Nokia 2010 Annual Report Download - page 142

The Board of Directors decided in March 2011 that in order to align Stephen Elop’s compensation to
the successful execution of the new strategy announced on February 11, 2011, his compensation
structure for 2011 and 2012 would be modified. This onetime special CEO incentive program is
designed to align Mr. Elop’s compensation to increased shareholder value and will link a meaningful
portion of his compensation directly to the performance of Nokia’s share price over the next two
years. To participate in this new program, Mr. Elop will invest during 2011 and 2012 a portion of his
shortterm cash incentive opportunity and a portion of the value of his expected annual equity grants
into the program as follows:
• His target shortterm cash incentive level is reduced from 150% to 100% and
• His annual equity grants are reduced to a level below the competitive market value.
In consideration, Mr. Elop will be provided the opportunity to earn a number of Nokia shares at the
end of 2012 based on two independent criteria, half of the opportunity tied to each criterion:
(1) Total Shareholder Return (TSR), relative to a peer group of companies over the 2 year period
from December 31, 2010 until December 31, 2012: Minimum payout will require performance
at the 50th percentile of the peer group and the maximum payout will occur if the rank is
among the top three of the peer group. The peer group consists of a number of relevant
companies in the high technology/mobility, telecommunications and Internet services
industries,
(2) Nokia’s absolute share price at the end of 2012: Minimum payout if the Nokia share price is
EUR 9, with maximum payout if the Nokia share price is EUR 17.
Nokia share price under both criteria is calculated as a 20day trade volume weighted average share
price on the NASDAQ OMX Helsinki. If the minimum performance for neither of the two performance
criterion is reached, no share delivery will take place. If the minimum level for one of the criterion is
met, a total of 125 000 Nokia ordinary shares will be delivered to Mr. Elop. At maximum level for both
criteria, a total of 750 000 Nokia ordinary shares will be delivered to him. Shares earned under this
plan during 20112012 will be subject to an additional oneyear vesting period until the first quarter
2014, at which point the earned and vested shares will be delivered to Mr. Elop. The number of
shares earned and to be settled may be adjusted by the Board of Directors under certain exceptional
circumstances. Until the shares are settled, no shareholder rights, such as voting or dividend rights,
associated with the shares would be applicable. Right for the shares would be forfeited and no shares
would be delivered if Mr. Elop resigned without cause or was terminated for cause by Nokia before
the settlement.
Nokia also had a service contract with OlliPekka Kallasvuo covering his position as President and CEO
until September 20, 2010. As at September 20, 2010, Mr. Kallasvuo’s annual total gross base salary
was EUR 1 233 000, and his incentive targets under the Nokia shortterm cash incentive plan were
150% of annual gross base salary. The service contract included provisions concerning termination of
employment, and Nokia announced on September 10, 2010 that in accordance with the terms and
conditions of his service contract, Mr. Kallasvuo was entitled to a severance payment consisting of
18 months gross base salary and target incentive which totaled EUR 4 623 750. Mr. Kallasvuo was
paid the shortterm cash incentive for the period from July 1 to September 20, 2010 at a level of
100% of base pay on a pro rata basis. He also received as compensation the fair market value of the
100 000 Nokia restricted shares granted to him in 2007, which were to vest on October 1, 2010. All
the unvested equity granted to him was forfeited upon termination of the employment, while his
vested outstanding stock options remained exercisable until midFebruary 2011, at which point they
were forfeited in accordance with the plans’ terms and conditions. In addition, Mr. Kallasvuo did not
meet the minimum eligibility requirements under his supplemental retirement plan agreement and
as such, will not receive any payments under that agreement. As a result, Nokia reversed the actuarial
liability of EUR 10 154 000, that had been accrued under that plan. In accordance with the terms and
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