Nokia admits mistake over Stephen Elop's €18.8m payoff

Pile Of Coins

The chairman of Nokia has admitted that he accidentally misled the public and Finland's prime minister over an €18.8m (£15.9m) payoff to former chief executive Stephen Elop triggered by the sale of the mobile phone business to Microsoft.

Risto Siilasmaa, Nokia's chairman, had tried to calm growing national anger at the massive payoff by saying that the terms were "substantially similar to those of former Nokia CEOs". But he was forced to admit on Tuesday that the Canadian will pocket €14.6m more than the previous Nokia boss, Olli-Pekka Kallasvuo, collected when he was fired three years ago.

Siilasmaa told Finnish news site Helsingin Sanomat that an "accident" during the formulation of the contract meant that Elop would collect the huge sum. "This is a very unfortunate thing about the case, which, moreover, raises a lot of emotions," Siilasmaa said, according to a translation of the Helsingin Sanomat article. Nokia declined to comment further last night.

Filings with the US regulator the Securities and Exchange Commission reveal that Elop's contract requires him to be paid €14.6m in share awards on top of 18 months' salary. Kallasvuo collected only 100,000 shares on top of 18 months' pay.

Siilasmaa's admission is likely to reignite the heated national debate over Elop's payoff, which was triggered by Microsoft's €5.5bn takeover.

Jyrki Katainen, the Finnish centre-right prime minister, criticised the payoff on national TV on Saturday as "quite outrageous". "Many, with reason, are sure to be thinking about what is reasonable," he said. "Apparently the practices of rewards by large corporations all over the world are so exceptional that they cannot be understood with common sense."

Jutta Urpilainen, the country's centre-left finance minister, said the payoff could spark unrest. "In addition to the general toxic atmosphere, it may be a threat to social harmony," she wrote on her blog.

The payout was triggered by a change of control clause in Elop's contract. As part of the deal with Microsoft, Elop stood down as Nokia's CEO to run the phone unit within Microsoft, his employer before he joined Nokia three years ago.

The payout works out at roughly €1m for every €1bn wiped off Nokia's market value under Elop's leadership. Microsoft is paying 70% of the payoff, which works out at roughly the same as the controversial share bonuses.

Nokia paid Elop a $6m signing-on bonus when he joined the company in 2010 on top of his $1.4m salary.

Elop, the first foreigner to run the 148-year-old company, warned staff after taking the top job that Nokia was standing on a "burning platform" surrounded by innovative competitors that were taking its market share. He quickly decided that the company should abandon its own operating software for smartphones and tie up with Microsoft instead.

Elop is widely seen as the frontrunner to replace Steve Ballmer as chief executive of Microsoft. Ballmer announced in August that he would stand down within 12 months.

Powered by article was written by Rupert Neate, for The Guardian on Tuesday 24th September 2013 22.31 Europe/London © Guardian News and Media Limited 2010