Nokia 2011 Annual Report Download - page 161

equity will be forfeited as determined in the applicable equity plan rules, with the exception of the equity
out of the Nokia Equity Program 2010 which will vest in an accelerated manner. In case of termination
by Mr. Elop, the notice period is six months and he is entitled to a payment for such notice period (both
annual base salary and target incentive for six months) and all his equity will be forfeited. In the event
of a change of control of Nokia, Mr. Elop may terminate his employment upon a material reduction of
his duties and responsibilities, upon which he will be entitled to a compensation of 18 months (both
annual base salary and target incentive), and his unvested equity will vest in an accelerated manner. In
case of termination by Nokia for cause, Mr. Elop is entitled to no additional compensation and all his
equity will be forfeited. In case of termination by Mr. Elop for cause, he is entitled to a severance
payment equivalent to 18 months of notice (both annual base salary and target incentive), and his
unvested equity will vest in an accelerated manner. Mr. Elop is subject to a 12-month non-competition
obligation after termination of the contract. Unless the contract is terminated by Nokia for cause,
Mr. Elop may be entitled to compensation during the non-competition period or a part of it. Such
compensation amounts to the annual base salary and target incentive for the respective period during
which no severance payment is paid.
The Board of Directors decided in March 2011 that in order to align Stephen Elop’s compensation to
the successful execution of the new strategy announced on February 11, 2011, his compensation
structure for 2011 and 2012 would be modified. This one-time special CEO incentive program is
designed to align Mr. Elop’s compensation to increased shareholder value and links a meaningful
portion of his compensation directly to the performance of Nokia’s share price over the period of 2011-
2012. To participate in this program, Mr. Elop invested a portion of his short-term cash incentive
opportunity and a portion of the value of his expected annual equity grants into the program as follows:
• His target short-term cash incentive level is reduced from 150% to 100% and
• His equity grants are reduced to a level below the competitive market value.
In consideration, Mr. Elop has the opportunity to earn a number of Nokia shares at the end of 2012
based on two independent criteria, with half of the opportunity tied to each criterion:
(1) Total Shareholder Return (TSR) relative to a peer group of companies over the two-year period
from December 31, 2010 until December 31, 2012: Minimum payout will require performance at
the 50th percentile of the peer group and the maximum payout will occur if the rank is among
the top three of the peer group. The peer group consists of a number of relevant companies in
the high technology/mobility, telecommunications and Internet services industries.
(2) Nokia’s absolute share price at the end of 2012: Minimum payout if the Nokia share price is
EUR 9, with maximum payout if the Nokia share price is EUR 17.
Nokia share price under both criteria is calculated as a 20-day trade volume weighted average share
price on the NASDAQ OMX Helsinki. If the minimum performance for neither of the two performance
criterion is reached, no share delivery will take place. If the minimum level for one of the criterion is
met, a total of 125 000 Nokia ordinary shares will be delivered to Mr. Elop. At maximum level for both
criteria, a total of 750 000 Nokia ordinary shares will be delivered to him. Shares earned under this
plan during 2011-2012 will be subject to an additional one-year vesting period until the first quarter
2014, at which point the earned and vested shares will be delivered to Mr. Elop. The number of shares
earned and to be settled may be adjusted by the Board of Directors under certain exceptional
circumstances. Until the shares are settled, no shareholder rights, such as voting or dividend rights,
associated with the shares would be applicable. No shares will be delivered if Mr. Elop resigns without
cause or is terminated for cause by Nokia before the settlement.
For information about the compensation and benefits received by Mr. Elop during 2011, see Item 6B.
“Compensation—Executive Compensation—Summary Compensation Table 2011” and
“Compensation—Executive Compensation—Equity Grants in 2011.”
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