Employees held 122.5 million shares as of December 2016, down from 143.7 million the year before, taking the Esop plan one place down to the fourth position in the list of the lender’s top 10 shareholders.
Chief executive James Mwangi is now the third-largest owner with a direct stake of 3.39 per cent.
Trading of the 21.1 million shares – with a current market value of Sh696 million — held by the ESOP last year indicates profit taking or increased staff turnover.
Equity Group #ticker:EQTY staff last year redeemed nearly Sh700 million worth of the bank’s stock held through the employee share ownership plan (Esop), cutting their stake to a record low of 3.25 per cent.
The bank’s annual report shows that the employees held 122.5 million shares as of December 2016, down from 143.7 million the year before, taking the Esop plan one place down to the fourth position in the list of the lender’s top 10 shareholders.
Chief executive James Mwangi is now the third-largest owner with a direct stake of 3.39 per cent.
Mr Mwangi holds additional shares in the ESOP, which was established ahead of the bank’s listing in 2006, and which saw the staff acquire a 5.5 per cent stake that has steadily dropped over the years.
Trading of the 21.1 million shares – with a current market value of Sh696 million — held by the ESOP last year indicates profit taking or increased staff turnover.
“Employees who leave the bank’s employment or who no longer wish to be shareholders have their units redeemed by the trust,” Equity says of the situations under which staff may cash in their entitlements.
Capital Markets Authority (CMA) regulations also provide that retrenched workers can apply for shares held in the trust to be transferred to them directly after which they can trade them in the open market.
Equity’s ESOP is the largest among Kenya’s publicly traded firms, its current market value standing at Sh4 billion and having topped the Sh7 billion mark at the height of the bull market in 2015.
The ESOP was initially credited with 15 million shares but the volumes grew ten-fold in 2009 following a stock split that year. The 10:1 stock split, coupled with the lender’s long-term share price rally, has significantly boosted the fortunes of employees who qualified for the ESOP plan.
Stock-based compensation schemes gained traction from the early 2000s as a means of aligning the interests of employees with those of shareholders.
By owning stock in their company, workers, including executives, are exposed to the upside and downside of their performance and decisions.
Firms running ESOPs have traditionally offered staff their shares at a discount to the prevailing market price to encourage their participation in the schemes.
Others have also granted shares for free to select employees with outstanding performance, setting them up for major capital gains down the road.
Listed companies with outstanding ESOP plans include oil marketer KenolKobil #ticker:KENO, HF Group #ticker:HFCK and Barclays Bank of Kenya #ticker:BBK.
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