EABL executives will receive Sh125m Diageo shares in a compensation deal

Senior executives of listed brewer EABL received shares worth Sh125.22 million in the company’s British parent Diageo Plc in the year to June 2024, representing a 20 percent decline from the value of the share-based rewards from the previous year.

The British company awards the shares to its senior executives as part of its non-cash compensation plan, with the awards linked to the performance of its share on the London Stock Exchange.

In the year to June, Diageo shares lost 26 percent to £24.90 (Sh4,230), but share awards normally have a longer vesting period.

“The costs associated with these arrangements are passed on to the company and accounted for as part of personnel costs,” EABL said in its 2024 annual report.

EABL also has three proprietary share-based compensation plans, which are not linked to performance. The first is an executive stock option plan (ESOP), where managers are given the option to purchase shares at a future date, at a fixed price determined at the time of grant.

In the second plan, called the restricted share units (RSU) plan, the company offers eligible employees free shares in a strategy aimed at helping retain key talent. This scheme was introduced in 2020.

The third plan, called the Employee Share Save Scheme (ESSS), offers employees the opportunity to save a fixed amount of money over three years and use these savings to purchase shares at a future date. The price of the units is fixed at 80 percent of the EABL share on the date of grant.

The vesting period for the vesting plans is three years, with employees having up to seven years after the vesting date to exercise their option.

To fund the plans, EABL purchases and holds its own shares – known as treasury shares – for future awards to eligible employees.

At the end of June, the company owned 4.18 million shares under its employee compensation programme, valued at Sh613.6 million at the time. This was an increase from 3.82 million units in June 2023, valued at Sh836.8 million at the time.

No options were exercised in the company’s 2024 financial year, while employees had withdrawn 27,332 units worth Sh4.37 million in 2023.

Employee share ownership plans are considered fringe benefits to increase workforce productivity, reward, retain and attract talent and are issued subject to approval by the Capital Markets Authority.

For EABL, share awards, both at local and parent level, are part of the company’s total personnel costs, which also include salaries, pensions and other statutory contributions.

EABL’s total personnel costs stood at Sh14.14 billion in the year to June, compared to Sh13.5 billion in the previous period.