Employees of Equity Group led by its top executives will buy shares at a discounted price of 50 cents in its proposed stock-based compensation scheme.
The low price sets up the staff for major rewards, with the company’s stock price closing at Sh38.35 on Wednesday, a premium of 7,570 percent to the level at which those qualifying will exercise their right to acquire the shares.
The bank has proposed to issue a total of 198.6 million shares with a current market value of Sh7.6 billion to employees over 10 years, subject to approval at its annual general meeting on June 28.
The employees will, however, spend an aggregate of only Sh99.3 million, setting them up for major capital gains.
Details of the new employee share ownership plan (Esops) have been disclosed in a circular to shareholders.
“Qualifying employees will be granted options to purchase units in the Trust at a significantly discounted exercise price of Sh0.50 per unit,” the circular says.
The bank’s offer makes it one of the most generous stock-based compensation plans after Safaricom which buys its shares in the open market and distributes them to qualifying staff at no cost to the workers.
The telco’s ESOP trust bought 12.4 million shares at Sh489.4 million in the year ended March 2022 to replenish shares awarded to staff in earlier years.
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.
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 are exposed to the upside and downside of their performance and decisions.
Firms running Esops have traditionally offered staff shares at a discount to the prevailing market price to encourage their participation in the schemes.
Equity’s proposed scheme will be open to employees in Kenya, Uganda, Rwanda, South Sudan, Tanzania and Ethiopia and any additional markets the Kenyan banking multinational may expand to.
The company says those participating in the scheme will include the chief executive (James Mwangi), executive director (Mary Wamae), members of middle management, senior officers and officers.
The shares will be issued annually, “provided agreed parameters are met”, the circular says. The shares will vest –be available for purchase and ownership or sale— in the third year after allotment.
“The Esop has been designed as a fit-for-purpose employee share ownership plan which will see Equity Group employees participate in the shared prosperity philosophy, act like owners, and make long-term value-creating decisions every day,” Equity said.
“The Esop will be a share-based long-term incentive scheme to be added to the existing reward mix (i.e. guaranteed pay plus cash-based short-term incentives (annual performance bonus). Since Equity Group is headquartered in Kenya with a primary listing on NSE, the Esop will be administered in Kenya and be governed by the laws of Kenya.”