Equity Group Employees to Buy Shares at 50 Cents

In its proposed stock-based compensation plan, Equity Group employees, including its top executives, will purchase shares at a reduced rate of 50 cents.

With the company’s stock closing at Sh38.35 on Wednesday, a premium of 7,570 percent to the level at which individuals who qualify would exercise their entitlement to purchase the shares, the low price positions the personnel for significant benefits.

Subject to approval at its annual general meeting on June 28, the bank has proposed to issue a total of 198.6 million shares with a current market value of Sh7.6 billion to workers over a ten-year period.

However, the employees will only spend a total of Sh99.3 million, positioning them for significant capital gains.

In a circular to shareholders, specifics of the new employee share ownership plan (Esops) have been revealed.

“Qualifying employees will be granted options to purchase units in the Trust at a significantly discounted exercise price of Sh0.50 per unit,” the circular says.

After Safaricom, which buys its shares on the open market and distributes them to the qualified staff at no cost to the employees, the bank’s offer makes it one of the most generous stock-based compensation plans.

For the year ending March 2022, the telco’s ESOP trust purchased 12.4 million shares for Sh489.4 million to replace shares granted to personnel in prior years.

After ending a second program that gave a wider range of employees the chance to purchase shares at a fixed price of Sh5.4 each, Safaricom has concentrated on providing high-scoring managers with shares at no cost.

Stock-based compensation plans are viewed as an extra kind of compensation that has the ability to align the interests of shareholders and employees.

Employees are exposed to the positive and negative effects of their actions and performance since they own shares in the company.

Firms running Esops have traditionally offered staff shares at a discount to the prevailing market price to encourage their participation in the schemes.

Equity’s proposed scheme will be open to employees in Kenya, Uganda, Rwanda, South Sudan, Tanzania, and Ethiopia and any additional markets the Kenyan banking multinational may expand to.

The chief executive (James Mwangi), executive director (Mary Wamae), members of middle management, senior officers, and officers, according to the company, would all take part in the scheme.

The circular states that the shares will be granted yearly “provided agreed parameters are met.” In the third year following allotment, the shares will vest and become vested, or available for purchase, ownership, or sale.

“The Esop has been designed as a fit-for-purpose employee share ownership plan which will see Equity Group employees participate in the shared prosperity philosophy, act like owners, and make long-term value-creating decisions every day,” Equity said.

“The Esop will be a share-based long-term incentive scheme to be added to the existing reward mix (i.e. guaranteed pay plus cash-based short-term incentives (annual performance bonus). Since Equity Group is headquartered in Kenya with a primary listing on NSE, the Esop will be administered in Kenya and be governed by the laws of Kenya.”