Companies

Safaricom managers get Sh2.3bn shares in four years

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Safaricom Chief Financial Officer Sateesh Kamath (left) and chief executive Bob Collymore. FILE PHOTO | NMG

High-performing Safaricom #ticker:SCOM managers have over the past four years received for free 84.1 million shares with a current market value of Sh2.3 billion as part of their compensation package.

The shares are awarded to middle and top level managers who only get to own them three years later as a staff-retention and performance incentive scheme.

The free shares make Safaricom’s stock compensation one of the most lucrative among Nairobi Securities Exchange-listed firms.

The telco says in its latest annual report that 15.1 million shares currently worth Sh415 million were transferred to employees in the year ended March.

The shares were historically valued at Sh268.2 million, implying a gain of some Sh150 million.

Safaricom CEO Bob Collymore, for instance, received shares worth Sh34 million while the chief financial officer Sateesh Kamath got stocks valued at Sh8.7 million in the period.

“On July 1, 2011, the group implemented an Employee Performance Share Award Plan (the Trust) where shares are awarded to qualifying staff based on previous year’s achieved performance ratings,” Safaricom says of the scheme.

“Under the outright grant scheme, shares are purchased from the market and transferred to eligible staff at no cost after a three-year vesting period.”

The telco’s staff exercised 13.7 million shares with a current market value of Sh376 million in the year ended March 2017 and 30.4 million units worth Sh836 million the year before.

They received 24.9 million shares valued at Sh684 million in the year ended March 2015 when they started cashing in their entitlements.

Unlike other employee share ownership plans (Esops), Safaricom’s has not diluted investors since the stocks are bought from the existing pool in the open market.

Most other companies including KenolKobil #ticker:KENO and HF Group #ticker:HFCK have created new shares that are offered to staff for free or at a discount, causing dilution to shareholders.

The trustees of Safaricom’s scheme bought 16.9 million shares at a cost of Sh473 million in the year ended March, with the beneficiaries set to unlock the holdings from 2020 if they will still be working for the telco.

The trust currently holds 28.1 million shares which it acquired for Sh667.5 million, with the telco’s current share price of Sh27.5 indicating a capital gain of Sh106 million on the holdings.

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.

Share-based compensation schemes are seen as aligning the interest of workers with those of shareholders. By owning stocks in their company, employees are exposed to the up and downsides of their performance.

The collapse of ARM Cement #ticker:ARM, for instance, has put on the line stock options worth hundreds of millions of shillings that are held by the company’s former executives Pradeep Paunrana and Surendra Bhatia.