Jumia, a Pan-African ecommerce company founded by Jeremy Hodara and Sacha Poignonnec, has implemented a strategy to enhance loyalty and motivation among its managers. They achieve this by providing ownership shares in the company to these managers, thereby aligning their interests with the company’s success. In November 2022, Jeremy Hodara and Sacha Poignonnec stepped down as Co-CEOs of Jumia, and their positions were filled by Francis Dufay and Antoine Maillet-Mezeray, who were appointed as new members of the Management Board.

To motivate managers, Jumia introduced a program called Virtual Restricted Stock Units (VRSUs). VRSUs are a form of employee incentive that promises employees a specific number of company shares at a future date. Unlike stock options, VRSUs do not grant immediate ownership or the ability to purchase shares. Instead, they have a vesting period during which employees must meet certain conditions. Once the VRSUs vest, employees receive the equivalent number of shares based on the company’s stock price. This approach aligns employee interests with company performance and value, providing an incentive for employees to contribute to the company’s success. However, it’s important to note that VRSUs do not grant voting rights or dividends until the shares are owned by the employee.

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Jumia’s VRSUs are divided into short-term and long-term plans, and managers receive them based on their performance. Let’s delve into the details of these plans and the rules in place to ensure managers’ accountability.

Short-term VRSU Plan: Managers receive VRSUs for two years, and the number of shares depends on the company’s growth rate and share price. The shares vest (become fully owned) after two years, with the vesting percentages determined as follows:

• 100% if the growth rate is at least 5%
• 80% if the growth rate is between 2.5% and 5%
• 50% if the growth rate is between -15% and 2.5%
• No shares vest if the growth rate is -15% or lower.

Long-term VRSU Plan: Managers are granted VRSUs for four years, and the number of shares depends on their responsibilities and the company’s performance. The vesting of shares is based on both the growth rate and profitability, with the vesting percentages determined as follows: Growth Rate Performance condition:

• 100% if the growth rate is at least 10%
• 80% if the growth rate is between 5% and 10%
• 50% if the growth rate is between -5% and 5%
• No shares vest if the growth rate is -5% or lower.

Profitability Performance condition:

• 100% if profitability improves by at least 15%
• 80% if profitability improves by 10% to 15%
• 50% if profitability improves by 5% to 10%
• No shares vest if profitability improves by less than 5%.

An overview of the VRSU program reveals that newly appointed managers, Francis Dufay and Antoine Maillet-Mezeray, received VRSUs on 15 December 2022. However, no shares vested or were awarded to them during their service between 5 November and 31 December 2022.

To ensure accountability, Jumia has established rules that managers must follow as part of their service agreements. If managers intentionally break rules or neglect their duties, their compensation can be reduced or taken back. The company’s supervisory board has the authority to enforce these rules, while other legal rights, such as claims for damages, remain unaffected.

Another rule mandates that Jumia’s managers purchase company shares trading on stock exchanges worth 100% of their annual gross base salary. These shares must be held until the end of their tenure on the board. Managers are given up to four years to accumulate the required number of shares.

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According to the rules, if a manager’s term ends due to revocation or voluntary resignation, their service agreement with Jumia automatically terminates. In such cases, any vested or unvested VRSU shares and other incentives will be forfeited without compensation.

In the event of a “Change of Control” of the company, where a person or entity acquires a majority of Jumia’s shares or its assets, all unvested VRSU shares granted to the concerned manager will immediately become vested.

If a manager’s tenure is prematurely terminated, any negotiated severance payment cannot exceed two years’ compensation or the remaining term of the service agreement. If a manager becomes permanently incapacitated, their service agreement ends upon confirmation of their permanent incapacity.

Following the end of their service agreement, Jumia’s managers are prohibited from competing with Jumia or its subsidiaries for 24 months. During this time, Jumia is required to pay the board member half of their previous fixed monthly compensation. However, Jumia has the option to waive this clause after six months by providing a written declaration.

Jeremy Hodara and Sacha Poignonnec, the former Co-CEOs, adhered to these rules by forfeiting all VRSU shares granted to them in 2021 and 2022 upon their resignation. They also exercised all their remaining stock options granted under the Stock Option Program 2016. Any stock options granted in 2020 were cancelled and forfeited without compensation. Furthermore, stock options from the Stock Option Plan 2020 were cancelled if they had not vested at the time of resignation. Vested stock options under the Stock Option Plan 2020 must be exercised within the specified period, or they will be forfeited.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert. 
As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard