Nokia 2005 Annual Report Download - page 98

Olli-Pekka Kallasvuo’s contract covers his current position as President and COO, and his future
position as President and CEO, and Chairman of the Group Executive Board, as from June 1, 2006.
Mr. Kallasvuo’s annual total gross base salary, which is subject to an annual review by the Board
of Directors, is EUR 750 000 starting from October 1, 2005, and will be EUR 1 000 000 from June 1,
2006. His incentive targets under the Nokia short-term incentive plan are 125% starting from
October 1, 2005 and will be 150% from June 1, 2006. In case of termination by Nokia for reasons
other than cause, including a change of control, Mr. Kallasvuo is entitled to a severance payment
of up to 18 months of compensation (both annual total gross base salary and target incentive). In
case of termination by Mr. Kallasvuo, the notice period is 6 months and he is entitled to a
payment for such notice period (both annual total gross base salary and target incentive for
6 months). Mr. Kallasvuo is subject to a 12-month non-competition obligation after termination of
the contract. Unless the contract is terminated for cause, Mr. Kallasvuo may be entitled to
compensation during the non-competition period or a part of it. Such compensation amounts to
the annual total gross base salary and target incentive for the respective period during which no
severance payment is paid. Mr. Kallasvuo is entitled to a full statutory pension from the date he
turns 60 years of age, instead of the statutory age of 65.
During 2005, we also had a service contract with Pekka Ala-Pietil¨ a, who acted as President until
October 1, 2005. Thereafter he acted as Executive Advisor until termination of employment on
January 31, 2006. Mr. Ala-Pietil¨ a’s contract had provisions for severance payments for up to
18 months of compensation (both base compensation and bonus) in the event of termination of
employment for reasons other than cause. For compensation paid to Mr. Ala-Pietil¨ a pursuant to his
service contract, which has been terminated, see ‘‘—Summary Compensation Table 2005’’ on
page 94.
Equity-based compensation programs
General
Nokia has today three global stock option plans outstanding, two performance share plans and
three restricted share plans. After using broad-based employee stock option plans since 1997, we
introduced in 2004 performance shares as the main element to our broad-based equity
compensation program, to further emphasize the performance element in employees’ long-term
incentives. As part of this change, the number of stock options granted has been significantly
reduced since then. From 2003 we have also granted restricted shares to very few selected
employees each year.
The broad-based equity compensation program in 2005, approved by the Board of Directors,
followed the same structure adopted in 2004. The target group for the 2005 equity-based incentive
program continued to be broad with a wide number of employees in many levels of the
organization eligible to participate. The rationale for using a combination of both performance
shares and stock options for employees in higher job grades is to build an optimal and balanced
combination of equity-based incentives. The program aligns the potential value received by
participants directly with the performance of the company.
The equity-based incentive grants are conditional upon continued employment with Nokia, as well
as the fulfillment of the performance related and other conditions, as determined in the relevant
plan rules.
The aggregate number of participants in all of our equity-based programs in 2005 was
approximately 34 000, which is similar to the number in 2004.
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