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How executive greed led to ruin of De La Rue, world’s top banknote printer…

Summary:
De La Rue which prints/provides technology for banknotes is in financial trouble. One would think this would be due to rise in digital transactions. But this is not the case. It is due to executive compensation! Guardian reports: De La Rue’s shareholder meeting in June, 48% of votes were cast against the banknote printer’s remuneration report, presumably in protest at the £197,000 bonus awarded to its then chief executive, Martin Sutherland, in his final undistinguished year at the helm. Perhaps the 52% of compliant voters were half asleep. Five months later, the horrible state of De La Rue should be plain even to dozy fund managers. Debt has soared, borrowing covenants are tight and there is “material uncertainty” over the 200-year-old company’s future if known risks materialise. De

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De La Rue which prints/provides technology for banknotes is in financial trouble. One would think this would be due to rise in digital transactions. But this is not the case. It is due to executive compensation!

Guardian reports:

De La Rue’s shareholder meeting in June, 48% of votes were cast against the banknote printer’s remuneration report, presumably in protest at the £197,000 bonus awarded to its then chief executive, Martin Sutherland, in his final undistinguished year at the helm. Perhaps the 52% of compliant voters were half asleep. Five months later, the horrible state of De La Rue should be plain even to dozy fund managers.

Debt has soared, borrowing covenants are tight and there is “material uncertainty” over the 200-year-old company’s future if known risks materialise. De La Rue has fallen into a half-year loss of £12.1m. The dividend is being cut from 25p a share to zero, which clearly should have happened before now. The share price, down by almost a quarter on Tuesday, stands at a 21-year low.

The farewell bonus for Sutherland, who finally departed last month, now looks a wretched joke about a licence to print money.

The new chief executive, Clive Vacher, was too polite to aim a direct kick at his predecessors but it wasn’t hard to detect his diagnosis of drift in the boardroom. “The business has experienced an unprecedented level of change with the chairman, CEO, senior independent director and most of the executive team leaving or resigning in the period,” he wrote in the half-year report. “This has led to inconsistency in both quality and speed of execution.”

Phew..

No lessons learnt..

Amol Agrawal
I am currently pursuing my PhD in economics. I have work-ex of nearly 10 years with most of those years spent figuring economic research in Mumbai’s financial sector.

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