Nokia 2011 Annual Report Download - page 160

For more information on the actual cash compensation paid in 2011 to our executive officers,
see “—Actual Executive Compensation for 2011—Summary Compensation Table 2011” below.
Long-Term Equity-Based Incentives
Long-term equity-based incentive awards in the form of performance shares, stock options and
restricted shares are used to align executive officers’ interests with shareholders’ interests, reward for
long-term financial performance and encourage retention, while also considering evolving regulatory
requirements and recommendations and changing economic conditions. These awards are determined
on the basis of the factors discussed above in “—Executive Compensation Philosophy, Programs and
Decision-making Process,” including a comparison of an executive officer’s overall compensation with
that of other executives in the relevant market and the impact on the competitiveness of the executive’s
compensation package in that market. Performance shares are Nokia’s main vehicle for long-term
equity-based incentives and reward the achievement of both Nokia’s long-term financial results and an
increase in share price. Performance shares vest as shares, if at least one of the pre-determined
threshold performance levels, tied to Nokia’s financial performance, is achieved by the end of the
performance period and the value that the executive receives is dependent on Nokia’s share price.
Stock options are granted with the purpose of creating value for the executive officer, once vested, only
if the Nokia share price at the time of vesting is higher than the exercise price of the stock option
established at grant. This is also intended to focus executives on share price appreciation and thus
aligning the interests of the executives with those of the shareholders. Restricted shares are used
primarily for long-term retention purposes and they vest fully after the close of a pre-determined
restriction period. Any shares granted are subject to the share ownership guidelines as explained
below. All of these equity-based incentive awards are generally forfeited if the executive leaves Nokia
prior to their vesting.
Recoupment of certain equity gains
The Board of Directors has approved a policy allowing for the recoupment of equity gains realized by
Nokia Leadership Team members under Nokia equity plans in case of a financial restatement caused
by an act of fraud or intentional misconduct. This policy applies to equity grants made to Nokia
Leadership Team members after January 1, 2010.
Information on the actual equity-based incentives granted to the members of our Nokia Leadership
Team in 2011 is included in Item 6E. “Share Ownership.”
Actual Executive Compensation for 2011
Service Contracts
Stephen Elop’s service contract covers his position as President and CEO as from September 21,
2010. As at December 31, 2011, Mr. Elop’s annual base salary, which is subject to an annual review
by the Board of Directors and confirmation by the independent members of the Board, is
EUR 1 050 000. His incentive targets under the Nokia short-term cash incentive plan are 100% of
annual base salary as at December 31, 2011 (description of a separate plan approved by the Board of
Directors for 2011-2012 is below). Mr. Elop is entitled to the customary benefits in line with our policies
applicable to the top management, however, some of them are being provided on a tax assisted basis.
Mr. Elop is also eligible to participate in Nokia’s long-term equity-based compensation programs
according to Nokia policies and guidelines and as determined by the Board of Directors.
In case of termination by Nokia for reasons other than cause, Mr. Elop is entitled to a severance
payment of up to 18 months of compensation (both annual base salary and target incentive) and his
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