The FINANCIAL — Nokia announced on February 2 that its Board of Directors has approved the company’s equity program for 2017 (the “Nokia Equity Program 2017”). In line with previous years, the Nokia Equity Program 2017 includes the following equity instruments:
An employee share purchase plan for Nokia employees in selected jurisdictions (the “Employee Share Purchase Plan”), entitling the eligible employees to contribute a part of their salary to purchase Nokia shares. After a 12-month holding period, Nokia will offer the employees one matching share for every two purchased shares held by an employee at the end of the holding period;
Performance shares, which are dependent on the achievement of independent performance criteria (“Performance Shares”); and
Restricted shares, which are used on a limited basis or in exceptional retention and recruitment circumstances (“Restricted Shares”).
Nokia Equity Program 2017
The Nokia Equity Program 2017 is designed to support and align the participants’ focus with Nokia’s strategy and long-term success.
Nokia uses Performance Shares as the main long-term incentive instrument with the intention to effectively contribute to the long-term value creation and sustainability of the company and to align interests of the employees with those of Nokia’s shareholders. Performance Shares are also designed to ensure that the overall equity-based compensation is based on performance, while also supporting the recruitment and ensuring retention of vital talent for the future success of Nokia.
Restricted Shares are granted on a limited basis for exceptional purposes related to retention and recruitment, primarily in the United States, to ensure Nokia is able to retain and recruit vital talent for the future success of the company, according to Nokia.
Since 2014, stock options have no longer been part of the Nokia equity programs.
Employee Share Purchase Plan
Under the Employee Share Purchase Plan, the eligible Nokia employees may elect to make monthly contributions from their net salary to purchase Nokia shares. Participation in the plan is voluntary.
The monthly minimum and maximum contribution limit to the Employee Share Purchase Plan is EUR 15 and EUR 150, respectively. Consequently, the maximum participant contribution limit during the plan cycle is EUR 1 800. Generally, the share purchases will be made at market value on pre-determined dates on a monthly basis during a 12-month period. Nokia intends to deliver one matching share for every two purchased shares that the participant still holds on July 31, 2018, which marks the end of the Employee Share Purchase Plan cycle for 2017. The aggregate maximum amount of contributions that employees can make during the enrolment window for the plan cycle commencing in 2017 will be approximately EUR 60 million, which equals approximately 14.2 million Nokia shares using the share price of EUR 4.25. Accordingly, based on the matching ratio of one matching share for every two purchased shares, the number of matching shares would be approximately 7.1 million.
The Employee Share Purchase Plan is planned to be offered to Nokia employees in up to 57 countries for the plan cycle commencing in 2017. The savings period is intended to start in July 2017 and the first monthly purchases are planned to be made in August 2017.
Performance Shares
Under the 2017 Performance Share plan, the pay-out will depend on whether independent performance criteria have been met by the end of the performance period. The performance criteria are Nokia’s continuing operations average annual non-IFRS net sales and average annual non-IFRS earnings-per share (diluted).
The 2017 Performance Share plan has a two-year performance period (2017-2018) and a subsequent one-year restriction period. The number of Performance Shares to be settled would be determined by reference to the performance targets during the performance period. For non-executive participants, 25 per cent of the Performance Shares granted in 2017 will settle after the restriction period, regardless of the satisfaction of the applicable performance criteria. In case the applicable performance criteria is not satisfied, employees who are executives at the date of Performance Share grant in 2017 will not receive any settlement.
The grant under the 2017 Performance Share plan could result in an aggregate maximum settlement of 74 million Nokia shares, in the event that maximum performance against all the performance criteria is achieved.
Restricted Shares
Under the 2017 Restricted Share plan, the Restricted Shares are divided into three tranches, each tranche consisting of one third of the Restricted Shares granted. The first tranche has a one-year restriction period, the second tranche a two-year restriction period, and the third tranche a three-year restriction period. The grant under the 2017 Restricted Share plan could result in an aggregate maximum settlement of 4.5 million Nokia shares.
Employees covered by the Nokia Equity Program 2017
In accordance with the previous years’ practice, the primary equity instruments granted to executive employees and other eligible employees are Performance Shares.
Nokia limits the use of Restricted Shares as means of compensation. Shares under the Restricted Share plan can be granted for exceptional retention or recruitment purposes, primarily in US markets to support the specific needs, practices and competitive market environment, to ensure Nokia is able to retain and recruit vital talent for the future success of Nokia.
Nokia employees in up to 57 countries are planned to be offered the possibility to participate in the Employee Share Purchase Plan for the cycle commencing in 2017, provided that there are no local regulatory or administrative restraints in relation to such plan.
Dilution effect
As of December 31, 2016, the aggregate maximum number of shares that could be issued under Nokia’s outstanding equity programs and stock option rights, assuming the Performance Shares would be delivered at maximum level, represented approximately 1.67 per cent of Nokia’s total number of shares (excluding the shares owned by Nokia Corporation). The potential maximum number of shares that could be issued under the Equity Program 2017 represents approximately an additional 1.49 per cent, 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.
Settlement of shares under various Nokia equity plans
To fulfill Nokia’s obligations under the 2013, 2014, 2015 and 2016 Restricted Share plans and the 2014 Performance Share plan in respect of shares to be settled in 2017, Nokia’s Board of Directors has resolved to issue, without consideration, a maximum of 9.75 million Nokia shares held by the company to settle its commitments to plan participants, who are all employees of the Nokia Group.
The performance period for the 2015 Performance Share plan ended on December 31, 2016, and Nokia’s performance over 2015 and 2016, assessed against the independent performance criteria set out in the plan rules, was above the threshold performance level for the plan. The settlement to the participants under the plan is planned to take place in the beginning of 2018 after the restriction period ends.
