Employee share ownership plans (ESOP’s) are define by the CMA as unit trusts. They are ideal for high tech small companies, but when establish companies roll them out without clear rules, it’s a cause for legal concern, but more so for shareholders of these companies.
They make sense in high tech small companies who need to retain key employees (Access Kenya, Scangroup), but what does a large company like KCB, NMG and HFCK (who have all applied to set up ESOP’s) need them for? Equity Bank has had one for three years and when they listed in 2006 said they’d get CMA approval as soon as possible (yet to happen). If the company does well is it a collective effort and managers and staff should be rewarded with increases and bonuses from their existing contracts.
ESOP votes should not be pressed on unsuspecting shareholders without certain disclosures such as; whether shares will be bought from the public or allocated from the company, vesting rules and participation requirements, whether they are for company executives or non executives (which may be more palatable to shareholders) and trustee/management information of the ESOP?
As at April 2007, CMA licensed ESOP’s were 6: EABL, Kenol, Athi River Mining, Access Kenya, Scangroup and Safaricom.