Cantillon: Nokia farce gives insight into company decline
Trouble started when it emerged Stephen Elop stood to receive €18.8m in compensation
Nokia CEO, Canadian Stephen Elop. Photograph: AFP/Getty Images.
When you look at the developing fiasco over the departure of former chief executive Stephen Elop (above), it’s easy to understand just how Nokia’s star has fallen so spectacularly.
As a study in how not to manage the departure of key executives, it will undoubtedly become an MBA case study: in the meantime, it’s the best corporate soap opera in town. For Nokia chairman Risto Siilasmaa, it has been a week to forget.
The trouble started when it emerged that Elop stood to receive €18.8 million in compensation for loss of office when Microsoft finalised its €5.4 billion deal for the one-time world leader in mobile phones.
Having initially, incomprehensibly, insisted that Elop’s contract and payoff was substantially in line with his predecessors, Siilasmaa was forced to concede that this was not the case – but not before senior Finnish politicians publicly questioned the scale of the award, with prime minister Jyrki Katainen calling it “quite outrageous”.
In fact, Elop, it emerged, stood to gain €14.6 million more than his predecessors.
Siilasmaa then blamed an “accident” in the drawing up of Elop’s original contract three years ago, which requires him to be paid €14.6 million in share awards on top of 18 months’ salary. Notwithstanding that, he continued to defend the payout, under which Microsoft is paying 70 per cent of the cash.
It emerged that the former CEO’s contract had been amended even as Microsoft waited to pounce, on the basis that Elop could have otherwise sued for breach of contract as his role was being diminished under the terms of the deal.
“Stephen has been very constructive throughout the process,” Siilasmaa concluded. No doubt he was.
Finally, the beleaguered Nokia chairman (and acting chief executive) called on Elop to consider returning some of the cash. Elop demurred, apparently because he is in the middle of a divorce and might have to make-up the loss to his wife in any ultimate settlement.
As the Nokia board is left to face the ire of their thrifty Finnish compatriots already smarting over the loss of their only global icon, Elop – who received €6.6 million when he originally moved from Microsoft to Nokia, only to see the company report over €5 billion in losses during his tenure – returns to Microsoft where he becomes a front-runner in the battle to succeed Steve Ballmer as CEO.