Nokia 2006 Annual Report Download - page 88

The Personnel Committee considers the following factors, among others, in its review when
determining the compensation of Nokia’s executive officers:
)The compensation levels for similar positions (in terms of scope of position, revenues, number
of employees, global responsibility and reporting relationships) in relevant benchmark
companies,
)The performance demonstrated by the executive officer during the last year,
)The size and impact of the role on Nokia’s overall performance and strategic direction,
)The internal comparison to the compensation levels of the other executive officers of Nokia,
and
)Past experience and tenure in role.
The Committee uses outside independent consultants to obtain benchmark data and information on
current market trends, and for advice regarding specific compensation questions.
Components of Executive Compensation
The compensation program for executive officers includes the following components:
Annual Cash Compensation
) Base salaries targeted at globally competitive market levels.
) Shortterm cash incentives tied directly to performance and representing a significant portion
of an executive officer’s total annual cash compensation. The shortterm cash incentive
opportunity is expressed as a percentage of the executive officer’s annual base salary. These
award opportunities and measurement criteria are presented in the table below. The incentive
payout formula is determined by two main factors: (a) a comparison of Nokia’s actual
performance to preestablished targets for net sales, operating profit and operating cash flow
and (b) a comparison of each executive officer’s individual performance to his/her predefined
targets. Certain executive officers may also have objectives related to market share, quality,
technology innovation, new product revenue, or other objectives of key strategic importance
which require a discretionary assessment of performance by the Personnel Committee of the
Board. The target setting as well as the weighting of each measure also require the Personnel
Committee’s approval. The final incentive payout is determined by multiplying each
executive’s eligible salary by: (1) his/her incentive target percent; and (2) the results of above
mentioned factors (a) and (b). The Personnel Committee of the Board may also apply
discretion when evaluating actual results against targets and the resulting incentive payouts.
In certain exceptional situations, the actual shortterm cash incentive awarded to the
executive officer could be zero. The maximum payout is only possible with maximum
performance on all measures.
A portion of the shortterm cash incentives is paid twice each year based on the performance
for each of Nokia’s shortterm plans that end on June 30 and December 31 of each year.
Another portion is paid annually at the end of the year, based on the Personnel Committee’s
assessment of Nokia’s total shareholder return compared to key competitors in the high
technology and telecommunications industries and relevant market indices over one, three
and fiveyear periods. In the case of the President and CEO, the annual incentive award is also
partly based on his performance compared against strategic leadership objectives.
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