Several senior executives at Safaricom, Kenya’s preeminent telecom, were awarded 16.4 million shares with a current market value of Sh700-million ($6.4-million) for free in March as compensation for their past performance.
According to Business Daily Kenya, the company’s employees cashed out 17.8-million units of stock worth Sh763-million ($7-million) the year prior. The company’s cumulative spending on the share-based compensation scheme currently stands at more than Sh3.5-billion ($32.2-million).
Safaricom’s Stock-Based Compensation Scheme
Safaricom, a Nairobi Securities Exchange-listed firm, buys its own shares in the open market and allocates them to specific employees who eventually take ownership three years later. At this point, the employees are free to sell the stocks or continue holding them in their personal accounts.
“Additionally, 16.42 million shares historically valued at Sh480.7-million ($4.4-million) (2020: 17.83 million shares valued at Sh438.6-million ($4-million)) vested and were exercised by eligible staff,” the telecom says in its latest annual report.
The free shares, coupled with Safaricom’s long-term stock price rally, have made the company’s stock-based compensation one of the most lucrative amongst the firms listed on the Nairobi Securities Exchange.
Safaricom’s scheme sees the distribution of shares focused on high-scoring managers, who receive the shares at no cost. A separate scheme where a more diverse group of employees were offered an opportunity to buy shares at a fixed price of Sh5.4 ($0.05) each once existed but has been closed.
CEO and CFO Will Not Receive Shares
The shares are being given to senior executives as part of compensation for meeting or exceeding performance targets. Traditionally, the company’s CEO and CFO have taken most of the stock-based compensation.
However, the current holders of these offices, CEO Peter Ndegwa and CFO Dilip Pal, were not amongst those awarded shares in the review period, since they only joined Safaricom recently.
Ndegwa was appointed on 1 April 2020, while Pal took office on 1 November 2020.
Safaricom’s stock is currently trading at record highs of Sh42.8 ($0,39), driven by investor’s expectations for growth and increased profitability from the company’s imminent entry into Ethiopia’s virtually untouched telecom market.
The company also recently benefited from increased profits from its M-Pesa platform.
“The performance was supported by M-Pesa revenue growth, up 43.2% on a normalised basis, which benefited from the increased customer base, higher platform usage and the reinstatement of person-to-person M-Pesa transaction fees,” Safaricom’s parent, Vodacom Group had said.