Nokia recently announced that its board of directors has approved the company’s equity program for 2020 which is designed to support and align the participants’ focus with Nokia’s strategy and long-term success. In line with previous years, the Nokia Equity Program for 2020 consists of a performance share plan, a restricted share plan and an employee share purchase plan.
Performance share plan 2020
Nokia uses performance shares as the main long-term incentive instrument for executives and other eligible employees. The plan intends to effectively contribute to the long-term value creation and sustainability of the company and align the interests of the executives and employees with those of Nokia’s shareholders.
The 2020 Performance Share Plan has a three-year plan period with the company’s total shareholder return (TSR) used as the basis of the plan’s performance metric. How many Nokia shares will be delivered on pay-out, if any, depends on the Company’s share price growth, plus any dividends paid during the plan period, compared to pre-set TSR targets.
If Nokia’s TSR does not exceed the threshold target, no 2020 Performance Share Plan participant will receive any settlement. In the event that the Company’s share price growth, plus any dividends paid during the plan period, achieves or exceeds the maximum TSR target, awards under the 2020 plan could result in an aggregate maximum settlement of 88 million Nokia shares.
Restricted Share Plan 2020
Restricted shares are granted to Nokia’s executives and other eligible employees on a more limited basis than Performance Shares for purposes related to retention and recruitment to ensure Nokia is able to retain and recruit vital talent for the future success of the company.
Under the 2020 Restricted Share Plan, the restricted shares are divided into three equal tranches, each tranche consisting of one third of the restricted shares granted. The first tranche has a one-year restriction period, the second tranche a two-year restriction period, and the third tranche a three-year restriction period. On an exceptional basis, the Personnel Committee of the Board of Directors may, in its discretion, approve shorter aggregate restriction periods of no less than 18 months from the date of grant.
The awards under the 2020 Restricted Share Plan could result in an aggregate maximum settlement of 4.5 million Nokia shares.
Employee Share Purchase Plan 2020
Under the employee share purchase plan, the eligible Nokia Group employees may elect to make contributions from their monthly net salary to purchase Nokia shares. The 2020 Employee Share Purchase Plan is planned to be offered to Nokia employees in up to 73 countries, provided that there are no significant local regulatory or administrative restraints in relation to the plan. Participation in the plan is voluntary.
The share purchases are intended to be made at market value on pre-determined dates on a quarterly basis during a 12-month period. Nokia intends to deliver one matching share for every two purchased shares that the participant still holds on July 31, 2021.
The aggregate maximum amount of contributions that employees can make during the plan cycle commencing in 2020 is approximately EUR 60 million. Accordingly, based on the matching ratio of one matching share for every two purchased shares, the number of matching shares would be approximately 8.2 million, calculated using the closing share price of EUR 3.65 on Nasdaq Helsinki on February 27, 2020.
As of February 28, 2020, the aggregate maximum number of shares that could be issued under Nokia’s outstanding equity programs, assuming the performance shares would be delivered at maximum level, represented approximately 1.63 per cent of Nokia’s total number of shares (excluding the shares owned by Nokia Corporation). The potential maximum number of shares that could be issued under the Equity Program 2020 represents approximately an additional 1.79 percentage points, assuming delivery at maximum level for performance shares and the delivery of matching shares against the maximum amount of contributions of approximately EUR 60 million under the Employee Share Purchase Plan.