Nokia’s corporate governance practices are subject to Finnish laws and regulations, Nokia’s Articles of Association, the 2010 Finnish Corporate Governance Code, and other mandatory corporate governance rules of the stock exchanges where Nokia shares are listed, i.e. NASDAQ OMX Helsinki and the New York Stock Exchange.
The Finnish Corporate Governance Code is available at www.cgfinland.fi. The corporate governance rules that are mandatory for foreign private issuers under section 303A of the New York Stock Exchange Listed Company Manual are available at http://nysemanual.nyse.com/lcm/
Deviations from the corporate governance standards
Under the Finnish Corporate Governance Code, companies must disclose if they deviate from an individual recommendation of the Code and provide an explanation for doing so.
In 2013 Nokia was not in full compliance with recommendation 39 of the Finnish Corporate Governance Code as Nokia’s Restricted Share Plans did not include any performance criteria but were time-based only, with a restriction period of at least three years from the grant. Restricted Shares are granted only for exceptional retention and recruitment purposes aimed to ensure Nokia is able to retain and recruit talent vital to the future success of the Company. In the Restricted Share Plan 2014, the number of the shares to be granted was reduced significantly and they no longer are part of the annual grants.
In 2013 Nokia was not in full compliance with the recommendation 46 of the 2010 Finnish Corporate Governance Code as the termination payment payable due to the termination of Nokia’s former President and CEO Stephen Elop’s service contract exceeded the aggregate amount of his non-variable salary of two years. While we decide on our executives' total compensation through benchmarking against similar companies, along with other factors, the company’s approach has been to keep the non-variable part rather small in proportion and emphasize the variable part. This compensation structure is designed to align the interest of executive officers with those of the shareholders and with Nokia’s performance. The termination payment was also significantly affected by the share price increase from the announcement of the transaction with Microsoft through the termination of Mr. Elop’s contract, as over 80% of the termination payment consisted of the value of his equity-based compensation. Moreover, in the end 70% of this termination payment was borne by Microsoft and the remaining 30% of the amount, equaling to EUR 7,3 million, by Nokia pursuant to the agreement between Nokia and Microsoft.
Under the New York Stock Exchange’s corporate governance listing standards, listed foreign private issuers, like Nokia, must disclose any significant ways in which their corporate governance practices differ from those followed by US domestic companies under the NYSE listing standards. There are no significant differences in the corporate governance practices followed by Nokia as compared to those followed by US domestic companies under the NYSE listing standards, except that Nokia follows the requirements of Finnish law with respect to the approval of equity compensation plans. Under Finnish law, stock option plans require shareholder approval at the time of their launch. All other plans that include the delivery of company stock in the form of newly issued shares or treasury shares require shareholder approval at the time of the delivery of the shares or, if shareholder approval is granted through an authorization to the Board of Directors, no more than a maximum of five years earlier. The NYSE listing standards require that equity compensation plans be approved by a company’s shareholders.