Dive Brief:
- Grain trading giant Archer Daniels Midland’s suspended CFO Vikram Luthar reached a deal with the company to resign effective Sept. 30, unless an earlier date is mutually accepted, as part of a “transition agreement” that calls for him to be available to assist ADM until his resignation as a “non-executive employee,” according to a Securities and Exchange Commission filing Monday
- The Chicago-based company — which revealed last month it was cooperating with SEC and Department of Justice investigations into its accounting practices and put Luthar on forced leave in January when it announced an internal accounting probe — will continue to pay Luthar his base salary during the transition, according to the filing. Luthar will also receive a $743,419 annual cash performance incentive award for 2023 and the shares awarded for his 2021 performance share unit award.
- The compensation package is “very generous” and likely related to Luthar’s roughly two-decade tenure at the company, according to Josh Crist, co-managing partner at Crist Kolder, an executive search firm. “Though we cannot say for certain…when a transition agreement is in place before the executive’s departure announcement is made, one may rightly assume that the executive was transitioned out, or asked to leave,” Crist told CFO Dive in an email. He said the package was likely, “a base-plus bonus in a fire for cause situation, which usually never happens.”
Dive Insight:
ADM did not respond immediately to requests for comment on Luthar’s resignation. The pay package includes a change from last month, when ADM indicated it held off on granting Luthar’s annual cash incentive since he was still on administrative leave. Last year Luthar’s salary was $770,840, according to the company proxy.
Given the accounting problems and remaining cloud from the government probes hanging over the company, Luthar’s departure had been anticipated by some analysts such as Morningtar’s Seth Goldstein. That expectation grew when ADM handed interim CFO Ismael Roig a $35,000 monthly stipend and a one-time grant of restricted stock units valued at $1 million in association with him taking on the finance chief’s responsibilities in a temporary capacity in January, CFO Dive previously reported.
It’s likely that ADM’s board first wanted to resolve the accounting issues and be able to file the previously delayed 10-K and restatements — which it has now done — before negotiating a transition plan with Luthar, Goldstein told CFO Dive in an email Monday after the SEC filing.
“In my view, the company was not likely to bring back Mr. Luthar, so a transition plan makes sense as the outcome so that ADM can move forward,” said Goldstein, noting that he sees no changes to his outlook for ADM as a result of Luthar’s resignation. “Now that the transition plan has been finalized, I imagine the next step is to find a new CFO, so we may see the interim tag dropped from Mr. Roig’s title.”
Goldstein also said it’s hard to say what is typical in terms of compensation when an executive departs due to an investigation as he has not seen too many cases involving such circumstances. However, he said it is typical for outgoing executives to still receive compensation and that likely helped pave the way to reach an agreement with Luthar.
In light of the accounting problems, Crist said the company was likely pressured to see Luthar “out the door” even if a replacement has not been found. “They clearly need to run an external search, given the ramifications of what happened here,” Crist said, adding that it will be “a very difficult search.”
Luthar joined the company in 2004 and held multiple senior roles before being named CFO in 2022. He previously spent nearly a decade in various financial positions at General Motors. Roig also joined the company in 2004 from General Motors, where he spent 11 years in various finance positions.