There are many ways to get rich while working a 9–5 job. Getting millions of shares in the company you run is certainly one of the more interesting ones.
Peter Ndegwa, Safaricom’s chief executive officer (CEO), and Dilip Pal, its chief financial officer (CFO), have received an additional 9.24 million shares in Kenya’s largest telecom company. The shares are worth KES 337.3 million ($2.6 million).
What happened? Ndegwa and Pal received the shares through Safaricom’s share-based compensation plan, which gives managers company stock as part of their pay. So, unlike a regular investor, they did not spend KES 337 million ($2.6 million) buying these shares on the Nairobi Securities Exchange (NSE). The new shares take the combined value of their Safaricom holdings to KES 865.1 million ($6.7 million), according to local Kenyan publication Business Daily.
Between the lines: The award gives Safaricom’s top executives a bigger financial stake in the company, tying part of their compensation to its share price and, ultimately, shareholder returns— a structure commonly used by listed companies to align executives’ incentives with investors.
MTN Group, Africa’s largest telecom company, made a similar move in April, awarding shares to members of its executive committee under its long-term incentive scheme. The idea is clear: executives stand to gain more when the company creates value for shareholders, giving them a financial reason to focus on the company’s performance over several years.
For Safaricom, the timing is worth watching. The company has been trying to grow beyond its traditional telecom business, with M-PESA becoming central to its strategy. Its management has more to manage than subscriber growth and voice revenue. The value created from M-PESA, data, and new businesses ultimately has to translate into stronger earnings and shareholder returns.
The share award does not guarantee that will happen, but it changes how much executives personally stand to gain if it does, encouraging them. The world works by incentives.
And then there’s Vodacom. Safaricom has become one of the most important companies in Kenya’s stock market, and its shares are also at the centre of a much bigger ownership story. In July, Vodacom, one of Africa’s largest telecom groups, increased its stake in Safaricom to 55%, giving it majority control. However, Kenya’s High Court on Tuesday ordered the government return the 15% stake it sold to Vodacom, putting that part of the transaction in limbo.
Zoom out: So while the lawyers, shareholders, the Kenyan government, and everyone else with a vested interest in that Vodacom-Safaricom saga figure out what happens next, Safaricom’s top two executives have just received a fresh chunk of the company. Not a bad addition to the portfolio.
