The Audit Committee for the board of directors at Chemours Co. has completed an internal review and discovered concerning accounting and compensation practices among some senior management members. These individuals, already placed on administrative leave last week, have been found to lack adequate transparency.
According to the Audit Committee, these senior management members have breached the Company's Code of Ethics, specifically related to standards pertaining to the Chief Executive Officer, the Chief Financial Officer, and the Controller. The misconduct is linked to not fostering "full, fair, accurate, timely and understandable disclosure."
It's important to note that the results from this internal review do not impact the estimated operating outcomes and other financial metrics for the year ending on December 31, 2023.
Based on the investigation assisted by independent external counsel, the Audit Committee has determined that the senior management individuals suspended last week had taken actions in the fourth quarter of 2023 to postpone payments to certain vendors until the first quarter of 2024 and fast-track the collection of receivables into the fourth quarter of 2023, which were initially due in the first quarter of the next year.
The Committee found that these actions were partly driven by a need to meet free cash flow targets that the company had publicly announced. These targets also contribute to a critical metric used to decide incentive compensation for executive officers. Departing from acceptable transparency norms, these maneuvers were not disclosed to the Board of Directors by the management members who were eventually placed on administrative leave.
The review by the Audit Committee stemmed from an anonymous report made through the Chemours Ethics Hotline. However, the hotline did not immediately pass the issue to the General Counsel or the Audit Committee - it only came to light during the company’s end-of-year external audit for 2023.
Faulty controls and procedures regarding the evaluation and escalation of hotline reports, as well as poor judgment by specific employees who handle the intake of such reports, are to blame for this oversight. The Audit Committee has determined.
