Safaricom cuts CEO Ndegwa’s annual bonus by Sh62 million


Safaricom CEO Peter Ndegwa during an interview on October 5, 2023 at Michael Joseph Centre, Nairobi. 

Photo credit: File | Nation Media Group

Safaricom chief executive officer Peter Ndegwa’s annual performance bonus fell by Sh62.2 million in the year to March 2024, marking the first time his pay has dropped since he was appointed in April 2020.

Disclosures in Safaricom’s annual report for the 12 months ending March 2024 show that the company paid Mr Ndegwa a bonus of Sh134.1 million in the period, compared to Sh196.3 million in the year to March 2023. The bonus had risen from Sh90 million in March 2021 to Sh178.9 million in March 2022.

The fall in the bonus saw Mr Ndegwa’s total pay for the year to March 2024 decline to Sh252.3 million from Sh313.1 million a year earlier.

Safaricom said in its latest annual report that executive directors — Mr Ndegwa and the chief finance officer Dilip Pal — are remunerated as per their negotiated employment contracts and are employed on a permanent basis, but does not give a breakdown of the performance parameters used in setting their annual bonus.

“Besides the basic salary, the executive director is entitled to an annual performance-based bonus and shares, residential accommodation, utility bills payment and club membership,” the company said in its 2024 annual report.

Safaricom told the Business Daily to stick to what is in the report when contacted for comment.

Listed companies normally include a number of short- and long-term incentives for executives, based on business performance parameters such as profitability, growth of cash generated by the business, the performance of the company’s share at the stock market, shareholder returns such as dividends and development of new revenue lines.

In the year to March, Safaricom’s consolidated net profit rose marginally to Sh62.99 billion from Sh62.26 billion, with its share of losses from its recently established Ethiopian subsidiary weighing down growth in the Kenyan unit.

Safaricom Kenya’s net profit grew by 13.7 percent in the period to Sh84.74 billion, while Safaricom Ethiopia posted a Sh42.09 billion net loss.

Safaricom owns 51.67 percent of the Ethiopia unit, meaning that the share of the losses booked on its financial report stood at Sh21.7 billion.

The company kept its total dividend for the year unchanged at Sh1.20 per share, amounting to a total payout of Sh48.08 billion. The dividend was split into an interim payout of Sh0.55 per share — paid out in March — and a final dividend of Sh0.65 per share, which will be paid out on August 31 to shareholders on the register as of July 31.

In terms of share price performance, the telco’s stock saw a 1.9 percent decline in the reporting period — standing at Sh17.55 per share at the end of March 2024 compared to Sh18.10 a year earlier. In addition to straight cash bonuses, the company also offers its staff a share-based reward scheme.

Under Safaricom’s employee performance share award plan, the company buys its own shares in the open market and allocates them to specific employees, who take ownership after a three-year vesting period when they are free to sell or continue holding the stock in their personal accounts.

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.

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.

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