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Jan. 25, 2024 By Tarso Veloso and Anders Melin, Bloomberg The division of Archer-Daniels-Midland Co. that's under investigation for its accounting practices is responsible for less than 10% of the crop giant's revenue. Yet it has had an outsized influence on recent executive bonuses, records show. ADM's board in 2020 and 2021 staked a considerable share of senior executives' stock award payouts to the profitability growth of its nutrition unit. The company blew past the goals for the first round of awards, helping the executives collect shares worth more than $70 million. Payouts for the second round of awards were set to be determined early this year. ADM disclosed this past week that it had suspended its chief financial officer and opened a probe of the nutrition unit. The news triggered a selloff in the company's shares that wiped out almost a quarter of its market value. The company declined to comment. ADM's senior executives, like many peers at large public companies, receive a big part of their compensation in the form of stock awards. Roughly half of these awards, which are granted annually, vest after three years largely depending on how the company performs on a few specific key metrics. The other half vests after three years as long as the person remains on the job. The portion that's linked to performance targets is now in focus. For awards like these, boards typically select metrics that reflect the company's broader financial goals, like adjusted earnings, return on invested capital or stock return relative to rivals. ADM's board for many years followed this principle. But in 2020, it removed adjusted earnings before interest, taxes, depreciation and amortization as one of the key metrics for executive stock awards and added something much more specific: growth of average operating profit in the nutrition segment. The three-year average had to exceed 10% for executives to receive their target payout. If the unit's growth hit 20%, they stood to receive twice as many shares. "Some of these changes were designed to emphasize our focus to significantly grow the nutrition segment of our business," the company said in a filing at the time. In the most recent quarterly report, the unit made up about 8% of total company revenue. To read the entire report click here. Tweet |
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