Safaricom chief executive Peter Ndegwa raised the number of shares he holds in the company sevenfold to 6.21 million in the year ending March 2024 from 895,500 a year earlier, the firm’s latest disclosures show.
Mr Ndegwa, who was appointed as Safaricom CEO in April 2020, had seen his stake in the company remain unchanged at 895,000 shares since 2021, when the annual report records show that the units were acquired.
The CEO's current stake in the company is now valued at Sh107.41 million at Friday’s closing price of Sh17.30 a share, with the previous year’s stake valued at Sh15.5 million at present price.
The jump in the volume of shares indicates that Mr Ndegwa could have benefitted from the vesting of employee share ownership plan (Esop) shares due to him as a reward for meeting performance targets, or alternatively, he could have acquired the units through a purchase on the stock market.
Under Safaricom’s employee performance share award plan, the company buys its own shares in the open market and allocates them at no cost to specific employees, who take ownership after a three-year vesting period when they are at liberty to sell or continue holding the stock in their personal accounts.
The free shares form part of the compensation due to the staff for meeting or exceeding performance targets. Any shares awarded to Mr Ndegwa in his first year of service would have vested from April 2023.
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.
In the year to March 2024, Safaricom rewarded senior managers with 17.5 million shares worth Sh302.75 million under the performance award scheme. The beneficiaries had received 15.3 million shares the previous year.
Future awards
The company also bought an additional 10 million shares in the year to March 2024 for future awards, at a cost of Sh164.3 million.
The free shares and Safaricom’s long-term stock price gains in recent years have made the company’s stock-based compensation one of the more lucrative among the country’s publicly-traded firms.
The beneficiaries who continue to hold their shares after vesting also benefit from dividends paid out annually by the company, whose payout policy normally sees it distribute about 80 percent of its net profits every year to shareholders.
Stock-based compensation, which comes with a vesting period, helps a company retain high performing staff, in the process improving its prospects for continued profitability.
Equity Group has also recently announced a stock-based compensation scheme which will allow qualifying employees to buy shares at a discounted price of 50 cents each, setting them up for major capital gains.
