Investors in Nokia are furious over the company’s failure to disclose by “accident” a change in CEO
Stephen Elop’s contract that gave him a $US25.5 million bonusfor selling the company’s smartphone division to Microsoft.
Writing in Forbes — via translation from the Finnish press — Tero Kuittinen says that Nokia had previously told the Finnish press that Elop’s compensation package was the same as his predecessor’s.
In fact, as you can see on page 149 of this SEC document, Elop’s compensation was adjusted to give him a very short-term incentive to sell the company. In the event of a “change of control” he would get all his stock incentives at once (emphasis added):
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.
His stock price targets were also pegged to a two year-period instead of the company’s long-term performance.
Here’s what happened next, according to Forbes:
According to “Helsingin Sanomat”, when chairman Siilasmaa was questioned about Elop’s contract last Friday, he made the false claim of there being “no essential changes” in Elop’s bonus structure compared to previous CEOs. According to Siilasmaa on early Tuesday, Nokia’s legal department had committed “a working place accident” of not noticing the slight discrepancy between Elop’s contract and the contracts of the previous CEOs.
The Finnish are livid about it, according to BGR:
Many people in Finland are unsurprisingly not happy with this state of affairs, however, and The Financial Times reports that Finnish politicians from both the right and the left are seething that Elop is getting $US25 million for selling off pieces of Nokia to Microsoft. Center-right Prime Minister Jyrki Katainen, for instance, called the payment “outrageous” and added that “apparently the practices of rewards by large corporations all over the world are so exceptional that they cannot be understood with common sense.” Jutta Urpilainen, the centre-left finance minister, similarly wrote that the Elop payday has created “a general toxic atmosphere” that “may be a threat to social harmony.”
This sort of thing shouldn’t have been too surprising. CEOs are often given incentives to sell the company, although in this case the change wasn’t spelled out in plain English. At Business Insider we pointed out back in August that BlackBerry’s CEO had a similar incentive to sell the company inserted in his contract.