At the end of February, chemical company and the maker of Teflon, Chemours, made headlines when the company’s board of directors placed its CEO, CFO and controller and principal accounting officer on administrative leave. As part of the announcement, Chemours added that its audit committee would oversee an internal review of the company’s financial reporting following an anonymous report to the company’s ethics hotline.
One week later, the company provided an update on the probe that accuses the executives placed on leave of participating in efforts to make the company’s cash flow look more appealing than they actually were.
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According to the audit committee, last quarter, CEO and president Mark Newman, CFO and senior vice president Jonathan Lock and financial executive Camela Wisel looked to delay payments to vendors that were supposed to be made at the end of 2023. Simultaneously, they sought receivables that were not due until the beginning of 2024.
The committee also found that similar actions occurred in 2022, albeit to a lesser extent. Upon discovering this information, the committee determined that the senior management members violated Chemours’ Code of Ethics.
The increased cash flow measures included publicly communicated free cash flow targets, a metric that determines executive officers’ incentive compensations. These incentives can carry significant weight. According to SEC filings, the salary for on-leave CEO Mark Newman totaled approximately $996,000 in 2022. However, other earnings, including “non-equity incentive plan compensation” and “stock awards,” brought his total pay to nearly $7.7 million that year.
Chemours has yet to complete its year-end reporting process but claimed that the findings from the review would not affect the company’s estimates of operating results and other financial measures that it reported at the end of February. However, the company admitted it was working to assess the actions’ net impact on cash flow measures. Chemours previously reported $1.2 billion of unrestricted cash and cash equivalents as of December 31, 2023.
Chemours also wants to evaluate its ethics hotline program, which the committee said displayed “poor judgment” by not bringing the anonymous report that highlighted the executives’ actions to the general counsel or the committee until it was spotted in an external audit process.
The company did not disclose an updated status for the executives placed on leave.
