Nokia 2004 Annual Report Download - page 88

None of the Committee members are current or former executives of the company. None of the
Committee members participate in any of the plans or programs that the Committee oversees. In
accordance with its charter, the Committee evaluates its work, and such an evaluation was conducted
in 2004.
Compensation Philosophy and Objectives
The company operates in the extremely competitive and rapidly evolving high technology industry.
The key objectives of the executive compensation programs are to attract, retain, and motivate
talented executive officers that drive Nokia’s success and industry leadership.
The executive compensation programs are designed to:
•Provide to executives a total compensation package that is competitive with the relevant
market,
•Provide competitive base pay rates,
• Deliver significant variable cash compensation for the achievement of stretch goals,
• Align the interests of the executives with those of the shareholders through long-term
incentives in the form of equity-based awards.
Compensation Components and Determination
The compensation program for executives includes the following:
• Base salaries targeted at competitive market levels
• Short-term cash incentives paid twice each year based on performance for each of Nokia’s
short-term plans that end on June 30 and December 31 of each year. Short-term incentive
payments are primarily determined based on a formula that considers the company’s
performance to pre-established targets for Net Sales, Operating Profit and Net Working Capital
efficiency measures. Certain executives may have objectives related to quality, technology
innovation, new product revenue, total shareholder return or other objectives of key strategic
importance, which may require a discretionary assessment of performance by the Committee.
• Equity awards comprised of stock options and performance shares for the CEO and Group
Executive Board members are determined on the basis of each executive’s performance and a
comparison of that executive’s compensation to the relevant market. All stock options are
granted at fair market value. Additional details on the equity plan are described in ‘‘Item 6.E
Share Ownership—Stock Option Ownership.’’
The Committee considers the compensation practices of other relevant companies in the same or
similar industries and the compensation levels of the executive officers in these relevant companies
when it makes decisions regarding the compensation for the company’s executive officers. The relevant
companies include both high technology and telecommunications firms that are headquartered in
Europe and the United States. The Committee has access to, and uses outside independent consultants.
Compensation of the Chief Executive Officer and President
Subject to Board approval, the Committee establishes performance objectives and evaluates the
performance of the Chief Executive Officer. The Committee reviews the compensation of the Chief
Executive Officer. The review is made consistent with the principles and programs described
previously. The Committee makes recommendations to the Board of Directors for approval. The CEO’s
short-term incentive bonus payments are based on the performance of the company against
87