Equity to award employees cheap shares in Bank in major win for staff

Equity Bank CEO Dr. James Mwangi during the Q1 2024 Investor Briefing event. [Wilberforce Okwiri,Standard]

Equity Bank employees will now have the opportunity to own shares in the tier-one lender through an employee share ownership plan (ESOP).

The plan outlined in a notice on Tuesday will be interrogated by shareholders at the bank’s upcoming annual general meeting (AGM) to be held virtually on June 26.

Equity, which also operates in Uganda, Tanzania, Rwanda, Burundi, South Sudan and the Democratic Republic of Congo, will grant its employees options to purchase shares at a significantly discounted price compared to the market value.

Over a 10-year period, employees will also be able to acquire up to five per cent of the total company shares.

It will be a chance for Equity Group chief executive James Mwangi to increase his shareholding in the tier-one lender, which currently stands at 3.39 per cent. Equity Group’s net profit for the year ended December 2023 fell by Sh2.91 billion or 6.5 per cent to Sh41.98 billion after the lender doubled its provisioning for bad loans in the period.

Despite experiencing a decrease in profitability, the bank opted to keep its dividend unchanged at Sh4 per share for the year, leading to a total payout of Sh15.1 billion, despite the decline in net profit.

The payout was a boon for income-focused shareholders to whom dividends form a critical lifeline as the cost-of-living crisis rages.

Norwegian Investment Fund-backed institutional investor Arise BV was the biggest beneficiary of the dividend boom. It took home Sh1.92 billion of the dividends declared on account of its 12.76 per cent shareholding in the lender.

Mwangi was also a big winner, taking home Sh511.8 million through his 3.39 per cent stake in the bank. Other shareholders who held 62.8 per cent divided the rest.

The latest ESOP plan is designed to incentivise Equity employees and make them feel like owners of the company. This can lead to increased employee engagement and loyalty, according to experts. The proposed ESOP plan translates to around 198 million shares, with a current market value of approximately Sh10 billion.

“Notice is hereby given to Shareholders that the Twentieth Annual General Meeting (“AGM”) of Equity Group Holdings PLC (the “Company”) will be held on Wednesday, 26th June 2024 by electronic means, for the purpose of considering and, if thought fit, passing the resolutions set out below,” said Equity in a notice.

At its last AGM held on June 28, 2023, the shareholders passed a resolution to establish an employee share ownership plan.

“The board of directors recommends that subject to approval by the Capital Markets Authority, the shareholders approve and adopt the Draft Trust Deed and Rules as the Trust Deed and Rules for the EGH Group ESOP and that the board of directors be authorised to consider and approve any changes proposed or required by the CMA when the Draft Trust Deed and Rules are submitted to the CMA for approval.”

An employee stock ownership plan is an employee benefit plan that gives workers ownership interest in the company in the form of shares of stock. ESOPs encourage employees to give their all as the company’s success translates into financial rewards.

They also help staff to feel more appreciated and better compensated for the work they do.

Companies typically tie distributions from the plan to vesting, which gives employees rights to employer-provided assets over time.