Elop’s contract incented him to a firesale of Nokia

Tero Kuittinen, a Finn who covers the telephony markets at Forbes, has reported the latest twist in the Nokia acquisition by Microsoft. Apparently, Stephen Elop, the Nokia CEO and former Microsoft exec who engineered the deal, was allowed a very different contract than his predecessor’s, one that gives him a huge bonus if the scenario that we saw at Nokia happened. This is all according to research done by Helsingin Sanomat, the largest daily Finnish newspaper. He writes

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.

The $25 million is a 30% acceleration of the full golden parachute built into the contract.

Also note that Nokia’s chairman, Risto Siilasmaa, was questioned about the contract last week he made the statement that there were “no essential changes” in the contract relative to the previous CEO’s. Now he has backpedaled, and says the company’s legal department slipped up.


The Finns are pissed, with Prime Minister Jyrki Katainen saying the situation was “outrageous”, and then “apparently the practices of rewards by large corporations all over the world are so exceptional that they cannot be understood with common sense.”

Elop has responded to a request by Nokia to decrease the payout by saying he needs the money for his divorce, 50% of which has to pass to his wife under Finnish law.

At any rate, Microsoft is paying 70% of the payout, so Nokia is only stuck paying him $7.5 million.