Nokia’s board of directors seems caught in a tragicomedy of epic proportions. The latest twist is Finland’s largest newspaper claiming that Nokia made a false statement about CEO’s bonus package last Friday. Pressed by Finnish and international media last week, chairman Siilasmaa had claimed then that the bonus structure of Stephen Elop’s contract in 2010 was “essentially the same” as the one the previous CEO had received. But the largest daily of the country, “Helsingin Sanomat”, decided to dig into SEC filings to investigate the matter. By early Tuesday morning, the newspaper had uncovered evidence that Nokia’s board had made fundamental changes in Elop’s contract compared to his predecessors.
According to changes implemented in 2010, Elop was entitled to immediate share price performance bonus in case of a “change of control” situation… such as selling of Nokia’s handset division. Curiously, his predecessor Kallasvuo had no such clause in his contract. This adjustment meant that unlike previous CEOs, Elop was facing an instant, massive windfall should the following sequence happen to take place:
- Nokia’s share price drops steeply as the company drifts close to cash flow crisis under Elop.
- Elop sells the company’s handset unit to Microsoft under pressure to raise cash
- The share price rebounds sharply, though remains far below where it was when Elop joined the company.
Should this unlikely chain of events ever occur, Elop would be entitled to an accelerated, $25M payoff.