EABL bosses get Sh155m Diageo shares

Beer production line at the EABL plant in Ruaraka, Nairobi. 

Photo credit: File | Nation Media Group

Executives of East African Breweries Plc (EABL) were awarded shares in the parent company Diageo Plc worth Sh155.8 million in the year ended June as part of their stock-based compensation.

The Nairobi Securities Exchange-listed firm disclosed the value of the employee share ownership plan (Esop) in its financial statements for the review period.

The brewer’s executives had been awarded a slightly more valuable pool of shares worth Sh157.9 million the year before.

“Some of the senior executives of the group participate in the share ownership schemes linked to the share price of Diageo Plc shares and administered by Diageo Plc,” EABL says in its 2022 annual report in notes explaining the Esop.

“The schemes are of various categories. The costs associated with these schemes are recharged to the company [EABL] and accounted for as part of staff costs.”

The brewer runs three stock-based compensation plans, with none linked to performance conditions.

One offers executives an option to buy the shares at a future date but a fixed price which is set at the time when the option is granted.

A second one offers qualifying employees free shares which are restricted in a strategy aimed at retaining top talent.

A third scheme offers employees an opportunity to save money over three years with the objective of using the funds to buy shares at a 20 percent discount to the market price at the grant date.

In all three schemes, the vesting (waiting) period is three years after which the employees are allowed to take possession of the shares. The staff can exercise their right to the shares within seven years upon the lapse of the vesting period.

Diageo’s share price has gained more than 65 percent in the past decade, boosting the value of the shares granted in earlier years.

Other listed firms with stock-based compensation plans that are based on the shares of their parent companies are Absa Bank Kenya and Standard Chartered Bank Kenya.

Stock-based compensation schemes are seen as an additional means of remuneration and which has the potential 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.

Some are more generous, offering shares to their employees for free or at a marginal cost, setting them up for major gains once the stocks vest.

PAYE Tax Calculator

Note: The results are not exact but very close to the actual.