http://www.forbes.com/sites/terokui...-how-inept-was-nokias-board/?partner=yahootix
Elop now gets a golden handshake too,,what a lucky guy..
[h=1]Just How Inept Was Nokia's Board?[/h]
Finland is boiling with rage this weekend over the $25 M bonus payment the CEO Stephen Elop is set to receive as he leaves
Nokia NOK -1.64% after his two-year tenure. Questions are now being raised by the oddest aspect of the bonus: the board of Nokia seems to have given Elop a $25 M incentive to sell the handset unit cheaply to
Microsoft MSFT -2.52% way back in in 2010. This effectively means that the board hired a man who was given a giant carrot to drive down Nokia’s overall valuation and phone volumes while preparing a sale to Microsoft. What could possibly be a reason to structure Elop’s original contract in this manner? Did the board in fact end up promising Elop more compensation in case he sells the phone division than if he runs it with modest success?
During Elop’s time at the helm, Nokia’s market value plunged by about $20 B and the quarterly smartphone shipments collapsed from 24 M units per quarter to 7 M units per quarter. It is hard enough to understand how Elop merits the bonus on this performance – but the real storm in the Finnish media started when the chairman of Nokia’s board
blurted out that Elop’s bonus is “solely a result of terms that were accepted in 2010″. The chairman Siilasmaa probably meant to defend his board with this comment. But instead, his comments have helped fuel
a massive backlash ranging from the Finance Minister and unions to national newspapers and finance industry professionals.
<aside class="vestpocket" data-position="4" style="">
Why Microsoft Was Not Stupid To Buy Nokia's Phones <cite class="box_byline clearfix">
Nigam Arora Contributor </cite>
</aside>Why on earth would Nokia’s board sign a contract with Elop in 2010 guaranteeing him a $25 M bonus if he ends up selling the core division of the company in 2013 at less than 0.5 P/S ratio? Elop was already a Microsoft man when he arrived to Nokia. His ability to make a purely independent decision about Nokia’s mobile OS strategy was already in question. Why give him a substantial additional reason to demolish Symbian sales as rapidly as possible, bet everything on Windows and then sell the handset division to Microsoft?
Nokia shareholders have been wondering for more than two years why Elop made such brutally negative comments about Symbian in the beginning of his tenure. At that point, Nokia was still shipping more than 20 M units of Symbian smartphones quarterly. Would it not have been sensible to promise operators strong Symbian support for years and an aggressively marketed niche for the OS in the budget smartphone market? That might have slowed down Symbian sales erosion and given Nokia more time to transition to a new OS. Instead, Elop gave a curiously dramatic condemnation of Symbian and effectively signaled to global carriers Nokia would kill the platform as soon as possible. Operators started canceling Symbian orders right after the “burning platform” drama erupted.
We now know that when Elop was hastening Symbian’s decline in the spring of 2011 he already knew that if Symbian sales would collapse and Nokia would start bleeding cash, he could sell the handset unit to Microsoft and personally cash in $25 M. You can hardly blame Elop for making a grab for the money. But you have to question the competence and motivations of Nokia’s board in pushing its own CEO to dismantle the company. How could the board have known in 2010 that it truly is in Nokia’s best interest to sell its phone unit cheaply in 2013? If the board had no such knowledge, why would it create a compensation package that favors that outcome?
As BlackBerry’s disastrous August quarter demonstrates, the handset industry is growing inhospitable to minor operating systems.
Apple AAPL -1.07% and Samsung continue increasing their dominance. Nokia always did face an uphill battle in the spring of 2011. But thanks to its board of directors, it entered that battle with a general who was promised a king’s ransom should he happen to lose. Nokia’s directors will go down in the European business history as one of the most perverse crews to lead a major corporation in the post-war era.
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