The plan to pay former Nokia CEO Stephen Elop a termination fee of €18.8 million ($25.4 million) has caused outrage in Finland, but the situation has taken a new turn of late, with Nokia confessing it gave misleading information about Elop's payout and reports emerging that Elop pushed back against attempts to reduce the award because he is getting divorced.
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Revelations that Elop will receive €18.8 million as a final payout if the €5.55 billion deal to sell Nokia's devices and services business to Microsoft goes through rubbed salt into the wound for many Finns, who were already reeling from the news that they were to lose their most famous business.
Elop stepped down as Nokia CEO following the announcement earlier this month of Microsoft's proposed acquisition of Nokia's handset business; Elop is currently serving as executive vice president of Nokia's devices and services unit.
Nokia's chairman and interim CEO Risto Siilasmaa at first attempted to calm the situation by saying that the bonus structure of Elop's contract in 2010 was "essentially the same" as the one the previous CEO, Olli-Pekka Kallasvu, had received. Finnish newspaper Helsingin Sanomat decided to investigate further, and by digging into U.S. Securities and Exchange Commission filings it found that Nokia's board had made fundamental changes to Elop's contract compared to his predecessors, according to Forbes.
Siilasmaa then on Tuesday admitted he made an error by describing the clause in Elop's employment contract on the termination payment as similar to his predecessor's, reported Reuters. "All the details were not checked," he told Helsingin Sanomat. Nokia confirmed his remarks, according to Reuters.
As pointed out by the Financial Times, a crucial difference between the two contracts meant that Elop receives €14.6 million in stock awards to which Kallasvuo would not have been entitled. In fact, as Forbes notes, under his 2010 contract, Elop was entitled to an immediate share price performance bonus in the event of a "change of control" situation, such as Nokia selling its devices business to Microsoft.
Finnish politicians have also been raising questions about the fairness of the sum, reportedly causing Siilasmaa to turn to Elop and beg him to consider taking a lower fee, according to Helsingin Sanomat and the Financial Times, which cited unnamed sources.
Elop said that was impossible, however, as he is getting a divorce, according to the reports. Under Finnish law, Elop's wife would be entitled to half of the €18.8 million compensation, and he would have to convince her to accept a reduced settlement if he in turn had to reduce the value of his payout, Helsingin Sanomat reported. Nokia declined to comment on the matter.
It's unlikely that the situation will rest here, however. For one thing, the FT said questions are now being raised about the role of the board and the changes that were made to Elop's contract.
For more:
- see this FT article (sub. req.)
- see this separate FT article (sub. req.)
- see this Reuters article
- see this Helsingin Sanomat article (translated via Google Translate)
- see this Forbes article
- see this ZDNet article
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