Nokia 2008 Annual Report Download - page 109

EquityBased Compensation Programs
General
During the year ended December 31, 2008, we sponsored three global stock option plans, five global
performance share plans and four global restricted share plans. Both executives and employees
participate in these plans. In 2004, we 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 longterm equity
based incentives. The equitybased compensation programs intend to align the potential value
received by participants directly with the performance of Nokia. Since 2003, we also have granted
restricted shares to a small selected number of employees each year.
The equitybased incentive grants are generally conditioned upon continued employment with Nokia,
as well as the fulfillment of performance and other conditions, as determined in the relevant plan
rules.
The broadbased equity compensation program for 2008, which was approved by the Board of
Directors, followed the structure of the program in 2007. The participant group for the 2008 equity
based incentive program continued to be broad, with a wide number of employees in many levels of
the organization eligible to participate. As at December 31, 2008, the aggregate number of
participants in all of our equitybased programs was approximately 18 000 compared with
approximately 22 000 as at December 31, 2007 reflecting changes in our grant guidelines.
The employees of Nokia Siemens Networks have not participated in any new Nokia equitybased
incentive plans since the formation of Nokia Siemens Networks on April 1, 2007.
For a more detailed description of all of our equitybased incentive plans, see Note 22 to our
consolidated financial statements included in Item 18 of this annual report.
Performance Shares
We have granted performance shares under the global 2004, 2005, 2006, 2007 and 2008 plans, each
of which, including its terms and conditions, 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
growth for the performance period of the plan and earnings per share (“EPS”) at the end of the
performance period.
The 2004 and 2005 Performance Share Plans had a fouryear performance period and a twoyear
interim measurement period. The 2006, 2007 and 2008 Performance Share Plans have a threeyear
performance period with no interim measurement period. The below table summarizes the relevant
periods and settlements under the plans.
Plan
Performance
period
Interim
measurement
period
1st (interim)
settlement
2nd (final)
settlement
2004 .................................. 20042007 20042005 2006 2008
2005 .................................. 20052008 20052006 2007 2009
2006 .................................. 20062008 N/A N/A 2009
2007 .................................. 20072009 N/A N/A 2010
2008 .................................. 20082010 N/A N/A 2011
Until the Nokia shares are delivered, the participants will not have any shareholder rights, such as
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