Tuesday, May 13, 2008

Next CMA minefield

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.

7 comments:

dropmyload said...

Almost every single multinational Bank offers ESOP in order to retain their top performing staff.

bankelele said...

ESOP's are Ok, but (i) need more disclosures (ii) it's very hard to attribute performance to an individual effort - even with super-star CEO's liek james Mwangi and Michael Joseph, I'm sure they have assistants and boards who would want to claim some credit for their companys/CEO's achievements

Maishinski said...

Some beef with CMA and NSE regarding Safaricom IPO:

We warned them about the foolishnes of not giving retail investors the Payment v/s Delivery option - i.e using BANK GUARANTEE!

Now:
- exchange rate is completely haywire (compare ksh with inflation - beats logic).
- interbank rate is inching up. I think CBK set a max limit, but it doesnt help ease the liquidity crunch because:
- Citibank chooses not to lend to some banks forcing them to run to CBK for overnight lending.

This is yet another self induced crisis attributed to conflict of interest by the so-called ipo advisors.

Actually a form of corruption as the intention is for them to recover the costs of bidding at 0.5 cents!!!

CMA, as the regulator, should put in place laws preventing the creation of "packs of greedy hyenas" (e.g. by rejecting ridiculously low bids also!) if they are to stop this kind of self destructive outcome.

Corruption - right in our faces. AAAERRRRGGGHHH!!!!!

bankelele said...

Maishinski: I'm waiting to see how retail fare first. I don't think they did as badly as QII's in allocation. cash crunch bad for small banks - and Citibank won't lend to them? They may be blue chip in Kenya, but their parent is not doing so well in US

Anonymous said...

Can somebody tell me about the owners of Nyaga Stockbrockers, especially this guy I saw in the papers today called Gakiavih! I feel that it is a big shame for CMA that there are no adequate corporate governance practices for a firm that was entrusted with millions of Kenyans' money.

adam cartwright said...

pg 25 of dn may 14... what exactly is going on with posta saccco, first they are selling, then they are not .plus its a prime property so whay even try to sel it? any info...

Anonymous said...

jNyagah Owner: If convicted, I hope they lock him up, throw away the key and confiscate all ill-gotten wealth.

If not convicted, we want a clear explanation from CMA as to why not????

Credibility of CMA has been at stake for a long time and this is an opportunity for it to clear its name.

The writing on Broker's walls should be: "You can't steal investor funds with shameless impunity and get away with it."

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