Nokia 2015 Annual Report Download - page 99

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Corporate governance
NOKIA IN 2015
Additionally in 2015, we also had outstanding awards under the 2007
and 2011 stock option plans and the Nokia Networks EIP. Stock options
under the 2007 option plan lapsed on January 1, 2016. No new awards
have been made under these plans since 2013. These are described in
the section on legacy equity compensation programs “—Legacy equity
compensation programs” below.
As of February 12, 2016, when new Nokia shares were issued as
consideration for the Alcatel Lucent securities tendered into the
subsequent French and/or U.S. oers, and consequently, included
inthe aggregate amount of Nokia shares, the aggregate maximum
dilution eect of our currently outstanding equity programs, assuming
that the performance shares would be delivered at maximum level and
including the aggregate amount of Nokia shares, wasapproximately
0.86%. The potential maximum dilution eect of the equity program
2016 would approximately be an additional 1.04%, assuming delivery
at maximumlevel for performance shares and the delivery of
matchingshares against the maximum amount of contributions of
approximately EUR 60 million under the employee share purchase
plan. Employees of Alcatel Lucent that have transferred as part of the
acquisition of Alcatel Lucent are only included in equity plans under
theequity program 2016.
Performance shares
The performance shares represent a commitment by us to deliver
Nokia shares to employees at a future point in time, subject to our
fulllment of pre-dened performance criteria. They vest to
participants after three years based on the performance of the
company against its targets for the rst two nancial years. The Board
believes the practice of a two-year performance period which gives
greater predictability in a fast changing environment and supports
greater alignment of underlying achievement with payments, is
appropriate in the current business context. Targets are set in the
context of the Board’s view of the future business plans for Nokia,
investor expectations and analyst forecasts, and the Board will
continue to review the suitability of the two-year performance period
for future years. The table below illustrates the performance criteria of
the performance share plans for 2013 through to 2016. Targets are
set by reference to the company’s long-term plans and in the context
of investment analysts’ forecasts for the business.
Performance criteria (non-IFRS)(1) 2016 2015 2014 2013
Average annual net sales Nokia Group Yes Yes(2) Yes Yes(3)
Average annual EPS Nokia Group Yes Yes(2) Yes Yes
Minimum settlement at below threshold performance(4) 25% 25% 25% 0%
(1) Non-IFRS measures exclude all material special items for all periods. Additionally, non-IFRS results exclude intangible asset amortization and other purchase price accounting-related items arising from
business acquisitions.
(2) The Board is expected to approve an amendment to the performance condition of the performance share plan 2015 in conjunction with the publication of Nokia’s Q1/2016 results announcement to
reect the new organizational structure and scope of the Nokia Group. The amendment would adjust the net sales and EPS performance targets to remove the HERE related impact for the 4th quarter
of 2015 following the sale of HERE in 2015 and restate the 2016 targets based on the combined Nokia Group following the acquisition of Alcatel Lucent in January 2016.
(3) The performance condition was amended at the time of the Sale of the D&S Business to reect the new prole of the business and dierent annual revenue levels of the new business. The amendment
introduced a metric set on the basis of the Average Net Sales Index over the two-year performance period in replacement of the metric set on the basis of the Average Annual Net Sales Revenue. The
‘Net Sales Index’ relates to the nal non-IFRS annual net sales achieved through the business operations of Nokia Group (excluding Nokia Networks) in relation to 2013 and for Nokia Networks, HERE and
Nokia Technologies in relation to 2014, expressed as a percentage of the annual target set for each year. A separate Annual Net Sales Index will be calculated for 2013 and 2014, and the average of the
two will be calculated following the close of 2014 and used, in part, to determine the nal payout under the Plan, which will occur after the one-year restriction period in 2016.
(4) In 2014, a minimum payout level was introduced to reinforce the retentive impact of the plan by giving some certainty to remaining employees during the transformation of Nokia following the Sale
ofthe D&S Business and integration of the Nokia Networks business.
Until the shares have vested and been delivered to the participants, they carry no voting or dividend rights. The performance share grants are
generally forfeited if the employment relationship terminates with Nokia prior to vesting.