Finland’s prime minister and finance minister have both spoken out against the proposed €18.8 million payoff to former Nokia CEO Stephen Elop, reports the Financial Times.
Jyrki Katainen (pictured), the country’s prime minister, criticised the size of the payment in today’s difficult economic climate. He described it as “quite outrageous” and said: “Apparently the practices of rewards by large corporations all over the world are so exceptional that they cannot be understood with common sense.”
His critique was echoed by Jutta Urpilainen, Finland’s finance minister, who said the size of the payoff could cause divisions within a company’s workforce. “A disproportionately large salary increase or bonus for only a portion of the company’s employees, in turn, undermines trust,” she wrote on her blog.
The political interventions reflect a wider mood in Finland that is sceptical about Microsoft’s proposed €5.44 billion purchase of Nokia’s handset business, which would trigger the hefty payment to Elop who is moving to Microsoft as part of the deal.
The mood is significant ahead of a shareholder vote to approve the sale of the handset business at an extraordinary general meeting on 19 November.
There is also growing scrutiny of the payoff. According to proxy materials for the November meeting, Nokia said it had amended Elop’s contract as part of the Microsoft deal.
He is receiving the €18.8 million payment under a change-of-control clause. The payoff is made up of €4.1 million in salary; €100,000 in benefits; and €14.6 million in stock awards.
According to the proxy materials, under the contract amendment Elop resigned as company chief executive and took over Nokia’s handset business.
The company has told the FT there were three reasons for the amendment: One was to stop Elop resigning (Microsoft wants to retain his services). The second reason was his contract originally included a non-compete clause that included Microsoft in a list of companies that Elop couldn’t join (this needed to be altered). Thirdly, the amendment was in case the deal ultimately collapses. Elop’s contract now means he could be resinstated as Nokia’s chief executive although he would give up his equity awards.
Microsoft has agreed to contribute 70 per cent of the Elop payoff with Nokia picking up the remainder.
Nokia has argued change of control clauses have also been present in past chief executive contracts, as well as with other companies.