Nokia 2006 Annual Report Download - page 94

no longer eligible for incentives, bonuses, stock options or other equity grants or additional
retirement benefits from Nokia. Mr. Ollila was entitled to retain all vested and unvested stock
options and other equity compensation granted to him prior to June 1, 2006.
OlliPekka Kallasvuo’s service contract covers his current position as President and CEO and Chairman
of the Group Executive Board. The contract also covered his prior position as President and COO.
Mr. Kallasvuo’s annual total gross base salary, which is subject to an annual review by the Board of
Directors, was EUR 750 000 from January 1, 2006 until May 31, 2006, and is EUR 1 000 000 from
June 1, 2006. His incentive targets under the Nokia shortterm incentive plan were 125% of annual
gross base salary, starting from January 1, 2006 and are 150% of annual gross base salary, starting
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.
EquityBased Compensation Programs
General
During the year ended December 31, 2006, Nokia sponsored three global stock option plans, three
global performance share plans and four global restricted share plans. Both executives and
employees participate in these plans. In 2004, Nokia introduced performance shares as the main
element to the company’s broadbased equity compensation program to further emphasize the
performance element in employees’ longterm incentives. Thereafter, the number of stock options
granted has been significantly reduced. The rationale for using 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 intends to align the potential value received by participants
directly with the performance of Nokia. Since 2003, Nokia has also granted restricted shares to a
small selected number of employees each year.
The broadbased equity incentive program in 2006, which was approved by the Board of Directors,
followed the structure of the program in 2005. The target group for the 2006 equitybased incentive
program continued to be broad, with a wide number of employees in many levels of the
organization eligible to participate. The aggregate number of participants in all of Nokia’s equity
based programs in 2006 was approximately 30 000, which is similar to the number in 2005.
The equitybased incentive grants are generally conditional upon continued employment with Nokia,
as well as the fulfillment of performance and other conditions, as determined in the relevant plan
rules.
For a more detailed description of all of Nokia’s equitybased incentive plans, see Note 23 to our
consolidated financial statements included in Item 18 of this annual report on Form 20F.
Performance Shares
We have granted performance shares under the global 2004, 2005 and 2006 plans, each of which
has been approved by the Board of Directors.
The performance shares represent a commitment by Nokia to deliver Nokia shares to employees at a
future point in time, subject to Nokia’s fulfillment of predefined performance criteria. No
performance shares will vest unless Nokia’s performance reaches at least one of the threshold levels
measured by two independent, predefined performance criteria: Nokia’s average annual net sales
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