KenolKobil’s has paid its former chief executive Jacob Segman the largest single exit pay in the history of Kenya’s corporate sector. Segman was paid Sh707.1 million to settle a prolonged dispute regarding his stock-based compensation.
The company revealed the settlement in its annual report in accordance with new regulations that require directors’ pay to be made public.
“A legal dispute arose on [the] validity of the Esop [employee share ownership plan] options, with legal proceedings commencing in courts of law in Kenya and in the State of Delaware, USA. In December 2017, the company settled the matter out of court, making payment to Mr Segman possible,” the report stated.
Earlier, the company has provided Sh77.1 million as Segman’s compensation. On the other hand, the company’s other reports have suggested that Segman left with pays between Sh300 million and Sh480 million.
Segman resigned as the group managing director in 2013 and was granted Esop option tranches between 2005 and 2010. “The same vested at various dates between 2008 and 2013,” KenolKobil said in the report.
KenolKobil, however, failed to reveal what Segman earned in salaries. Still, his settlement is enough to pay the current executive, David Ohana, over 13 years based on his monthly pay of Sh4.4 million in the year ended December 2017. Ohana also received a bonus of Sh84.7 million and other payments for unnamed items totalling to Sh13.4 million.
Segman’s settlement affected the company’s earnings in the year ended December 2017 after the net profit only increased by two percent from 2.41 billion in 2016 to Sh2.46 billion.
The Sh707.1 million settlement is the same as redeeming 40.2 million shares (2.7 percent) of KenolKobil’s 1.4 billion issued shares based on the present market price of Sh17.6. Weeks prior to paying Segman, the company went to court to find determination whether it was legal for the ex-CEO to exercise his share options.
Esop’s trustees said in their court application that Segman’s contract permitted him to exercise his shares up to three years after exiting the company. The trustees said the chance has closed by the time Segman decided to take up the shares on 26 April 2017, about 4 years after his exit.
KenoKobil is the latest company to payout a high-stakes claim originating from an Esop. Other workers have also sued the company in order to get access to the shares which KenolKobil has frozen on the grounds of breaching vesting rules.
Equity Bank has also been sued by former employees who say the bank reduced their shares and cashed them out below market rates.
Esops are used by companies to align the interest of employees with that of the shareholders.