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Divorce could prevent Elop from giving up Nokia golden parachute

HS learns of negotiations with outgoing CEO on reducing or cancelling bonus

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Mika Ranta HS
Stephen Elop saapui tasavallan presidentin itsenäisyyspäivän vastaanotolle viime joulukuussa ilman Nancy-vaimoaan.
Stephen Elop saapui tasavallan presidentin itsenäisyyspäivän vastaanotolle viime joulukuussa ilman Nancy-vaimoaan.

Nokia's outgoing CEO Stephen Elop and his wife are divorcing. His wife could demand half of Elop's final bonus of 18.8 million euros even if Elop himself were to decide to turn down the money.

Helsingin Sanomat has learned that Risto Siilasmaa, Chairman of the Board of mobile telephone manufacturer Nokia, has held discussions with former CEO Stephen Elop on either cancelling or reducing his bonus of € 18.8 million.

In the discussions, Elop has brought up the fact that he has filed for a divorce from his wife. If he were to agree to relinquish his final compensation of € 18.8 million during the divorce proceedings, he might still be required to pay half of the value of the bonus to his wife.

Siilasmaa does not want to comment on the matter.

As CEO of Nokia, Elop travelled around the world constantly. His family lives in the United States, in Seattle, Washington.

Elop has an apartment in Helsinki, but most of his time has been spent on work-related travel. His family includes his wife Nancy and their five children.

HS does not know the details of Elop's divorce process, and does not know which country will have jurisdiction over the divorce proceedings.

Under Finnish law, the property that a couple had at the moment that the divorce proceedings are initiated must be shared equally.

If one of the two gives away property or, e.g. renounces the right to money that he or she is entitled to, that partner can be required to pay the spouse half of the property that was relinquished.

Most of the compensation to be paid to Elop involves the advance payment of share equity and stock options that might later have been realized, before they actually mature.

If the value of Nokia stock rises by the beginning of next year, his final compensation would grow. The € 18.8 million bonus has been calculated according to the value of Nokia shares on September 6th.

Under a CEO contract drafted in 2010, Elop is entitled to a payout equivalent to 18 months' pay. In addition, his share-based incentive fees are to be paid on an accelerated schedule if his tasks and responsibilities are significantly reduced.

Elop resigned from his post as Nokia CEO and from his seat on Nokia's Board of Directors on the evening before the Microsoft deal was made public. He is to be paid the bonus when the deal is implemented at the beginning of next year.

Microsoft announced at the beginning of September that it would buy Nokia's mobile telephone operations for € 5.4 billion. Microsoft will pay 70 % of Elop's final bonus – € 13.2 million.

The payout to the CEO is exceptionally large by Finnish corporate standards.

However, compared with the golden parachutes of Nokia's international competitors in similar situations, Elop's bonus is not particularly large.

Motorola Mobility's CEO Sanjay Jha was promised a final bonus of € 47 million when Motorola's telephone operations were bought out by Google.

Thorsten Heins, CEO of Research in Motion, which manufactures Blackberry telephones, is set to be paid € 41 million if the purchase offer made on Monday by investors is implemented.

In large international corporations it is customary to include a provision in a CEO's contract for the payment of compensation for changes in executive authority.

The purpose of the stipulation is to make sure that the CEO operates in the best interests of the shareholders in any corporate rearrangements. In such reshuffles the CEO often has to give up his or her post.

Therefore, it is theoretically possible that without a clause on change in authority, a CEO could prevent corporate rearrangements that would be beneficial for shareholders as a way of holding on to his or her reputation and position.

According to former members of Nokia's Board, the Board got an assessment from an international consulting company according to which Elop's final payout is significantly smaller than those that are generally paid to top executives of international corporations in the United States.

According to the statement, Elop's final payout is about mid-range in a comparison of European international corporations.

Kääntäjä: Kimmo Wilska

Helsingin Sanomat | hs.online@hs.fi

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