ADM’s CFO agrees to resign amid DOJ investigation. What’s the board’s next move?

Good morning. As a Department of Justice investigation of Archer-Daniels-Midland continues, the agricultural giant and its CFO have agreed to part ways.

In January, I reported that CFO and SVP Vikram Luthar, in the role since 2022, had been placed on administrative leave—Ismael Roig was named interim CFO—amid an investigation of accounting issues tied to ADM's nutrition segment, which produces ingredients for both human and animal food. The inquiry was sparked by a voluntary document request from the Securities and Exchange Commission.

And now with Luthar, according to an April 19 SEC filing by ADM, agreeing to resign as CFO effective Sept. 30, I contacted the company to see what its plans were regarding a permanent finance chief.

“ADM has initiated a formal selection process to identify the company’s next CFO,” the company told me in an email. “Vikram Luthar is transitioning to a non-executive position, until the end of September, to support transitional efforts as needed. We appreciate Vikram’s many years of service to ADM, and wish him the best in the future.” The company didn't comment on the ongoing investigation.

Luthar, who joined ADM in 2004 and has held several financial leadership roles, will receive his annual cash performance incentive award of $743,419 for 2023 and the shares earned for his 2021 performance share unit award, according to the filing. This is based on the “company performance metrics that applied to other executive officers,” the document states. He’ll also receive his paid base salary during the transition period. And if Luthar remains as an employee through July 1, he'll be eligible to receive a prorated 2024 cash performance incentive payment.

Following ADM's announcement of an internal investigation, the company received document requests from the DOJ. The agency directed grand jury subpoenas to “certain current and former company employees,” according to a 10-K filing. ADM's internal investigation found “a material weakness” in its internal control over financial reporting related to its accounting practices and procedures for intersegment sales, according to the company.

“There is a larger problem at ADM as this scandal didn’t begin and end with Mr. Luthar,” said Shawn Cole, president and founding partner of Cowen Partners, a C-suite-focused executive search firm.

Roig has served in various finance and operational leadership roles at ADM for two decades, and as a member of the firm's executive council for 10 years.

“My bet is on the internal candidate, as a qualified outside hire will be difficult to attract without significant financial incentives to retain—even then the willing candidate pool will be small,” Cole told me.

Last month, Roig, during his first earnings call as interim CFO, said the priorities for cash deployment in 2024 would remain focused around the shareholders. The company repurchased almost $1.6 billion in shares in Q4 2023 and “nearly $330 million of shares so far in Q1” as part of a plan to “actualize $2 billion of additional share repurchases” this year.

And Although Roig may a front-runner, Cole said many of those same shareholders benefitting from the buybacks may prefer an outside hire for the full-time CFO spot, someone with “a clean resume, spotless reputation, a Big Four 4 auditor, significant internal controls, and financial reporting experience. This is a financial reporting trust issue, and the entire accounting and finance function should be under scrutiny.”

Sheryl Estrada
sheryl.estrada@fortune.com

María Soledad Davila Calero curated the Leaderboard and Overheard sections of today’s newsletter.

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