s 2010 Annual Report are available at www.chk.com/proxy. If you are interested in receiving all future shareholder communications electronically, including proxy statements and annual reports, please visit www.icsdelivery.com/chk and register for electronic distribution. Once you register, any time we distribute materials or communications to our shareholders, you will receive an email notification containing an internet address which will direct you to these documents. You will continue to receive all shareholder communications electronically until you change this election at www.icsdelivery.com/chk. Electronic distribution saves the Company the cost of printing and mailing the documents to you, reduces the amount of mail you receive and is environmentally friendly by helping to conserve natural resources consumed in the printing process.

Householding

Based on SEC rules, we are permitted to send a single set of proxy materials to shareholders who share the same last name and address. This procedure is called “householding” and is designed to reduce our printing and postage costs. If you would like to receive a separate copy of a proxy statement or annual report, either now or in the future, please contact us by email at investorinfo@chk.com, by telephone at (405) 935-8000 or in writing to the following address: Attn: Investor Relations, P.O. Box 18496, Oklahoma City, Oklahoma 73154.

If you hold your shares in street name and would like additional copies of the proxy materials, or if you are currently receiving multiple copies of the proxy materials and would like to request householding, please contact your broker.

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VOTING ITEM 1—ELECTION OF DIRECTORS

Pursuant to provisions of the Company’s Certificate of Incorporation and Bylaws, the Board of Directors has fixed the number of directors at nine, subject to the rights of the holders of our preferred stock to nominate and elect two additional directors on the occurrence of a voting rights triggering event as defined in the preferred stock certificates of designation. Our Certificate of Incorporation and Bylaws provide for three classes of directors serving staggered three-year terms, with each class to be as nearly equal in number as possible. The terms of three directors expire at the meeting. Due to the mandatory retirement age policy of our Board of Directors, Frederick B. Whittemore’s term will expire at the 2011 annual meeting of shareholders and Mr. Whittemore will retire from the Board of Directors.

The Board of Directors has nominated Aubrey K. McClendon and Don Nickles for re-election as directors. The Board of Directors has also nominated Kathleen M. Eisbrenner and Louis A. Simpson for election as directors. Ms. Eisbrenner was recommended to the Board of Directors by the Nominating and Corporate Governance Committee and was appointed to the Board of Directors effective December 1, 2010. Mr. Simpson was recommended to the Board of Directors by Southeastern Asset Management, the Company’s largest shareholder, and the Board of Directors has nominated Mr. Simpson to fill the vacancy created by Mr. Whittemore’s retirement. Upon election, Messrs. McClendon and Nickles and Ms. Eisbrenner will serve for terms expiring at the 2014 annual meeting of shareholders and Mr. Simpson will serve for a term expiring at the 2013 annual meeting and each until their successors are elected and qualified. Proxies cannot be voted for a greater number of persons than the number of nominees named. Other directors will continue in office until the expiration of their terms at either the 2012 or 2013 annual meeting of shareholders, as the case may be.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS.

It is the intention of the persons named in the enclosed form of proxy to vote such proxies for the election of the four nominees. The Board of Directors expects that all of the nominees will be available for election but, if any of the nominees is not available, proxies received will be voted for substitute nominees to be designated by the Board of Directors or, if no such designation is made, proxies will be voted for a lesser number of nominees.

The following information is furnished for each person who is a director nominee or who is continuing to serve as a director of the Company after the meeting. Many of the Company’s directors are either current or former chief executive officers or chairmen of significant corporations or have experience operating large, complex, academic, governmental or not-for-profit institutions or organizations. As such and as further discussed below, our directors have a clear understanding of and extensive experience in many of the areas that are of critical importance to the Company’s proper operation and success. For the purpose of our analysis, we have determined that any director who has served as a chief executive officer or chairman of a corporation or large complex institution generally has extensive experience with financial statement preparation, compensation determinations, regulatory compliance, corporate governance, risk management, public affairs and legal matters.

Nominees for Terms Expiring in 2014

Aubrey K. McClendon, 51, has served as Chairman of the Board and Chief Executive Officer since co-founding the Company in 1989. From 1982 to 1989, Mr. McClendon was an independent producer of oil and natural gas. Mr. McClendon graduated from Duke University in 1981. Mr. McClendon has also served as a director of the general partner of Chesapeake Midstream Partners, L.P. (NYSE:CHKM) since 2010.

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As our co-founder, Chairman and CEO, Mr. McClendon sets the strategic direction of our Company with the guidance of the Board of Directors and serves as the Company’s spokesman to its shareholders and other constituencies. Mr. McClendon’s extensive knowledge of the Company and experience in the energy industry make him an invaluable asset to the Board.

Don Nickles, 62, has been a member of our Board of Directors since 2005. Senator Nickles is the founder and President of The Nickles Group, a consulting and business venture firm in Washington, D.C. Senator Nickles was elected to represent Oklahoma in the United States Senate from 1980 to 2005 where he held numerous leadership positions, including Assistant Republican Leader from 1996 to 2003 and Chairman of the Senate Budget Committee from 2003 to 2005. Senator Nickles also served on the Senate Energy and Natural Resources Committee and the Senate Finance Committee. Prior to his service in the U.S. Senate, Senator Nickles served in the Oklahoma State Senate from 1979 to 1980 and worked for Nickles Machine Corporation in Ponca City, Oklahoma, becoming Vice President and General Manager. Senator Nickles is also a director of Valero Energy Corporation (NYSE:VLO), an independent oil refiner headquartered in San Antonio, Texas; Washington Mutual Investors Fund (WMIF); American Funds Tax Exempt Series 1 (AFTES-1) and JP Morgan Value Opportunities Fund (JPMVOF). Senator Nickles served in the National Guard from 1970 to 1976 and graduated from Oklahoma State University in 1971.

Senator Nickles’ 24 years of service as a U.S. Senator, including his chairmanship of the Senate Budget Committee as well as service on the Senate Energy and Natural Resources Committee and the Senate Finance Committee, have given him valuable experience and perspective on many of the major issues we face as a publicly-traded energy company and tremendous insight into past and potential international, national and state energy policy and other public policy and taxation issues. Additionally, his service on Valero’s board of directors has given him valuable exposure to the downstream energy sector and domestic energy supply and demand.

Kathleen M. Eisbrenner, 50, has been a member of our Board of Directors since December 2010. Ms. Eisbrenner has been Founder and Chief Executive Officer of Next Decade since June 2010, a company that is positioning itself to create new opportunities in the integrated international liquefied natural gas (LNG) industry. Prior to organizing Next Decade, she served as the head of Houston-based Poten & Partners’ Project Development Group from March 2010 to June 2010. Poten & Partners is a global broker and commercial advisor for the energy and ocean transportation industries and a recognized leader in the crude and petroleum products, LNG, liquefied petroleum gas (LPG), fuel oil, naphtha and asphalt market sectors. From September 2007 to December 2009, Ms. Eisbrenner was Executive Vice President responsible for Royal Dutch Shell plc’s global LNG business. From 2003 to August 2007, she was founder, President and Chief Executive Officer of Excelerate Energy, a global importer and marketer of LNG. Ms. Eisbrenner also previously served in various senior leadership positions with other energy companies in the United States, including El Paso Corporation (NYSE:EP). Ms. Eisbrenner graduated from the University of Notre Dame in 1982.

Ms. Eisbrenner has nearly 30 years of experience in the oil and gas industry. The executive and management experience she gained as President and Chief Executive Officer of Excelerate Energy, as well as that gained as an Executive Vice President with Royal Dutch Shell plc’s global LNG business, give her experience and insight on many of the major issues we deal with regularly, such as finance, business strategy, technology, compensation, management development, acquisitions, capital allocation, risk management, corporate governance and shareholder relations. In addition, Ms. Eisbrenner’s extensive experience in the global LNG industry provides valuable expertise regarding world-wide markets for natural gas.

Louis A. Simpson, 74, has been the Chairman of SQ Advisors, LLC since January 2011. Mr. Simpson served as President and Chief Executive Officer, Capital Operations, of GEICO

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Corporation (a subsidiary of Berkshire Hathaway Corporation) from 1993 until his retirement on December 31, 2010. From 1985 to 1993, he served as Vice Chairman of the Board of GEICO. Mr. Simpson joined GEICO in 1979 as Senior Vice President and Chief Investment Officer. Prior to joining GEICO, Mr. Simpson was President and Chief Executive Officer of Western Asset Management, a subsidiary of the Los Angeles, California-based Western Bancorporation. Previously, Mr. Simpson was a partner at Stein Roe and Farnham, a Chicago, Illinois investment firm, and an instructor of economics at Princeton University. Mr. Simpson has also served as a director of VeriSign, Inc. (NASDAQ:VRSN) since 2005 and as a director of SAIC, Inc. (NYSE:SAI) since 2006. He was previously a director of Western Asset Funds Inc. and Western Asset Income Fund and a trustee of Western Asset Premier Bond Fund until 2006. Mr. Simpson graduated from Ohio Wesleyan University in 1958 and from Princeton University in 1960.

Mr. Simpson’s unique blend of professional experiences, accomplishments and skills will be invaluable to the Company. Mr. Simpson has had a long and distinguished career as one of our nation’s most accomplished investors. His experience as Chief Executive Officer, Capital Operations, of GEICO will be of substantial benefit to the Company and will help us continue to build significant intrinsic value per share. Mr. Simpson has also served as a director of numerous public companies, which will allow him to bring insights into many of the major issues that we deal with regularly, such as finance, business strategy, technology, compensation, management development, acquisitions, capital allocation, risk management, corporate governance and shareholder relations.

Directors Whose Terms Expire in 2012

Richard K. Davidson, 69, has been a member of our Board of Directors since 2006. Mr. Davidson served as Chairman of the Board of Directors of Union Pacific Corporation (NYSE:UNP) from 1997 until February 2007 and as its Chief Executive Officer from 1997 until 2006. He started his railroad career in 1960 with Missouri Pacific Railroad and held various positions of increasing authority before being named Vice President of Operations in 1976. In 1982, Union Pacific merged with the Missouri Pacific and Western Pacific railroads, and in 1986, Mr. Davidson was promoted to Vice President of Operations of the combined railroads. He was promoted to Executive Vice President in 1989 and became Chairman and Chief Executive Officer of Union Pacific Railroad in 1991. He was named Chairman and Chief Executive Officer of Union Pacific Corporation in 1997. Mr. Davidson is currently a member of the board of advisors of Thayer/Hidden Creek, a private equity firm headquartered in Washington, D.C., and past member of the Horatio Alger Association of Distinguished Americans. He formerly served on the board of the Association of American Railroads, as chairman of the President’s National Infrastructure Advisory Council, and as a director and trustee of the Malcolm Baldridge National Quality Awards Foundation. Mr. Davidson graduated from Washburn University in 1966 and has completed the Program for Management Development at Harvard University.

Mr. Davidson’s career with Union Pacific, a large industrial company that consumes and transports energy (among many other commodities and goods), provides particularly valuable insight into the needs and concerns of large industrial energy consumers including their sensitivity to energy prices and the manner in which such consumers manage their exposure to volatility in energy prices. Additionally, due to Mr. Davidson’s experience as Chairman and Chief Executive Officer of Union Pacific and through his various other executive, financial and management positions, Mr. Davidson has valuable experience in managing many of the major issues, such as financial, business strategy, technology, compensation, management development, acquisitions, capital allocation, risk management, corporate governance and shareholder relations, that we deal with regularly.

V. Burns Hargis, 65, has been a member of our Board of Directors since September 2008. Mr. Hargis has been the President of Oklahoma State University since March 2008. Before being named OSU President, Mr. Hargis was Vice Chairman of BOK Financial Corporation

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(NASDAQ:BOKF), a financial holding company based in Tulsa, Oklahoma, from 1997 to 2008 and is currently a director of BOKF. Before joining BOKF, he practiced law in Oklahoma City for 28 years, most recently with the firm of McAfee & Taft. In 1967, Mr. Hargis entered the United States Army as a Commissioned 2nd Lieutenant, Military Intelligence, and was honorably discharged as a Captain, U.S. Army Reserves, Finance Corps in 1977. Mr. Hargis is a former President of the Oklahoma County Bar Association, former President of the Oklahoma Bar Foundation and is a Fellow of the American Bar Foundation. Mr. Hargis previously served as Vice-Chairman of the Oklahoma State Election Board, the Oklahoma Constitutional Revision Commission, Chairman of the Oklahoma Commission for Human Services, Chairman of the Board of Regents for the Oklahoma Agricultural and Mechanical Colleges of Oklahoma State University and a member of the Commission of the North Central Association of Colleges and Schools. Mr. Hargis graduated from Oklahoma State University in 1967 with a degree in Accounting and from the University of Oklahoma College of Law in 1970.

Mr. Hargis’ extensive public service in Oklahoma and his expertise in corporate law and public policy are invaluable to our Board of Directors. Additionally, Mr. Hargis’ financial and banking experience is particularly relevant to his service on our Audit Committee and qualifies him as an Audit Committee financial expert. Under Mr. Hargis’ leadership, Oklahoma State University has developed many innovative ways to manage its system-wide energy consumption, including the conversion of its vehicle fleet to compressed natural gas (CNG) and is recognized as an “ENERGY STAR Partner” by ENERGY STAR, a joint program of the U.S. Environmental Protection Agency and the U.S. Department of Energy, for its strategic approach to energy management. In addition, Mr. Hargis’ career in the legal profession brings considerable benefit to the Company as it addresses the various legal proceedings that companies the size of Chesapeake routinely face.

Charles T. Maxwell, 79, has been a director of the Company since 2002. Mr. Maxwell has been a Senior Energy Analyst with Weeden & Co., an institutional brokerage firm located in Greenwich, Connecticut, from 1999 to the present. Entering the oil and natural gas industry in 1957, Mr. Maxwell worked for what is now ExxonMobil for eleven years in the U.S., Europe, the Middle East and Africa. In 1968, Mr. Maxwell joined Cyrus J. Lawrence, an institutional research and brokerage firm, as an oil analyst. He was ranked by Institutional Investor Magazine as No. 1 in his field in 1972, 1974, 1977, and 1981 through 1986. He rose to the position of Managing Director of Cyrus J. Lawrence/Morgan Grenfell and retired from the firm in 1997, several years after it was acquired by Deutsche Bank. Mr. Maxwell is a director of American DG Energy Inc., a provider of on-site electric power through cogeneration, based in Waltham, Massachusetts. He is also a director of Daleco Resources Corporation (DLOV.OB), a minerals and oil and gas exploration and production company located in West Chester, Pennsylvania; and Lescarden, Inc. (LCAR.OB), a biotechnology company in New York. Mr. Maxwell graduated from Princeton University in 1953 and Oxford University in 1957.

Mr. Maxwell’s distinguished career in the energy industry and as an energy analyst provides the Board of Directors with very helpful perspective on global energy markets, potential OPEC decisions and initiatives and macro-economic trends affecting the energy industry in general. Mr. Maxwell has long been considered one of the foremost energy experts in the industry, and the Company has benefited from his deep insights into Middle Eastern politics and socioeconomic trends over the years. In addition, Mr. Maxwell frequently provides information about the possible future direction of natural gas and oil prices, which has been helpful to the Company in executing its highly successful natural gas and oil hedging program.

Directors Whose Terms Expire in 2013

Frank Keating, 67, has been a director of the Company since June 2003. Governor Keating has been the President and Chief Executive Officer of the American Bankers Association, a large trade organization based in Washington, D.C., since January 2011. Governor Keating previously served as

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President and Chief Executive Officer of the American Council of Life Insurers from January 2003 to December 2010. Governor Keating became a special agent in the Federal Bureau of Investigation in 1969 and then served as Assistant District Attorney in Tulsa County, Oklahoma. In 1972, Governor Keating was elected to the Oklahoma State House of Representatives and two years later was elected to the Oklahoma State Senate. In 1981, Governor Keating was appointed as the U.S. Attorney for the Northern District of Oklahoma and in 1985, he began seven years of service in the Ronald Reagan and George H.W. Bush administrations serving as Assistant Secretary of the Treasury, Associate Attorney General in the Justice Department and as General Counsel and Acting Deputy Secretary of the Department of Housing and Urban Development. In 1994, Governor Keating was elected as Oklahoma’s 25th Governor and served two consecutive four-year terms. He was chairman of the Interstate Oil and Gas Commerce Commission during his term as governor. Governor Keating is an advisory director of Stewart Information Services Corporation (NYSE:STC), a real estate information and transaction management company located in Houston, Texas. Governor Keating graduated from Georgetown University in 1966 and from the University of Oklahoma College of Law in 1969.

Through his service as Governor, Senator and a member of the House of Representatives of Oklahoma, senior-level U.S. government appointments, and other appointments and positions, Governor Keating has valuable experience and knowledge regarding many of the major issues we face as a publicly-traded energy company. He has extensive experience with national and state energy policy and other public policy matters. Governor Keating’s other board and management positions have given him exposure to different industries, approaches to governance and other key issues. Additionally, Governor Keating gained specific, first-hand knowledge of the energy industry and management of energy assets through management of his family’s oil and gas interests.

Merrill A. (“Pete”) Miller, Jr., 60, has been a director of the Company since January 2007 and our Lead Independent Director since March 2010. Mr. Miller is Chairman, President and Chief Executive Officer of National Oilwell Varco, Inc. (NYSE:NOV), a supplier of oilfield services, equipment and components to the worldwide oil and natural gas industry. Mr. Miller joined NOV in 1996 as Vice President of Marketing, Drilling Systems and was promoted in 1997 to President of the company’s products and technology group. In 2000, he was named President and Chief Operating Officer, in 2001 was elected President and Chief Executive Officer and in 2002 was also elected Chairman of the Board. Mr. Miller served as President of Anadarko Drilling Company from 1995 to 1996. Prior to his service at Anadarko, Mr. Miller spent fifteen years at Helmerich & Payne International Drilling Company (NYSE:HP) in Tulsa, Oklahoma, serving in various senior management positions, including Vice President, U.S. Operations. Mr. Miller graduated from the United States Military Academy, West Point, New York in 1972. Upon graduation, he served five years in the United States Army and received his MBA from Harvard Business School in 1980. Mr. Miller serves on the Board of Directors for the Offshore Energy Center, Petroleum Equipment Suppliers Association and Spindletop International, and is a member of the National Petroleum Council.

Mr. Miller has more than 30 years of management and executive experience in the oil and gas equipment and service industry. As a result of his positions as Chairman, President and Chief Executive Officer of NOV and various other executive, financial and management positions, Mr. Miller has valuable experience in managing many of the major issues that we deal with regularly, such as finance, business strategy, technology, compensation, management development, acquisitions, capital allocation, risk management, corporate governance and shareholder relations. Additionally, in Mr. Miller’s current position with NOV, he has particularly valuable insight into issues affecting the global energy environment including global energy supply and demand and trends affecting oilfield service costs both globally and domestically. Mr. Miller also has extensive financial and accounting expertise and is one of our Audit Committee financial experts.

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CORPORATE GOVERNANCE

The Board of Directors is responsible to the Company’s shareholders for the oversight of the Company and recognizes the importance and necessity of an effective corporate governance environment in enabling the Board to adequately oversee, advise and monitor the Company. The Board of Directors has adopted a set of Corporate Governance Principles that address the role, composition and functioning of the Board which is posted on the Company’s website at www.chk.com in the Corporate Governance sub-section of the section entitled “About”.

Corporate Governance Initiatives

The Board of Directors believes that a successful company requires appropriate and meaningful social, environmental and governance policies and a Board structure that provides independent oversight of management. The Board of Directors has implemented several policies and structures that have contributed to the Company’s goal of maintaining exemplary corporate governance, including:

The Board of Directors strives to maintain the optimal governance structure for the Company and periodically evaluates new ways to further improve the corporate governance of the Company. The Board of Directors considers every proposed governance change carefully in order to avoid unintended consequences to the Company and its shareholders.

Code of Business Conduct and Ethics

The Board of Directors has adopted a Code of Business Conduct and Ethics applicable to all directors, officers and employees of the Company, including our principal executive officer, principal financial officer and principal accounting officer. The Code of Business Conduct and Ethics is posted on the Company’s website at www.chk.com in the Corporate Governance sub-section of the section entitled “About”. Waivers of provisions of the Code as to any director or executive officer and

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amendments to the Code must be approved by the Audit Committee of the Board of Directors. We will post on our website required disclosure about any such waiver or amendment within four business days of Audit Committee approval.

Communications to the Board

The Company has established a Director Access Line whereby shareholders and other interested parties wishing to communicate directly with our non-employee directors may leave telephone messages for the directors. The Director Access Line number is 1-866-291-3401. Alternatively, shareholders and other interested parties can send written communications to non-employee directors as follows:

Chesapeake Energy Corporation Board of Directors

c/o Jennifer M. Grigsby, Senior Vice President, Treasurer and Corporate Secretary

P.O. Box 18496

Oklahoma City, OK 73154

All calls received by the Director Access Line will be reported promptly to the Company’s Corporate Secretary. Depending upon the subject matter of the communication, the Corporate Secretary will:

A report of all material communications and their disposition since the prior quarterly Board of Directors meeting is provided to the directors at each regular quarterly meeting of the Board.

Board Independence

In 2011, the Board of Directors, through its Nominating and Corporate Governance Committee, evaluated the independence of each director in accordance with the NYSE corporate governance standards, a portion of which are posted on the Company’s website at www.chk.com in the Corporate Governance sub-section of the section entitled “About”. During this review, the Committee considered transactions and relationships between the Company (and/or any of its executive officers) and each director or any member of his immediate family. Based on this review, the Committee affirmatively determined that all directors, other than Mr. McClendon due to his employment with the Company, are independent. We also expect that, if elected, Mr. Simpson will be considered independent under the Board’s Director Independence Standards.

In assessing director independence, the Committee considered the business the Company conducted in 2008, 2009 and 2010, including payments made by the Company to National Oilwell Varco, Inc. (“NOV”), for which Mr. Miller serves as Chairman, President and Chief Executive Officer, and payments made by the Company to BOK Financial Corporation (“BOKF”), for which Mr. Hargis served as Vice Chairman until March 2008 and since then has served as a director. The Company’s business transactions with NOV and BOKF were all conducted in the ordinary course of business. Payments made to NOV represented 0.5%, 1.0% and 0.6% of NOV’s gross revenues during 2008, 2009 and 2010, respectively, well below the 2.0% of gross revenues threshold under the NYSE director independence rules, and the Company’s payments to BOKF were nominal during the review period.

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The Committee also considered transactions and relationships with Oklahoma State University, for which Mr. Hargis has served as President since March 2008, including contributions and support for scholarships and faculty chair endowment, university athletics and various sponsorships and training programs. The Committee determined that all transactions and relationships it considered during its review were not material transactions or relationships with the Company and did not impair the independence of any of the affected directors.

Board Leadership Structure and Lead Independent Director

The Company’s board structure is designed to ensure consistent and effective leadership through open communication between the Board of Directors and management. As part of this approach, Mr. McClendon currently serves as Chairman of the Board and Chief Executive Officer of the Company, and works in concert with Mr. Miller, the Lead Independent Director, and the rest of our Board, which consists of all independent directors, to oversee the execution of the Company’s strategy. This arrangement has proven effective for the Company in the past and the Board of Directors believes it continues to best serve the interests of the Company and its shareholders.

The Board of Directors believes that no single organizational structure is best and most effective in all circumstances. Accordingly, the Board retains the flexibility to determine the organizational structure that best enables the Company to confront the challenges and risks it faces. The Board has concluded that the current organizational structure best serves the interests of the Company and its shareholders by promoting long-term shareholder value for the following reasons:

Accordingly, the Board of Directors believes that consolidating the positions of Chairman and CEO in Mr. McClendon most effectively coordinates the leadership and advisory roles of the Board with the strategic and operational expertise of the Company’s management team.

The Company is committed to strong corporate governance. As discussed under “Board Independence” above, except for the Chairman, all members of the Board of Directors are

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independent. In addition, by maintaining a Lead Independent Director, our leadership structure can provide strong independent oversight of management. Since his appointment as Lead Independent Director, Mr. Miller has held meetings with major shareholders of the Company to discuss various corporate governance issues. He has also reviewed, edited and approved all schedules and agendas for meetings of the Board and has chaired quarterly executive sessions of the non-employee directors, which regularly include discussions regarding succession planning and CEO compensation. The general duties of the Lead Independent Director are published on the Company’s website at www.chk.com in the Corporate Governance sub-section under the section entitled “About”.

The Lead Independent Director must be elected annually at the Board’s June meeting. However, it is the expectation of the Board of Directors that the Lead Independent Director will serve for multiple terms to enhance continuity and improve the effectiveness of the position.

In sum, the Board of Directors has determined that vesting the positions of Chairman and CEO in Mr. McClendon in conjunction with a Lead Independent Director provides unified leadership and vision for the Company while retaining strong corporate governance standards. The Board is committed to strong corporate governance practices and, in order to ensure that such practices are upheld, will review its leadership structure annually and when a new CEO is appointed.

Executive Sessions

Non-employee directors meet regularly in executive session, including after each scheduled quarterly Board of Directors meeting.

Board Role in Risk Oversight

It is management’s responsibility, subject to the oversight of the Board of Directors, to monitor and, to the extent possible, mitigate the negative impact of uncertainty in the business environment on our operations and our financial objectives. The Company maintains an enterprise risk management (“ERM”) program overseen by its Vice President of Risk Management, who reports directly to the Senior Vice President, Treasurer and Corporate Secretary. Significant risks and the possible approaches to mitigate such risks are reviewed by senior management at periodic meetings and presented to the Board or one or more of its three committees (Audit, Compensation and Nominating and Corporate Governance) to assess the impact of such risks on our strategic objectives and risk tolerance levels. The Company’s internal audit group participates in the ERM meetings to add perspective and insight regarding potential risks facing the Company.

A significant portion of the Board’s oversight of the risks facing the Company is initially addressed by the Board’s independent committees. The Audit Committee, in addition to overseeing the integrity of our financial statements and our compliance with legal and regulatory requirements, is primarily responsible for overseeing the ERM process, which oversight includes regular meetings with the Company’s Vice President of Risk Management, internal audit group and independent auditors. The Nominating and Corporate Governance Committee oversees Board composition, leadership structures and corporate governance matters. As described below, the Compensation Committee considers the impact of risks faced by the Company as part of its oversight of our compensation program and its impact on management retention, development and succession. In addition, by combining the positions of Chairman and CEO, the Board gains valuable perspective that combines the operating experience of a member of management with the oversight focus of a member of the Board; and by maintaining a Lead Independent Director, the Board can provide strong independent risk oversight. A number of other processes at the Board level support our risk management effort, including Board reviews of our long-term strategic plans, capital budget and certain capital projects, hedging policy, significant acquisitions and divestitures, capital markets transactions and the delegation of authority to our management.

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Our Compensation Committee does not believe our compensation programs encourage excessive or inappropriate risk taking for the following reasons:

THE BOARD OF DIRECTORS AND ITS COMMITTEES

During 2010, the Board of Directors held four meetings in person and nine meetings by telephone conference. Additionally, management frequently discusses matters with the directors on an informal basis. The Board of Directors has a standing Compensation Committee, Audit Committee and Nominating and Corporate Governance Committee. Each director attended, either in person or by telephone conference, at least 80% of the Board and committee meetings held while serving as a director or committee member in 2010. The Company expects the directors to attend annual meetings of shareholders. All of the Company’s directors attended the 2010 annual meeting of shareholders.

Compensation Committee

The Compensation Committee is responsible for establishing the Company’s compensation program and overseeing the implementation of the Company’s compensation system for its executives. The Committee’s objective is to develop an executive compensation system that encourages both short-term and long-term performance aligned with shareholders’ interests and is competitive with the Company’s peers.

Governor Keating, Messrs. Whittemore and Maxwell and Ms. Eisbrenner serve on the Compensation Committee. Governor Keating currently serves as the chairman of the Compensation Committee. During 2010, the Compensation Committee held four meetings. Governor Keating, Messrs. Whittemore and Maxwell and Ms. Eisbrenner are independent, as determined by the Board of Directors in accordance with the NYSE corporate governance listing standards. A copy of the Compensation Committee Charter, as approved by the Committee and the Board of Directors, is posted on the Company’s website at www.chk.com in the Corporate Governance sub-section under the section entitled “About”.

The Compensation Committee has delegated primary authority for the administration of the Company’s compensation program with respect to all employees who are not executive officers to the

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Employee Compensation and Benefits Committee (“ECBC”). The ECBC is chaired by Mr. McClendon, our Chairman and CEO, and further consists of our Executive Vice President and Chief Financial Officer; Executive Vice President—Operations and Geosciences and Chief Operating Officer; Senior Vice President—Human and Corporate Resources; Senior Vice President—Land and Legal and General Counsel; Senior Vice President, Treasurer and Corporate Secretary; Vice President—Compensation and Benefits; and Vice President—Human and Corporate Resources. For purposes of granting equity compensation to employees who are not executive officers, the ECBC consists of Mr. McClendon and all other members of the ECBC act in an advisory capacity only. The ECBC held four meetings during 2010.

Director Compensation

The full Board of Directors, rather than the Compensation Committee, is responsible for establishing and approving director cash compensation. The Board analyzes its director compensation package on an annual basis at the Board’s meeting in March of each year. Adjustments to director compensation are subsequently considered and approved by the Board at its meeting in June. Cash compensation adjustments approved by the Board in June are effective July 1 and annual restricted stock awards to directors are approved by the Compensation Committee at its June meeting.

Employee Compensation

We review the cash and equity compensation for substantially all of the Company’s employees, including executive officers, on a semi-annual basis, in June and December. With respect to the June compensation review, salary adjustments are effective July 1, cash bonuses are normally paid prior to the last business day in July and restricted stock is normally awarded on the first trading day of July. With respect to the December compensation review, salary adjustments are effective on January 1 of the following year, cash bonuses are normally paid prior to the last business day in January and restricted stock is normally awarded on the first trading day of January. Certain employees of our drilling and service operations subsidiaries (approximately 2,200 employees) do not receive equity compensation other than through matching contributions under the Company 401(k) Plan. Our union employees (approximately 150 employees) receive cash compensation in accordance with the offer we implemented following the expiration of the union’s collective bargaining agreement in 2007 and do not receive equity compensation. The Compensation Committee and the ECBC may review the compensation of the Company’s employees and senior management, including executive officers, at various times during the year, other than in connection with the regular June and December compensation reviews, if we determine such a review is necessary or appropriate.

Executive Officer Compensation. Messrs. McClendon, Dixon and Dell’Osso are responsible, in conjunction with the semi-annual evaluation of the Company’s other employees, for developing recommended base salary adjustments, cash bonuses and restricted stock awards for the executive officers, including themselves, for the Compensation Committee to review, discuss and vote on during its regularly scheduled meetings in June and December of each year. In order to develop such recommendations, Messrs. McClendon, Dixon and Dell’Osso work as a group to evaluate each executive officer utilizing their experience with each member of the executive officer group and the compensation established for the other members of senior management.

Mr. McClendon generally attends Compensation Committee meetings and, as appropriate, participates in discussions in order to provide information to the Committee regarding the compensation relevant to the Committee’s activities. On occasion the Compensation Committee meets in executive session without Mr. McClendon. Messrs. Dixon and Dell’Osso do not generally attend Compensation Committee meetings. After review, discussion, modifications, if any, and a vote on the final executive officer compensation amounts, the Compensation Committee makes a report to the

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Board of Directors for discussion and ratification. Mr. McClendon, not being a member of the Compensation Committee, does not vote at Compensation Committee meetings, and he does not participate in the Board’s vote on the acceptance and approval of the Compensation Committee’s report with respect to his compensation. Mr. McClendon is generally present during the Board’s discussions of executive officer compensation and performance, but does not attend the Board’s quarterly executive sessions when the non-employee directors discuss and assess the Company’s overall compensation program and Mr. McClendon’s performance and compensation in relation to the Company’s long-term results and strategy.

Senior Management Compensation. Messrs. McClendon, Dixon and Dell’Osso, collectively representing the ECBC, are responsible for developing and approving base salary adjustments, cash bonuses and restricted stock awards for employees representing the Company’s senior management team. These employees include senior vice presidents, vice presidents and our other management-level employees.

All Other Employee Compensation. The Company’s human resources department coordinates the semi-annual compensation review process for all other employees through an automated program that allows supervisors to provide performance assessments and to propose compensation adjustments for their subordinates. Each supervisor’s performance assessments and compensation proposals are sequentially reviewed, adjusted, approved and forwarded upward through the organization. The human resources department then aggregates the data by department and each department head meets with Messrs. McClendon, Dixon and Dell’Osso, representing the ECBC, for final discussion, adjustment and approval of base salary, cash bonuses and restricted stock awards with respect to all employees under the department head. Additionally, compensation adjustments for employees who are members of an executive officer’s or director’s immediate family are submitted by the ECBC to the Compensation Committee for review and approval along with executive officer compensation.

Internal Pay Equity and Tally Sheets

In performing semi-annual reviews of executive compensation, the Compensation Committee reviews “internal pay equity” within the Company’s senior management group. This involves a review of the base salary, cash bonus and equity compensation for our senior management levels (including the CEO, executive vice presidents, senior vice presidents, vice presidents and our other management-level employees) for the prior three years. Additionally, the Committee reviews tally sheets prepared by management which aggregate all components of cash, non-cash and equity compensation, calculates estimates of compensation payments due under various termination scenarios and estimates wealth accumulation over time from equity compensation at various stock prices.

Compensation Consultants

Neither the Compensation Committee nor the ECBC employed the services of compensation consultants in determining or recommending executive officer and director compensation in 2010. In March 2011, the Compensation Committee engaged Cogent Compensation Partners, an independent compensation consultant with extensive experience in the energy industry, to review the Company’s compensation system and provide recommendations to the Compensation Committee with respect to future improvements.

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Audit Committee

The Audit Committee assists the Board of Directors in overseeing (i) the integrity of the Company’s financial statements; (ii) the Company’s compliance with legal and regulatory requirements; (iii) the independent auditor’s qualifications and independence; (iv) the performance of the Company’s internal auditors and independent auditor; and (v) the ERM process. In so doing, it is the responsibility of the Audit Committee to maintain free and open communication among the directors, the independent auditor and the management of the Company with respect to audit-related matters.

The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of the independent auditor for the purpose of preparing or issuing audit reports or performing other audit, review or attest services for the Company. The independent auditor reports directly to the Audit Committee. PwC served as the Company’s independent registered public accounting firm during 2010 and was appointed by the Audit Committee to serve in that capacity for 2011, and we are seeking ratification of such appointment by the Company’s shareholders at the meeting. See “Voting Item 3—Ratification of Appointment of Independent Registered Public Accounting Firm” on page 71.

Messrs. Davidson, Hargis and Miller serve on the Audit Committee. Mr. Hargis currently serves as the chairman of the Audit Committee. The Committee held four meetings in person during 2010 and six meetings by telephonic conference. Messrs. Davidson, Hargis and Miller are all independent, as determined by the Board of Directors in accordance with Section 10A of the Securities Exchange Act of 1934 (the “Exchange Act”) and the NYSE corporate governance listing standards, and Messrs. Hargis and Miller are designated by the Board as “audit committee financial experts”, as defined in Item 407(d) of Regulation S-K. For the relevant experience of Messrs. Davidson, Hargis and Miller, please refer to their respective biographies on pages 10 and 12. The full text of the Committee’s charter is available on the Company’s website at www.chk.com in the Corporate Governance sub-section under the section entitled “About”.

Audit Committee Report

In connection with fulfilling its responsibilities under the Audit Committee charter, the Committee met with management and PwC, our independent registered public accounting firm, and discussed and reviewed the Company’s audited financial statements as of and for the year ended December 31, 2010. The Committee also discussed with PwC the matters required to be discussed by the Statement on Auditing Standards No. 61, as amended, as adopted by the Public Company Accounting Oversight Board in Rule 3200T. The Committee reviewed and discussed with PwC the auditor’s independence from the Company and its management. As part of that review, PwC provided the Committee the written disclosures and letter required by Public Company Accounting Oversight Board Rule 3526, Communication with Audit Committees Concerning Independence.

Based on these reviews and discussions, the Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s 2010 Form 10-K for filing with the Securities and Exchange Commission.

Members of the Audit Committee:

V. Burns Hargis, Chairman

Richard K. Davidson

Merrill A. (“Pete”) Miller, Jr.

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Nominating and Corporate Governance Committee

The duties and objectives of the Nominating and Corporate Governance Committee are described under “Nominating and Corporate Governance Committee Report” below. Senator Nickles, Messrs. Whittemore and Maxwell and Ms. Eisbrenner, who was appointed to the Board of Directors effective December 1, 2010, serve on the Nominating and Corporate Governance Committee. Senator Nickles currently serves as the chairman of the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee held four meetings in 2010. Each of the Committee members is independent, as determined by the Board of Directors in accordance with the NYSE corporate governance listing standards. A copy of the Nominating and Corporate Governance Committee charter, as approved by the Committee and the Board of Directors, is posted on the Company’s website at www.chk.com in the Corporate Governance sub-section under the section entitled “About”.

Nominating and Corporate Governance Committee Report

The Nominating and Corporate Governance Committee is responsible for identifying and recommending qualified candidates to the Board of Directors for nomination as members of the Board and for recommending to the Board the corporate governance principles applicable to the Company.

The Committee periodically assesses, and advises the Board of Directors, whether the current size of the Board is sufficient to function effectively as a body, assesses the diversity of skills and experience among the current Board and considers skill sets that would complement those of the current Board and provide value-added perspective.

It is challenging to identify highly qualified candidates who are willing to serve on public company boards. Therefore, we believe it is essential to continuously and actively identify and evaluate candidates, on an informal basis, that would potentially be willing to serve as a director on the Board of Directors at some future time. We may also use our network of contacts, or may engage, as we deem appropriate, a professional search firm to identify potential candidates. In addition, we will consider director candidates recommended by shareholders.

The Committee has no minimum qualifications for candidates. In general, however, we review and evaluate both incumbent and potential new directors, in an effort to achieve diversity of skills and experience among our directors, in light of the following criteria:

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Qualified candidates for nomination to the Board of Directors are considered without regard to race, color, religion, gender, ancestry or national origin.

On an annual basis, in advance of the annual meeting of shareholders, we will recommend to the Board of Directors a slate of nominees to be submitted to the Company’s shareholders at the next annual meeting. The Board has the authority to accept, modify or reject the slate of nominees recommended by the Committee.

The Committee, with the approval of the full Board, may determine from time to time that it is in the best interests of the Company and its shareholders to add a new director to the Board between annual meeting dates. If such determination is made, we will evaluate potential candidates, as described above and may make a formal recommendation to the Board that a potential candidate be appointed to the Board to serve until the next annual meeting of the Company’s shareholders.

We will consider candidates recommended by a shareholder and such recommendations will receive the same consideration that the Committee’s candidates receive.

Members of the Nominating and Corporate Governance Committee:

Don Nickles, Chairman

Kathleen M. Eisbrenner

Charles T. Maxwell

Frederick B. Whittemore

2010 Director Compensation

Non-employee director compensation has not changed since 2008 and continues to consist of the following:

The annual grant of restricted stock is made from our LTIP (see page 63, “Voting Item 2—Proposal to Amend Long Term Incentive Plan”). In 2010, the annual award was made on June 10, 2010. No additional compensation is paid to directors for participating on or chairing a committee of the Board of Directors or for serving as Lead Independent Director. Directors are also reimbursed for travel and other expenses directly related to their service as directors.

To best align the Board’s and shareholders’ interests, the Board focuses on the number of shares awarded annually to directors rather than the grant date fair value of such awards. The Board believes the value of restricted stock upon vesting, which cannot be predicted at the time an award is made, is a better measure of value of compensation to the director than the grant date fair value of an award. Because the SEC requires us to disclose the value of such awards based on their grant date fair value, however, non-employee director equity compensation reported in the proxy statement may fluctuate from year to year, even when the Board decides, as it has since 2005, to hold non-employee director equity compensation flat by awarding the same number of shares to each non-employee director as in the prior year.

Directors are eligible to defer any or all of their annual retainers and/or meeting fees through the Company’s deferred compensation plan on a tax-favored basis. Deferrals into the plan are not

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matched or subsidized by the Company nor are they eligible for above-market or preferential earnings. Please refer to the narrative to the Nonqualified Deferred Compensation Table for 2010 on page [·] for more information about the plan. In addition, the Company has established a guideline for non-employee directors to hold at least 15,000 shares of the Company’s common stock at all times while serving as a director. Newly appointed directors are generally given one year from the date of appointment to comply with this stock ownership guideline. Failure to comply with this guideline or potential deferrals of the guideline due to hardship are addressed on a case by case basis by the Board.

Under the Company’s 2003 Stock Award Plan for Non-Employee Directors, 10,000 shares of our common stock are awarded to each newly appointed non-employee director on his or her first day of service.

Under the Company’s policy regarding the use of fractionally-owned Company aircraft, our directors are provided access to fractionally-owned Company aircraft for travel to and from Board meetings. For Board meetings and other Company activities at which the attendance of a director’s spouse is also requested by the Company, we make tax gross-up payments to the director associated with the taxable compensation attributable to travel by the spouse. In addition, each non-employee director is entitled to personal use of fractionally-owned Company aircraft for up to 40 hours of flight time per calendar year. We apply the Internal Revenue Service’s (the “IRS’s”) Standard Industry Fare Level valuation methodology to determine the taxable compensation attributable to our directors’ personal usage of fractionally-owned Company aircraft.

The following table sets forth the compensation earned by our non-employee directors in 2010:

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INFORMATION REGARDING OFFICERS

Executive Officers

In addition to Mr. McClendon, the following are also executive officers of the Company as of the record date.

Steven C. Dixon, 52, has been Executive Vice President—Operations and Geosciences and Chief Operating Officer since February 2010. Mr. Dixon served as Executive Vice President—Operations and Chief Operating Officer from 2006 to February 2010 and as Senior Vice President—Production from 1995 to 2006. He also served as Vice President—Exploration from 1991 to 1995. Mr. Dixon was a self-employed geological consultant in Wichita, Kansas from 1983 through 1990. He was employed by Beren Corporation in Wichita, Kansas from 1980 to 1983 as a geologist. Mr. Dixon graduated from the University of Kansas in 1980.

Douglas J. Jacobson, 57, has been Executive Vice President—Acquisitions and Divestitures since 2006. He served as Senior Vice President—Acquisitions and Divestitures from 1999 to 2006. Prior to joining the Company, Mr. Jacobson was employed by Samson Investment Company from 1980 until 1999, where he served as Senior Vice President—Project Development and Marketing from 1996 to 1999. Prior to joining Samson, Mr. Jacobson was employed by Peat, Marwick, Mitchell & Co. Mr. Jacobson has served on various Oklahoma legislative commissions which have addressed issues in the oil and gas industry, including the Commission of Oil and Gas Production Practices and the Natural Gas Policy Commission. Mr. Jacobson is a Certified Public Accountant and graduated from John Brown University in 1976 and from the University of Arkansas in 1977.

Domenic J. (“Nick”) Dell’Osso, Jr., 34, has been Executive Vice President and Chief Financial Officer since November 2010. Mr. Dell’Osso served as Vice President—Finance of the Company and Chief Financial Officer of Chesapeake’s wholly owned midstream subsidiary, Chesapeake Midstream Development, L.P., from August 2008 to November 2010. Prior to joining Chesapeake, Mr. Dell’Osso was an energy investment banker with Jefferies & Co. from 2006 to August 2008 and Banc of America Securities from 2004 to 2006. Mr. Dell’Osso graduated from Boston College in 1998 and from the University of Texas at Austin in 2003.

Martha A. Burger, 58, has served as Senior Vice President—Human and Corporate Resources since March 2007. She served as Treasurer from 1995 to March 2007 and as Senior Vice President—Human Resources since 2000. She was the Company’s Vice President—Human Resources from 1998 until 2000, Human Resources Manager from 1996 to 1998 and Corporate Secretary from 1999 to 2000. From 1994 to 1995, she served in various accounting positions with the Company, including Assistant Controller—Operations. From 1989 to 1993, Ms. Burger was employed by Hadson Corporation as Assistant Treasurer and from 1993 to 1994 served as Vice President and Controller of Hadson Corporation. Prior to joining Hadson Corporation, Ms. Burger was employed by The Phoenix Resource Companies, Inc. as Assistant Treasurer and by Arthur Andersen & Co. Ms. Burger graduated from the University of Central Oklahoma in 1982 and from Oklahoma City University in 1992.

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Henry J. Hood, 50, was appointed General Counsel in 2006, and has served as Senior Vice President—Land and Legal since 1997. He served as Vice President—Land and Legal from 1995 to 1997. Mr. Hood was retained as a consultant to the Company during the two years prior to his joining the Company, and he was associated with the law firm of White, Coffey, Galt & Fite from 1992 to 1995. He was associated with or a partner of the law firm of Watson & McKenzie from 1987 to 1992. Mr. Hood is a member of the Oklahoma and Texas Bar Associations. Mr. Hood graduated from Duke University in 1982 and from the University of Oklahoma College of Law in 1985.

Jennifer M. Grigsby, 42, has served as Senior Vice President and Treasurer since March 2007 and as Corporate Secretary since 2000. She served as Vice President from 2006 to March 2007 and as Assistant Treasurer from 1998 to March 2007. From 1995 to 1998, she served in various accounting positions with the Company. Ms. Grigsby was employed by Commander Aircraft Company as Supervisor of Finance and Human Resources from 1994 to 1995 and by Deloitte & Touche LLC from 1991 to 1994. Ms. Grigsby is a Certified Public Accountant and Certified Equity Professional. She graduated from Oklahoma State University in 1991 and from Oklahoma City University in 1999.

Michael A. Johnson, 45, has served as Senior Vice President—Accounting, Controller and Chief Accounting Officer since 2000. He served as Vice President of Accounting and Financial Reporting from 1998 to 2000 and as Assistant Controller from 1993 to 1998. From 1991 to 1993, Mr. Johnson served as Project Manager for Phibro Energy Production, Inc., a Russian joint venture. From 1987 to 1991, he was employed by Arthur Andersen & Co. Mr. Johnson is a Certified Public Accountant and graduated from the University of Texas at Austin in 1987.

Other Officers

Jeffrey A. Fisher, 51, has been Senior Vice President—Production since 2006. He was Vice President—Operations for the Company’s Southern Division from 2005 to 2006 and served as Operations Manager from 2003 to 2005. Prior to joining the Company, Mr. Fisher held the position of Asset Manager for British Petroleum plc (NYSE:BP) from 2000 to 2003. From 1993 to 2000, Mr. Fisher worked for Vastar Resources as Engineering Manager. Mr. Fisher began his professional career with ARCO in 1983 as an engineer and served in various technical and managerial positions in the exploration, production and midstream business segments of ARCO until 1993. Mr. Fisher serves on the Oklahoma State University Advisory Board for the College of Engineering, Architecture & Technology and is a member of the Society of Petroleum Engineers. Mr. Fisher graduated from Oklahoma State University in 1983.

James C. Johnson, 53, has served as President of Chesapeake Energy Marketing, Inc., a wholly-owned subsidiary of the Company, since 2000. He served as Vice President—Contract Administration for the Company from 1997 to 2000 and as Manager—Contract Administration from 1996 to 1997. From 1980 to 1996, Mr. Johnson held various gas marketing and land positions with Enogex, Inc., Delhi Gas Pipeline Corporation, TXO Production Corp. and Gulf Oil Corporation. Mr. Johnson is a member of the Natural Gas & Energy Association of Oklahoma and graduated from the University of Oklahoma in 1980.

Stephen W. Miller, 54, has served as Senior Vice President—Drilling since 2001. He served as Vice President—Drilling from 1996 to 2001 and as District Manager—College Station District from 1994 to 1996. Mr. Miller held various engineering positions in the oil and gas industry from 1980 to 1993. Mr. Miller is a registered Professional Engineer and a member of the Society of Petroleum Engineers. Mr. Miller graduated from Texas A & M University in 1980.

Jeffrey L. Mobley, 42, has been Senior Vice President—Investor Relations and Research since 2006 and was Vice President—Investor Relations and Research from 2005 to 2006. From 2002 to

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2005, Mr. Mobley was Vice President of Equity Research at Raymond James & Associates focusing on the exploration and production sector. From 1998 to 2002, Mr. Mobley worked in energy investment banking for Prudential Securities and ABN Amro Securities. Mr. Mobley also worked in the Principal Investments Group and Energy Finance Group at Enron Capital & Trade Resources from 1995 to 1998. Mr. Mobley is a CFA Charterholder and graduated from New Mexico State University in 1991 and the Wharton School of Business at the University of Pennsylvania in 1995.

Thomas S. Price, Jr., 59, has served as Senior Vice President—Corporate Development and Government Relations since March 2009. He served as Senior Vice President—Corporate Development from 2005 to March 2009 and as Senior Vice President—Investor and Government Relations from 2003 to 2005, Senior Vice President—Corporate Development from 2000 to 2003, Vice President—Corporate Development from 1992 to 2000 and a consultant to the Company during the three years prior. He was employed by Kerr-McGee Corporation, Oklahoma City, from 1988 to 1989 and by Flag-Redfern Oil Company from 1984 to 1988. Mr. Price is a board member of the Oklahoma Independent Petroleum Association, the Texas Oil and Gas Association, the Colorado Oil and Gas Association and the American Clean Skies Foundation. Mr. Price graduated from the University of Central Oklahoma in 1983, from the University of Oklahoma in 1989 and from the Thunderbird School of Global Management in 1992.

J. Mike Stice, 52, has served as Chief Executive Officer of Chesapeake Midstream GP, L.L.C., the general partner of CHKM, which completed its initial public offering of common units in 2010, and has served as Senior Vice President—Natural Gas Projects of the Company and President and Chief Operating Officer of Chesapeake Midstream Development, L.P. a wholly-owned subsidiary of the Company, since November 2008. Prior to joining the Company, Mr. Stice spent 27 years with ConocoPhillips and its predecessor companies, where he most recently served as President of ConocoPhillips Qatar, responsible for the development, management and construction of natural gas liquefaction and regasification (LNG) projects. While at ConocoPhillips, he also served as Vice President of Global Gas LNG, as President of Gas and Power and as President of Energy Solutions in addition to other roles in ConocoPhillips’ midstream business units. Mr. Stice graduated from the University of Oklahoma in 1981 and from Stanford University in 1995.

Cathlyn L. Tompkins, 49, was appointed Senior Vice President—Information Technology and Chief Information Officer in 2006. Ms. Tompkins served as Vice President—Information Technology from 2005 to 2006. Prior to joining the Company in 2004 as Director—Applications and Programming, Ms. Tompkins spent 20 years in IT management and technical positions at various companies including Devon Energy Corporation, Ocean Energy, Inc., Cabot Oil and Gas Corporation, Price Waterhouse LLP and Shell Oil Company. Ms. Tompkins graduated from the University of Alabama in 1983.

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SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

Security Ownership

The table below sets forth (i) the name and address and beneficial ownership of each person known by management to own beneficially more than 5% of our outstanding common stock, and (ii) the beneficial ownership of common stock of our nominees, directors and executive officers listed in the Summary Compensation Table below and by all directors and executive officers of the Company as a group. Unless otherwise noted, information is given as of the record date and the persons named below have sole voting and/or investment power with respect to such shares.

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Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors and executive officers and persons who beneficially own more than 10% of the Company’s common stock to file reports of ownership and subsequent changes with the SEC. Based only on a review of copies of such reports and written representations delivered to the Company by such persons, the Company believes that there were no violations of Section 16(a) by any such persons during 2010 other than the following: (a) an untimely Form 4 filed for Mr. Hargis following a reportable transaction; (b) an untimely Form 4 filed for Mr. Rowland following a reportable gift transaction; and (c) an untimely Form 4 filed for Ms. Burger following a reportable inheritance transaction.

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

This Compensation Discussion and Analysis (“CD&A”) describes the compensation system for our NEOs for 2010 consisting of the following individuals:

Additionally, we describe the compensation of Marcus C. Rowland, our former Executive Vice President—Finance and CFO (the “Former CFO”), who retired from the Company in late October 2010 to become President and Chief Financial Officer of a company in which we have a strategic investment, Frac Tech Holdings, LLC.

Executive Summary

Compensation Philosophy. Our compensation philosophy has been developed over time to capture the following:

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Compensation Elements and Mix. Total compensation for the NEOs is weighted heavily toward incentive compensation rather than base salary, and a substantial majority of each NEO’s incentive compensation consists of restricted stock grants. The following charts illustrate the compensation elements and mix in 2010 for our CEO and our other NEOs (except our Former CFO) based on the compensation values disclosed in the Summary Compensation Table presented on page 45:

Executive Compensation Highlights. In recent years, we have increased our focus on developing and maintaining an active dialogue with our shareholders, and many of the groups that advise them, with the goal of achieving continuous improvement in all aspects of corporate governance, including executive compensation. We have taken the following actions with respect to our executive compensation system, many of which have grown out of these efforts:

Corporate Performance Highlights. Chesapeake is the second-largest producer of natural gas, a top 15 producer of oil and natural gas liquids (“NGLs”) and the most active driller of new wells in the U.S. As of March 31, 2011, we owned interests in approximately 45,100 producing natural gas and oil wells that are currently producing approximately 3.0 billion cubic feet of natural gas equivalent per day, 84% of which is natural gas. Since 2000, a period of high volatility in U.S. natural gas prices, Chesapeake has delivered strong long-term performance for our shareholders, despite the tendency of our stock price to be correlated with U.S. natural gas prices. The chart below illustrates the price of our common stock compared to the Henry Hub natural gas spot price at each month-end since January

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2000, and shows that natural gas prices increased only 59% while our stock price (without considering dividends) increased by 1,241% through March 31, 2011, as reflected by the arrow below.

We believe that the innovative thinking and leadership of our CEO during the last decade resulted in the Company generating superior performance for our shareholders. Moreover, we believe that our CEO’s continued leadership, along with the consistent effort of our NEOs, has positioned the Company very favorably to carry on its pioneering approach to generating superior performance for the next decade and beyond by:

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In addition to the above, our 2010 and first quarter 2011 accomplishments are described under “Corporate Performance Review” on page 37.

Compensation Design and Philosophy

Our compensation system is designed to achieve the following goals:

Our compensation philosophy has developed over time and is founded on our belief that great assets would not and cannot exist without great people. Accordingly, we take great pride in hiring, rewarding, motivating and retaining what we regard as the best NEO team in the industry. Our compensation system reflects the unique qualifications and commitment of our NEO team, including our CEO, who is a co-founder of the Company and brings unique skills and energy to the organization. The CEO’s focus and drive have helped set the direction of the Company and its high levels of productivity and innovation since its formation in 1989.

We also recognize the ever-changing nature of our industry, and the resulting necessity of clear and insightful decision making to generate superior shareholder returns. Our fundamental business process requires the NEOs to identify and incorporate in the Company’s strategy a number of variables, the relative importance of which changes frequently over short time periods. These variables include, among others, energy prices, new discoveries, new technology, resource availability, interest rates and capital availability. As a result, we have designed our compensation system to encourage the NEOs to seize opportunities to create long-term shareholder value during the limited windows of time in which they arise, even when doing so may be unpopular in the short-term. For example, we have assembled leading positions in 16 of the 20 most important major unconventional natural gas, NGL and oil plays in the U.S., creating a tremendous storehouse of value that we believe will provide the basis for strong returns for our shareholders for decades to come.

We believe that taking a comprehensive, subjective approach in determining the mix and level of executive compensation best meets our compensation objectives. This belief is rooted in the understanding that the energy exploration and production industry is highly complex and subject to cyclical downturns and upturns. We invest significant amounts of capital to accumulate and develop leasehold to ultimately produce natural gas and liquids at a profit, which may not occur until years after our initial investment. A large shale play can take up to a decade to fully develop; however, once completed, our wells can produce natural gas and liquids for many decades. Accordingly, short-term financial and operational performance metrics measured over a single year or less, including the price of our common stock or net income, are almost always ineffective indicators of the performance of the NEOs. Instead, the Compensation Committee values the flexibility it has to recognize both the current value created from the consistent effort of our NEOs in prior years and the anticipated future value creation for shareholders through each NEO’s current efforts.

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Although the Compensation Committee believes strongly that the NEOs should be paid for performance, the Committee has concluded that, due to the nature of our business, utilizing an objective set of metrics to drive incentive compensation poses problems of measurement and can encourage behavior that may be contrary to the long-term interests of the Company and our shareholders. Below are examples of how the use of predetermined, objective performance measurements could hinder or prevent the alignment of the interests of the NEOs with those of our shareholders:

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While many of the foregoing metrics are valuable tools for managing segments within the Company, they do not provide a meaningful mechanism for compensating our NEOs because as a team they manage a number of frequently changing variables to build a portfolio of assets that are intended to create long-term value for our shareholders. We believe our adaptable compensation philosophy balances our objective of paying for performance with our objective of attracting, retaining and motivating NEOs with the competence, knowledge, leadership skills and experience to promote the long-term growth and profitability of the Company.

Process for Determining Executive Compensation

The Compensation Committee oversees the development of our compensation system and determines the compensation of the NEOs. The Compensation Committee reviews each NEO’s performance twice each year in June and December, as described on page 17 under “The Board of Directors and its Committees—Compensation Committee”. The Compensation Committee believes that more frequent performance reviews (rather than year-end to year-end) accurately reflect the dynamic nature of our industry and permit the Committee to better monitor the performance of the NEOs and understand the business issues facing them on an ongoing basis.

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The Compensation Committee takes a comprehensive approach to determining the mix and level of executive compensation by making an overall assessment of the performance of the NEO team and the role and relative contribution of each of its members. For the reasons explained above under “Compensation Design and Philosophy”, this approach consists of a subjective consideration of each NEO’s overall role in the organization, not on individual, predetermined metrics or data points. The Compensation Committee’s assessment also includes recognizing the current value created from consistent effort in prior years and anticipating future value creation through current efforts. This practice rewards intangible long-term value creation, including innovation and individual commitment, and has contributed to the long tenure of most of our highly-qualified NEOs. In its assessment of the performance of each NEO, the Compensation Committee considers the following:

Our CEO, CFO, COO, Senior Vice President—Human and Corporate Resources and Senior Vice President, Treasurer and Corporate Secretary provide the Compensation Committee with detailed analyses and recommendations regarding each element of executive officer compensation to facilitate the Committee’s semi-annual review of executive compensation. Mr. McClendon generally attends Compensation Committee meetings and, as appropriate, participates in discussions in order to provide information to the Committee, as further described on page 18 under “The Board of Directors and its Committees—Compensation Committee—Employee Compensation—Executive Officer Compensation”.

The information provided to the Compensation Committee includes tally sheets detailing for each NEO:

The tally sheets bring together in one place all of the elements of actual and potential future compensation of the NEOs, as well as information about their wealth accumulation. This allows the Compensation Committee to analyze both the individual elements of compensation (including the compensation mix) and the aggregate total amount of actual and projected compensation.

The Company has not historically utilized any specific tools or contracted for services to benchmark total compensation or components of compensation to peer companies or other

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benchmarks. Nevertheless, the Company does review and consider the executive compensation systems of its large-cap industry peers at least annually to ensure the Company’s compensation system remains competitive, although we do not specifically target a percentile or range within such peers’ compensation. Due to the Company’s continuing rapid growth and in an effort to pursue best practices, in early 2011 the Compensation Committee retained Cogent Compensation Partners, an independent compensation consultant with extensive experience in the energy industry, to review our current compensation system and provide recommendations to the Compensation Committee with respect to future improvements.

Elements and Mix of Compensation

We provide short-term compensation in the form of base salaries and cash bonuses, and we provide long-term compensation in the form of restricted stock awards and matching contributions under the Company 401(k) Plan. Additionally, our more highly-compensated employees, including the NEOs, are eligible for compensation deferral and Company matching opportunities beyond IRS limitations on 401(k) plan contributions through a nonqualified deferred compensation plan and certain perquisites. Other forms of compensation are also provided to the NEOs as described below under “CEO Compensation in 2010” and “Other NEO Compensation in 2010”. In its December 2010 review of the NEO tally sheets, the Compensation Committee determined that the compensation amounts and mix are appropriate for each NEO and remained consistent with the Committee’s expectations.

Cash Salary and Bonuses. Base salaries reflect each NEO’s base level of responsibility, leadership, tenure and contribution to the success and profitability of the Company. Base salaries tend to be less variable over time and are intended to contribute less to total compensation than incentive awards. Cash bonuses make up a greater portion of each NEO’s total compensation than do base salaries and are intended to provide incentives based on a subjective evaluation of the performance of the Company and the individual over a shorter period than the equity compensation listed below. Cash bonuses are discretionary and not awarded pursuant to a formal plan or an agreement with any NEO (except our CFO because of his recent appointment). Each NEO’s base salary and cash bonus is reviewed semi-annually.

Restricted Stock. Stock-based compensation is intended to make up the largest portion of each NEO’s total compensation and provides incentives for long-term performance that increases shareholder value by aligning the interests of our shareholders and the NEOs. Restricted stock, with a ratable vesting period of four years, is awarded to employees, including the NEOs, on the first trading day of each January and July as part of the Compensation Committee’s semi-annual review of compensation. We award restricted stock, rather than stock options, because the annual stock usage rate or “burn rate” for restricted stock is less than the rate for stock options, thereby reducing the dilutive effect of stock compensation to our shareholders. Moreover, restricted stock is easier for employees to value than stock options, thereby better facilitating long-term employee stock ownership.

NEOs have the opportunity to earn restricted stock based on a comprehensive subjective evaluation of the performance of the Company and the individual during the immediately preceding six-month review period in light of the considerations described on page 34 under “Process for Determining Executive Compensation”, rather than based on predetermined objective Company or individual performance factors or metrics. In 2010, we granted an aggregate of 1,386,000 shares of restricted stock to the NEOs, representing approximately 0.21% of the 655,251,275 outstanding shares as of December 31, 2010.

Other Compensation Arrangements. We also provide compensation in the form of personal benefits and perquisites to the NEOs, including health and welfare insurance benefits, matching contributions of common stock under the Company 401(k) Plan and nonqualified deferred

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compensation plan (up to 15% of an employee’s annual base salary and cash incentive bonus compensation) and financial planning services (see the footnotes and narrative to the Summary Compensation Table). We do not have a pension plan or any other retirement plan other than the Company 401(k) Plan and our nonqualified deferred compensation plan. The foregoing perquisites are provided to all employees or large groups of senior-level employees.

We provide exclusively to our NEOs and other senior vice presidents reimbursement of monthly country club dues (other than for our CEO) and personal use of fractionally-owned company aircraft (see the narrative to the Summary Compensation Table). Feedback from the NEOs indicates that limited access to fractionally-owned Company aircraft for personal use greatly enhances productivity and work-life balance, which we believe provides performance and retention incentives far in excess of the cost of the perquisite to the Company. In addition, we provide certain other perquisites exclusively to our CEO that are discussed below under “CEO Compensation in 2010”. The Compensation Committee regularly reviews the terms under which these perquisites are provided and their value in relation to each NEO’s total compensation, which is generally less than 10% of each NEO’s total compensation. As a result, perquisites do not materially influence the Compensation Committee’s decisions in setting an NEO’s total compensation. The Company includes the above benefits and perquisites as taxable income to the executive on Form W-2 after each fiscal year, in accordance with IRS guidelines.

2008 Incentive Awards. As described in the Company’s 2010 proxy statement, in conjunction with the execution of new employment agreements in September 2009, each NEO (except our CEO and current CFO) was awarded a special incentive award for his or her efforts in executing significant asset monetization transactions in 2008 (each a “2008 Incentive Award”) to be paid in cash in four equal annual installments. The Compensation Committee intended the 2008 Incentive Awards to reward the NEOs for the leadership role they played in enabling, negotiating and consummating joint ventures in our Haynesville, Fayetteville and Marcellus Shale plays and the sale of all our interest in the Woodford Shale in 2008. These transactions monetized $10.1 billion in assets, including $4.4 billion of drilling and completion carries, compared to our net cost of only $1.4 billion, during an extraordinarily challenging time in natural gas and liquids markets and in financial markets. Additionally, each of our executive vice presidents at the time, including Messrs. Dixon, Jacobson and Rowland, agreed to salary and bonus caps in their respective employment agreements which will remain in place through 2012. Mr. Rowland forfeited the remaining unpaid portion of his 2008 Incentive Award when he left the Company in the fourth quarter of 2010.

As described in the Company’s 2009 proxy statement, in 2008, in conjunction with the renegotiation of his employment agreement, the Company awarded Mr. McClendon a $75 million well cost incentive award in recognition of his leadership role with respect to the 2008 joint venture and sale transactions described in the foregoing paragraph. His well cost incentive award is subject to a five-year clawback period ending on December 31, 2013.

Corporate Performance Review

Under the leadership of our CEO, the Company has delivered strong operational results and performance despite continued market challenges impacting the natural gas and oil industry. Starting in 2009, the Company saw evidence of a negative long-term persistent gap between world oil prices and U.S. natural gas prices caused by the industry’s proven ability to find and develop huge new unconventional natural gas resources in the U.S. Rather than passively watch declining U.S. natural gas prices negatively affect the Company’s financial performance, Mr. McClendon led the Company in shifting our strategy from a primary focus on natural gas to a balanced focus on both natural gas and liquids, applying the geoscientific and horizontal drilling expertise we have developed in our natural gas shale plays to unconventional liquids-rich reservoirs. We have entered into multiple joint venture

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arrangements which have allowed us to monetize a portion of our natural gas and liquids resource base and develop our resources at a lower cost by harvesting the carries received under these arrangements. In addition, Mr. McClendon and our senior management team developed the “25/25 Plan” to reduce our indebtedness while growing production by the end of 2012. We believe that our CEO’s continued leadership, and the consistent effort of our NEOs, positioned the Company very favorably for the next decade to carry on its pioneering approach to generating superior performance.

The success of the efforts of our NEOs and leadership of our CEO has already started to be reflected in our stock price, which, during the last six months, has increased by more than 50%. More importantly, we believe this success will continue to be reflected by the increase of our stock price over the next several years. Accordingly, these efforts were the primary basis used to establish the compensation for the NEOs in 2010.

Set forth below are highlights of the Company’s performance during 2010:

Additionally, the CEO guided the Company with respect to the following positive steps in the first quarter 2011:

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Other Corporate Achievements. We are proud to have a corporate culture in which our NEOs set an example for all of our employees to strive for excellence in every aspect of our business. We are honored to have received the following awards in recognition of these efforts in 2010 and the beginning of 2011:

CEO Compensation in 2010

Regular Compensation. Even more than our other NEOs, the CEO’s total compensation is heavily weighted towards incentive compensation paid in the form of restricted stock. As the CEO and co-founder of the Company, Mr. McClendon has been instrumental in shaping the vision for the Company, including with respect to the following actions:

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Though the Company achieved great success under his leadership in 2010, the Compensation Committee reduced the amount of restricted stock awarded to Mr. McClendon in 2010 compared to 2009 by 110,000 shares, for a total of 650,000 shares, to account for the growth in the Company’s stock price in 2010 compared to 2009. Mr. McClendon’s salary has remained at $975,000 since 2006 and will remain at that level through 2013 in accordance with his employment agreement. His employment agreement also provides that his annual bonus compensation for each of the years 2009 through 2013 may not exceed $1,951,000, the amount of cash bonus awarded to Mr. McClendon by the Compensation Committee in 2008.

For safety, security and efficiency, the Company provides Mr. McClendon with the use of fractionally-owned company aircraft. The Company also provides Mr. McClendon with certain home security services due to the high profile nature of his position. Additionally, the Company provides Mr. McClendon with accounting and engineering support services to enable him to focus on the variety of critical and complex issues that currently face the U.S. natural gas and oil industry while remaining actively involved in the oversight of the day-to-day management of the Company. Mr. McClendon is thoroughly involved in the financial and operational discussions and decisions that occur each day throughout the Company. More than any other NEO, he leads the Company’s public policy initiatives currently centered around promoting the use of natural gas to reduce the country’s dependence on foreign oil. The Compensation Committee believes these additional responsibilities warrant the perquisites provided to Mr. McClendon as compared to those provided to other NEOs. The All Other Compensation Table for 2010 presented on page 46, shows the incremental costs to the Company of such perquisites, net of reimbursements made by Mr. McClendon.

Founder Well Participation Program. Because of Mr. McClendon’s unique role as co-founder of the Company, he is the only NEO with the opportunity to participate and invest as a working interest owner in the Company’s wells under the Founder Well Participation Program (the “FWPP”). We believe the FWPP fosters and promotes the successful development and execution of the Company’s strategic business plan by: (i) retaining and motivating our CEO who co-founded the Company; (ii) aligning the financial rewards and risks of Mr. McClendon with those of the Company more effectively and directly than other performance incentive programs maintained by many of the Company’s peers; and (iii) imposing on Mr. McClendon the same proportionate costs and risks incurred by the Company in its exploration and production operations. The Compensation Committee reviews Mr. McClendon’s participation in the FWPP on a quarterly basis and periodically adjusts the acreage costs charged to Mr. McClendon to ensure his reimbursements reflect the Company’s recent acreage activities. The FWPP is described in greater detail under “Transactions with Related Persons—Founder Well Participation Program” on page 60.

Other NEO Compensation in 2010

The Compensation Committee takes a comprehensive approach in determining the mix and level of executive compensation by making an overall assessment of the performance of the NEO team and

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the role and relative contribution of each member of that team. Each NEO’s 2010 compensation was based on a comprehensive, subjective review of his or her individual performance as described below.

Steven C. Dixon. Mr. Dixon’s total compensation is greater than that of our other NEOs (except our CEO) in recognition of his broad-ranging responsibilities, experience and tenure with the Company. Among other factors the Compensation Committee considered was the activity level of the Company’s exploration and development operations, the performance of those operations and performance of the Company’s primary resource plays, all in light of the impact of the foregoing on the Company’s strategy shift described above and the Company’s overall outstanding performance.

The Compensation Committee has maintained Mr. Dixon’s base salary at $860,000 since July 2008, and it will remain at that level through 2012 pursuant to his September 2009 employment agreement. Under his employment agreement, his annual bonus compensation may not exceed $1,361,000 during the three-year term. Mr. Dixon demonstrated exemplary performance in 2010. The Compensation Committee, therefore, believed his performance merited a cash bonus of $1,361,000 in 2010 and an increase in his restricted stock award to 210,000 shares from 165,000 shares in 2009.

Douglas J. Jacobson. With respect to Mr. Jacobson’s 2010 compensation, the Compensation Committee considered, among other things, the Company’s acquisitions, the negotiation and execution of the Company’s innovative joint venture arrangements and the execution of various monetization transactions by Mr. Jacobson’s team, all in light of the impact of the foregoing on the Company’s strategy shift described above and the Company’s overall outstanding performance.

The Compensation Committee has maintained Mr. Jacobson’s base salary at $800,000 since July 2008, and it will remain at that level through 2012 pursuant to his September 2009 employment agreement. Under his employment agreement, Mr. Jacobson’s annual bonus compensation may not exceed $1,201,000 for the three-year term of such agreement. Mr. Jacobson demonstrated exemplary performance in 2010. The Compensation Committee, therefore, believed his performance merited a cash bonus of $1,201,000 in 2010, and an increase in his restricted stock award to 165,000 shares from 135,000 shares in 2009.

Domenic J. (“Nick”) Dell’Osso, Jr. Mr. Dell’Osso was appointed Executive Vice President and CFO in November 2010. In connection with his appointment, Mr. Dell’Osso entered into an employment agreement with the Company providing for a base salary, cash bonus, equity compensation and certain other benefits, as described below under “Employment Agreements” on page 47. The majority of his compensation in 2010 was based on a comprehensive and subjective review of his individual performance in his prior role as Vice President—Finance of the Company and Chief Financial Officer of Chesapeake Midstream Development, L.P., the Company’s wholly owned midstream subsidiary. This included his instrumental role in numerous significant transactions for the Company, including the initial public offering of CHKM and the early stages of the implementation of the Company’s 25/25 Plan.

Martha A. Burger. With respect to Ms. Burger’s 2010 compensation, the Compensation Committee considered her successful management of the Company’s more than 10,000 employees and 10% full-time job growth rate throughout 2010, our recognition by Fortune magazine as one of the “100 Best Companies to Work For” in the U.S. for the fourth consecutive year, the Company’s public relations campaigns promoting the use of natural gas to reduce the country’s dependence on foreign oil, the Company’s outreach and charitable giving programs and the day-to-day operation of the Company’s facilities, all in light of the impact of the foregoing on the Company’s strategy shift described above and the Company’s overall outstanding performance.

The Compensation Committee has maintained Ms. Burger’s base salary at $700,000 since July 2008. Ms. Burger demonstrated exemplary performance in 2010. The Compensation Committee,

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therefore, believed her performance merited a cash bonus in an amount of $900,000 in 2010, and an increase in her restricted stock award to 90,000 shares from 87,000 shares in 2009.

Marcus C. Rowland. Mr. Rowland retired from the Company in October 2010. With respect to his 2010 compensation, among other things, the Compensation Committee considered the Company’s financing and monetization transactions executed, the Company’s commodity and interest rate management strategy, and the long-term performance of the Company, all in light of the impact of the foregoing on the Company’s strategy shift described above and the Company’s overall outstanding performance.

The Compensation Committee maintained Mr. Rowland’s base salary at $860,000 from July 2008 through his retirement in October 2010. Under his employment agreement, his annual bonus was capped at $1,361,000. Mr. Rowland received $680,000 in bonus compensation in 2010. Mr. Rowland demonstrated exemplary performance in the first half of 2010 and, therefore, the Compensation Committee increased his restricted stock award to 210,000 shares from 165,000 shares in 2009. Mr. Rowland also received certain post-employment compensation in connection with his retirement, which is described below on page 56 under “Post-Employment Compensation—Marcus C. Rowland”. Mr. Rowland forfeited his right to receive the future installments of his 2008 Incentive Award.

Perquisites. As discussed above, the perquisites we provide exclusively to our executive vice presidents and senior vice presidents include reimbursement of monthly country club dues and personal use of fractionally-owned Company aircraft. Mr. Jacobson and Ms. Burger were each entitled to 55 hours personal use of fractionally-owned Company aircraft in 2010. Messrs. Rowland and Dixon were each entitled to 175 and 87.5 hours, respectively, in 2010 with the difference attributable to Mr. Rowland’s declination of participation in the award of restricted stock under our 2006 Long Term Incentive Program in June 2007. Mr. Rowland forfeited the balance of his hours for personal use upon his retirement in October 2010. Mr. Dell’Osso was entitled to 10 hours of personal use in 2010 following his promotion to Executive Vice President and CFO.

Termination Arrangements

We maintain employment agreements with the NEOs, the material terms of which are described throughout this proxy statement. The Compensation Committee reviews the terms of the agreements at least annually, generally focusing on the permitted activities allowed for the NEOs and the competitiveness, value and adequacy of the severance arrangements. Please refer to the narrative to the Post-Employment Compensation tables beginning on page 52 for additional details of the termination arrangements for the NEOs.

The energy industry’s history of terminating professionals during its cyclical downturns and the frequency of mergers, acquisitions and consolidation in our industry are two important factors that have contributed to a widespread, heightened concern for long-term job stability by many professionals in our industry. In response to this concern, arrangements that provide compensation guarantees in the event of an employee’s termination without cause, death or incapacity or due to a change of control are common practice in our industry. These provisions in our employment agreements are integral to our ability to recruit and retain the high caliber of professionals that are critical to the successful execution of our business strategy.

We believe the payment and benefit levels provided to the NEOs in their employment agreements in the event of a termination without cause should correspond to the level of risk and responsibility assumed by the NEO and should provide sufficient comfort to empower the NEO to make the types of decisions that impact the future of the Company without fear of imminent termination and without the resources to transition to another position in the industry. Because our CEO is ultimately responsible

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for the vision of the Company and the execution of the Company’s business strategy, our Compensation Committee believes that the CEO is entitled to cash compensation and benefits for the remainder of his then current employment agreement in addition to immediate vesting of all unvested equity compensation and unvested Company matching contributions under the nonqualified deferred compensation plan. For the Company’s other NEOs, we believe payment of base salary for one year, payment of any remaining unpaid portion of their 2008 Incentive Award and immediate vesting of all unvested equity compensation is appropriate given the risk and responsibility they have assumed.

We recognize that the NEOs are not likely to be retained by a successor in the event of a change of control of the Company. Therefore, we believe that guaranteeing the NEOs (other than the CEO) two years cash compensation plus payment of any remaining unpaid portion of their 2008 Incentive Award is sufficient to incentivize the NEOs to continue to work for the Company, even if a change of control were to appear imminent. Additionally, to incentivize the CEO to continue to provide vital leadership and direction to the Company’s employees during a change of control, we believe the CEO should be provided a more substantial compensation guarantee than that provided to the other NEOs. However, such guarantee should only be paid if the CEO’s services are not retained under reasonable terms by the successor. In other words, our CEO’s change of control benefits are subject to a “double trigger.” We believe a cash payment equal to three years compensation is appropriate under the above described scenario. If a change of control payment is triggered, all outstanding equity awards under the Company’s equity compensation plans and unvested Company matching contributions under the nonqualified deferred compensation plan become immediately vested.

The Compensation Committee has approved provisions in the employment agreements of our CEO, executive vice presidents and senior vice presidents that provide for accelerated vesting of unvested equity compensation upon retirement. The percentage of unvested equity compensation to be vested upon retirement ranges from 0% to 100% based on the executive’s age and years of service at retirement. This provision recognizes the longevity of our NEO team and, because we do not have a pension plan, is intended to motivate our executives to remain with the Company until retirement.

With respect to the termination of an executive officer resulting from an officer’s incapacity preventing continued service to the Company, we believe that a lump sum payment of 26 weeks of base salary and of any remaining unpaid portion of the 2008 Incentive Award, together with the immediate vesting of the executive officer’s unvested equity compensation and unvested Company matching contributions under the nonqualified deferred compensation plan, is appropriate to bridge the officer’s transition to another vocation or permanent disability insurance coverage. We further believe that the compensation provided in the event of a termination without cause pursuant to the CEO’s employment agreement should be paid if the CEO’s employment is terminated because of incapacity, less any payments under disability plans provided by the Company.

In the event of an NEO’s death, we believe that a lump sum payment of 52 weeks of base salary and of any remaining unpaid portion of the 2008 Incentive Award, immediate vesting of the executive officer’s unvested equity compensation and unvested Company matching contributions under the nonqualified deferred compensation plan and, with respect to the CEO, limited continuation of accounting support or financial advisory services for the CEO’s estate, are appropriate to respect the officer’s previous contributions to the Company.

Relationship between Compensation Program and Risk

Our Compensation Committee does not believe our compensation programs encourage excessive or inappropriate risk taking for the reasons described in detail above on page 16 under “Corporate Governance—Board Role in Risk Oversight”.

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Accounting and Tax Treatment of Compensation

In structuring executive compensation, the Company analyzes the anticipated accounting and tax treatment of various arrangements and payments; however, the accounting for or deductibility of compensation is not a determinative factor in compensation decisions. We award compensation which is not deductible under Section 162(m) of the Internal Revenue Code (the “Code”), or which results in less favorable accounting treatment than other types of compensation arrangements, if we believe it is consistent with our compensation objectives and would be in the best interest of the Company and its shareholders. Section 162(m) limits the annual tax deduction to $1 million for compensation paid by a publicly held company to its chief executive officer and each of the company’s three other most highly compensated named executive officers (other than the chief financial officer), unless certain performance-based requirements are met. None of the compensation paid to these covered employees in 2010 qualified as Section 162(m) performance-based compensation.

Compensation Consultant

Due to the Company’s growth and in an effort to follow best practices, in early 2011 the Compensation Committee retained Cogent Compensation Partners, an independent compensation consultant with extensive experience in the energy industry, to review our current compensation system and provide recommendations to the Compensation Committee with respect to future improvements. The compensation consultant reports directly to the Compensation Committee, and the Committee may replace the compensation consultant or hire additional consultants at any time. A representative of the compensation consultant will attend meetings of the Compensation Committee, as requested, and will communicate with the Compensation Committee Chair between meetings; however, the Compensation Committee will continue to make all decisions regarding the compensation of our executive officers.

Stock Ownership

Minimum Stock Ownership Guidelines. We have established stock ownership levels for our executive officers, including the NEOs, because we believe stock ownership directly aligns their interests with those of our shareholders. We believe that Mr. McClendon’s stock ownership level of 500% of his combined salary and cash bonus compensation is the highest ownership level required among his large-cap peer group CEOs. The ownership level for each of Messrs. Dell’Osso, Dixon and Jacobson is 25,000 shares of the Company’s common stock and for Ms. Burger is 10,000 shares of the Company’s common stock. Mr. Dell’Osso’s employment agreement provides him until December 31, 2011 to reach his ownership level. All of the NEOs are currently in compliance with the stock ownership provisions of their respective employment agreements.

The Compensation Committee reviews a report of each executive officer’s stock ownership in June and December of each year. If any shortfall of the ownership levels should occur, the Compensation Committee anticipates dealing with the matter on a case by case basis after consideration of the executive’s historical ownership, the cause for the shortfall and the expected period of time for restoring the ownership level.

Prohibition of Margining and Derivative or Speculative Transactions. In 2010, the Board of Directors amended our Insider Trading Policy to prohibit margining and derivative or speculative transactions involving Company stock in aggregate amounts up to the level set according to each NEO’s minimum stock ownership guideline. The transactions covered by the policy include trading in puts, calls, covered calls or other derivative products involving Company stock; engaging in hedging or monetization transactions with respect to Company stock; holding Company stock in a margin account; or pledging Company stock as collateral for a loan. We believe these prohibitions ensure that that the minimum ownership levels are effective in aligning each officer’s interests with those of our shareholders.

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Compensation Committee Report

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis set forth above. Based on the review and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s 2010 Form 10-K and this proxy statement.

Members of the Compensation Committee:

Frank Keating, Chairman

Kathleen M. Eisbrenner

Charles T. Maxwell

Frederick B. Whittemore

Summary Compensation Table for 2010