High-performing Safaricom managers have over
the past four years received for free 84.1 million shares with a
current market value of Sh2.3 billion as part of their compensation
package.
The shares are awarded to middle and top level
managers who only get to own them three years later as a
staff-retention and performance incentive scheme.
The free shares make Safaricom’s stock compensation one of the most lucrative among Nairobi Securities Exchange-listed firms.
The
telco says in its latest annual report that 15.1 million shares
currently worth Sh415 million were transferred to employees in the year
ended March.
The shares were historically valued at Sh268.2 million, implying a gain of some Sh150 million.
Safaricom
CEO Bob Collymore, for instance, received shares worth Sh34 million
while the chief financial officer Sateesh Kamath got stocks valued at
Sh8.7 million in the period.
“On July 1, 2011, the
group implemented an Employee Performance Share Award Plan (the Trust)
where shares are awarded to qualifying staff based on previous year’s
achieved performance ratings,” Safaricom says of the scheme.
“Under
the outright grant scheme, shares are purchased from the market and
transferred to eligible staff at no cost after a three-year vesting
period.”
The telco’s staff exercised 13.7 million shares with a current
market value of Sh376 million in the year ended March 2017 and 30.4
million units worth Sh836 million the year before.
They
received 24.9 million shares valued at Sh684 million in the year ended
March 2015 when they started cashing in their entitlements.
Unlike
other employee share ownership plans (Esops), Safaricom’s has not
diluted investors since the stocks are bought from the existing pool in
the open market.
Most other companies including KenolKobil
and HF Group
have created new shares that are offered to staff for free or at a discount, causing dilution to shareholders.
The
trustees of Safaricom’s scheme bought 16.9 million shares at a cost of
Sh473 million in the year ended March, with the beneficiaries set to
unlock the holdings from 2020 if they will still be working for the
telco.
The trust currently holds 28.1 million shares
which it acquired for Sh667.5 million, with the telco’s current share
price of Sh27.5 indicating a capital gain of Sh106 million on the
holdings.
Safaricom has focused on giving high-scoring
managers shares at no cost after closing a separate scheme where a more
diverse group of employees were offered an opportunity to buy shares at a
fixed price of Sh5.4 each.
Share-based compensation
schemes are seen as aligning the interest of workers with those of
shareholders. By owning stocks in their company, employees are exposed
to the up and downsides of their performance.
The collapse of ARM Cement
,
for instance, has put on the line stock options worth hundreds of
millions of shillings that are held by the company’s former executives
Pradeep Paunrana and Surendra Bhatia.
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