Senior Safaricom Executives Awarded Ksh390m In Shares

Senior Safaricom managers have been awarded 15.28 million shares with a current market value of Ksh390 million for free in the year ended March as compensation for past performance.

The employees had cashed out 17.8 million units of stock the year before, with the company’s cumulative spending on the share-based compensation scheme standing at more than Ksh4 billion.

The 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 when they are free to sell the stocks or continue holding them.

“Additionally, 15.28 million shares historically valued at Ksh519.4 million (2021: 16.42 million shares valued at Ksh480.7 million) vested and were exercised by eligible staff,” the telco says in its latest annual report.

The free shares and Safaricom’s long-term stock price rally have made the company’s stock-based compensation one of the most lucrative among the country’s publicly traded firms.

The telco’s share price has, however, dropped significantly in recent months, an outcome attributed to foreign investors’ flight to developed markets that have raised interest rates to combat inflation.

The stock closed trading at Ksh25.5 yesterday, slightly above the 52-week low of Ksh23 recorded on June 27. The share price had rallied to touch record highs of Ksh45 in August last year, helped by investor enthusiasm after a Safaricom-led consortium won a telecommunications license in Ethiopia.

Safaricom has focused on giving high-scoring managers shares at no cost after closing a separate scheme where a more diverse group of employees was previously offered an opportunity to buy shares at a fixed price of Ksh5.4 each.

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

Safaricom says it bought 12.4 million shares at a cost of Ksh489.4 million in the year ended March as it prepares to award qualifying employees soon. The telco, through a trust, now holds 11.5 million shares which it bought at Ksh416.2 million.

The shares will be given to senior executives for free as part of their compensation for meeting or exceeding performance targets.

The company’s Chief Executive and Chief Financial Officer have traditionally taken most of the stock-based compensation. However, the current officeholders, Peter Ndegwa (CEO) and Dilip Pal (CFO), were not among those who were awarded shares in the review period and the prior year, having joined the company recently.

Mr. Ndegwa was appointed on April 1, 2020, while Mr. Pal took office on November 1, 2020.