Nokia 2015 Annual Report Download - page 95

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Corporate governance
NOKIA IN 2015
Long-term incentives
Long-term incentive awards are determined by reference to the
market and as a percentage of salary. The President and CEO
participates in thesame long-term incentive arrangements as other
Nokia executives and senior managers. Additionally, Mr. Suri also
participates in the Nokia Networks equity incentive plan (“Nokia
Networks EIP”), which was set up in 2012 by the board of directors of
Nokia Siemens Networks, prior to the acquisition by Nokia of the
remaining 50% of the business and our full ownership of the Networks
business, to incentivize its turnaround. The targets of the plan were
set at a demanding level and payments from the plan represent the
outstanding achievement of the Networks team. In 2015, 30% of
theoptions awarded to Mr. Suri vested and were exercisable in cash
under the plan rules. Mr. Suri exercised these options and realized a
gain of EUR 3.24 million. The remaining 70% of the options will vest in
June 2016 and Mr. Suri will have until 2018 to exercise these options.
Under the plan rules, any exercise of these options will be in cash. The
maximum payment under these remaining options is EUR7.56 million,
unless certain dened corporate events take place.
Pension arrangements for the President and Chief Executive Ocer
The President and CEO participates in the statutory Finnish pension
system, as regulated by the Finnish Employees’ Pension Act (395/2006,
asamended) (the “Finnish TyEL”), which provides for a retirement
benet based on years of service and earnings according to prescribed
rules. No supplemental pension arrangements are provided. Under the
Finnish TyEL pension system, base pay, incentives and other taxable
fringe benets are included in the denition of earnings, while gains
realized from equity are not. Retirement benets are available from
age 63 to 68, according to an increasing scale.
Termination provisions for the President and Chief Executive Ocer
Mr. Suri’s service agreement species the dierent ways the agreement
can be terminated and associated compensation as follows:
■Termination by Nokia for cause: In the event of a termination by
Nokia for cause, Mr. Suri is entitled to no additional compensation
and all his unvested equity awards would be forfeited;
■Termination by Nokia for reasons other than cause: In the event
ofa termination by Nokia for reasons other than cause, Mr. Suri is
entitled to a severance payment equaling up to 18 months of
compensation (including annual base salary, benefits, and target
incentive) and his unvested equity awards would be forfeited;
■Termination by Mr. Suri for any reason: Mr. Suri may terminate his
service agreement at any time with six months’ prior notice. Mr. Suri
would continue to receive either salary and benefits during the
notice period or, at Nokia’s discretion, a lump sum of equivalent
value. Additionally, Mr. Suri would be entitled to any short- or
long-term incentives that would normally vest during the notice
period. Any unvested equity awards would be forfeited;
■Termination by Mr. Suri for Nokia’s material breach of the
serviceagreement: In the event that Mr. Suri terminates his
serviceagreement based on a final arbitration award demonstrating
Nokia’s material breach of the service agreement, he is entitled to a
severance payment equaling to up to 18 months of compensation
(including annual base salary, benefits and target incentive).
Anyunvested equity awards would beforfeited; or
■Termination based on specified events: Mr. Suri’s service
agreement includes special severance provisions on a termination
following a change of control event. Such change of control
provisions are based on a double trigger structure, which means
that both a change of control event and the termination of the
individual’s employment within a defined period of time must take
place in order for any change of control based severance payment
to become payable. More specifically, if a change of control event
has occurred, as defined in the service agreement, and Mr.Suri’s
service with Nokia is terminated either by Nokia or its successor
without cause, or by Mr. Suri for “good reason”, in either case within
18 months from such change of control event, Mr. Suri would be
entitled to a severance payment equaling up to 18 months of
compensation (including annual base salary, benefits, and target
incentive) and cash payment (or payments) for the pro-rated value
of his outstanding unvested equity awards, including equity awards
under the Nokia Networks EIP, restricted shares, performance shares
and stock options (ifany), payable pursuant to the terms of the
service agreement. “Good reason” referred to above includes a
material reduction of Mr.Suri’s compensation and a material
reduction of his duties and responsibilities, as defined in the
serviceagreement and as determined bythe Board.
Additionally, the service agreement denes a specic, limited
termination event that applies until June 30, 2016. Upon this
event,ifMr. Suri’s service with Nokia is terminated as a result of the
circumstances specied in the service agreement, he is entitled
to,inaddition to normal severance payment payable upon his
terminationby Nokia for reasons other than cause, to a pro-rated
value of unvested equity awards under the Nokia Networks EIP,
provided that the termination of his service takes place within six
months from the dened termination event (and at orprior to June
30, 2016). Subject to this limited time treatment of unvested equity
awards under the Nokia Networks EIP, all of Mr. Suri’s other unvested
equity would be forfeited.
Mr. Suri is subject to a 12-month non-competition obligation that
applies after the termination of the service agreement or the date
when he isreleased from his obligations and responsibilities,
whichever occurs earlier.