Nokia 2012 Annual Report Download - page 147

In addition, upon recommendation of the President and CEO, the Personnel Committee approves all
compensation for all the members of the Nokia Leadership Team (other than the President and CEO of
Nokia) and other executive level direct reports to the President and CEO, including long-term equity
incentives and goals and objectives relevant to compensation. The Personnel Committee also reviews
the results of the evaluation of the performance of the Nokia Leadership Team members (excluding the
President and CEO) and other executive level direct reports to the President and CEO and approves
their incentive compensation based on such evaluation.
The Personnel Committee considers the following factors, among others, in its review when
determining the compensation of Nokia’s executive officers or recommending the compensation of the
President and CEO to the Board:
• the compensation levels for similar positions (in terms of scope of position, revenues, number
of employees, global responsibility and reporting relationships) in relevant comparison
companies;
• the performance demonstrated by the executive officer during the last year, which is
evaluated at the end of the year against individual goals that are aligned to Nokia-level
financial and strategic goals and against the executive officer’s overall leadership capabilities;
• the size and impact of the particular officer’s role on Nokia’s overall performance and strategic
direction;
• the internal comparison to the compensation levels of the other executive officers of Nokia;
• past experience and tenure in role; and
• the potential and expected future contributions of the executive.
The above factors are assessed by the Personnel Committee in totality.
In 2011, Nokia’s management performed an internal risk assessment of Nokia’s compensation policies
and practices for all its employees specifically to understand any potential risk factors that would be
associated with the changes made to Nokia’s compensation programs in 2011 in alignment to our
strategy. Management assessed such factors as Nokia’s proportion of fixed compensation in relation to
variable compensation, the caps on incentive compensation that can be earned under our plans,
performance metrics tied to the incentive programs and the time horizon over which variable
compensation may be earned, as well as Nokia’s share ownership, severance and recoupment policies
and our overall governance structure and practices. Based on the assessment, management
concluded that there are no material risks arising from Nokia’s compensation programs, policies and
practices or the changes implemented that are likely to have a material adverse effect on Nokia. The
findings of the analysis were reported to the Personnel Committee. A similar assessment was not
conducted in 2012, as the 2011 assessment considered changes in our programs that were being
implemented in 2012.
Components of Executive Compensation
Our compensation program for executive officers includes annual cash compensation in the form of a
base salary and short-term cash incentives as well as long-term equity-based incentive awards in the
form of performance shares, stock options and restricted shares.
Annual Cash Compensation
Base salaries are targeted at globally competitive market levels. The Personnel Committee evaluates
and weighs as a whole the appropriate salary levels based on both our US and European peer
companies.
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