Nokia 2003 Annual Report Download - page 77

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Report of the Personnel Committee of the Board
The Personnel Committee of the Board of Directors has provided the following report on executive
compensation paid or awarded to executive officers for 2003:
Role and Composition of the Committee
The Personnel Committee of the Board of Directors has overall responsibility for evaluating and
deciding on compensation for the company’s top executives. The Committee approves incentive
compensation plans, policies and programs that affect executives and other significant incentive plans.
The Committee also reviews executive development plans, management succession plans, diversity
programs and the annual employee opinion survey.
The Committee recommends to the Board of Directors items regarding the compensation of the CEO
and the President, and all equity-based plans.
None of the Committee members are current or former executives of the company. None of the
Committee members participate in any of the plans or programs that the Committee oversees. In
accordance with its charter, the Committee evaluates its work, and such an evaluation was conducted
in 2003.
Compensation Philosophy and Objectives
The company operates in the extremely competitive and rapidly evolving high technology industry.
The key objectives of the executive compensation programs are to attract, retain, and motivate
talented executive officers that drive Nokia’s success and industry leadership.
The executive compensation programs are designed to:
•Provide to executives a total compensation package that is competitive with the relevant
market,
• Provide competitive base pay rates,
• Deliver significant variable cash compensation for the achievement of stretch financial goals,
• Align the interests of the executives with those of the shareholders through long-term
incentives in the form of equity-based awards.
Compensation Components and Determination
The compensation program for executives includes the following:
• Base salaries targeted at competitive market levels
• Short-term cash incentives paid twice each year based on performance for each of Nokia’s
short-term plans that end on June 30 and December 31 of each year. Short-term incentive
payments are primarily determined based on a formula that considers the company’s
performance to pre-established targets for Net Sales, Operating Profit and Net Working Capital
efficiency measures. Certain executives may have objectives related to quality, technology
innovation, new product revenue, or other objectives of key strategic importance, which may
require a discretionary assessment of performance by the Committee.
• Stock option awards for the CEO and Group Executive Board members are determined on the
basis of each executive’s performance and a comparison of that executive’s compensation to the
relevant market. All stock options are granted at fair market value. Additional details on the
stock option plan are described in ‘‘Item 6.E Share Ownership—Stock Option Ownership.’’
The Committee considers the compensation practices of other relevant companies in the same or
similar industries and the compensation levels of the executive officers in these relevant companies
when it makes decisions regarding the compensation for the company’s executive officers. The relevant
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