Nokia is one of the many organisations who believe in the potential of employee share plans. We caught up with Lisa West, Program Manager Long Term Incentives at Nokia, to talk advantages and pitfalls of ESPPs, how she sees the future of employee ownership, and 'Share in Success' - the employee share plan that won Nokia an ESOP Centre award for 'Best All-Employee International Share Plan' in 2017.
For how long has Nokia had an employee share plan?
Share in Success – Nokia’s voluntary all-employee share purchase plan (the ‘Plan’) - was launched in 2013. It is a one-year standalone plan cycle and we are currently running the Plan for the sixth consecutive year.
Nokia also operates discretionary long term incentive plans and has done so for many years before Share in Success was introduced.
Why did Nokia decide to set up an employee share plan?
The main objective for Share in Success has always been to promote employee engagement and encourage employee share ownership. Nokia believes in the value of employees being part-owners of the company for which they work. The Plan enables participating employees to be rewarded for their commitment as the company and the employee partner together towards the future.
Even though the company has undergone tremendous change since 2013, the Plan has remained the same and in fact has been an important tool in connecting employees new to the Nokia group to being shareholders.
How many employees are currently participating?
We have over 33,000 employees participating in the current 2018 Plan cycle. This is a record number for Nokia and we have seen Plan participation numbers increase each year.
Last year you won the ESOP Centre award for ‘Best All-Employee International Share Plan’. Can you tell us a bit more about the plan and why you think it worked so well?
Share in Success is Nokia's global voluntary employee share purchase plan. The Plan is an opportunity for Nokia employees to invest in the company by purchasing Nokia shares and becoming a Nokia shareholder. Participants in the Plan purchase Nokia shares on a quarterly basis for one year via a monthly contribution from net salary.
And here's the good part…Nokia matches employees' contribution. For every two Nokia shares employees purchase and continues to hold until the end of the 12-month holding period, Nokia will deliver one additional share for free after the end of the plan cycle.
Employees can elect to contribute up to EUR 150 (or local currency equivalent) per month to purchase Nokia shares.
We believe the Plan has been so well received is because it is a very simple plan which only lasts 1 year. So employees only have to purchase and hold shares for a maximum of 1 year in order to receive their free matching shares. Also we have pushed very hard to offer the Plan in as many countries as possible – so far we are up to 72 countries and we are always striving for more. Even when we face administrative or local regulatory issues, we try to work through these issues with local advisers wherever possible to enable as many of our employees to participate in the Plan. That means we are unusual in being able to offer the Plan in countries such as Iraq, Kazakhstan and Russia.
So far, what have been the main benefits of having an employee share plan for you?
One of the greatest benefits is seeing our employees who have been rated the most engaged with the company are most likely to be the ones participating in the Plan. Our data analysis shows a strong correlation between employee engagement and Plan participation. Whether that means our most highly engaged employees tend to be more willing to invest and partner with Nokia, or whether the Plan helps to make employees more engaged as a result of participating in Share in Success is more difficult to decipher. However we do believe the Plan fosters a sense of loyalty and co-ownership and it’s great to be able to reward these employees with the free matching shares.
What significant challenges did you face when implementing or managing your plan?
One of the greatest challenges when trying to extend the Plan to new countries is understanding all the possible intricate details in terms of finance and regulatory issues. Although there may not, on the face of it, be any banking or regulatory issues preventing the company from operating the Plan in a particular country, there can often be hidden obstacles such as the time it takes to transfer the salary deductions via an external bank remittance from the local payroll to central treasury based in another country - or the heavy paperwork workload involved for the local subsidiary or indeed the participants.
There are also administrative challenges when operating the Plan for so many employees in so many countries. For example, it is often difficult to track employees who move countries and ensuring their salary contributions are converted into a new currency and set up in their new payroll all within a matter of days so that there is a seamless transition from the old payroll to the new payroll from one month to the next.
What developments do you think we’ll see in employee equity sharing in the next few years?
With more and more companies operating on a global basis with employees based in many countries, it stands to reason that more companies will be rolling out global all employee share purchase plans. As companies become more ‘global’ in their outlook, we may see such plans being less country specific and more uniform in nature.
More generally, we hope to see a greater emphasis on employee share plans as part of compensation packages, with the benefits of offering share plans being more widely known and understood.
Are you planning any changes or new initiatives regarding your current options plan?
Nokia does not offer stock options and has not done so since 2013. As well as the Share in Success Plan, Nokia operates a Performance Share Plan (awards vest depending on the satisfaction of corporate performance conditions) and a Restricted Share Plan (not performance related - awards vest as long as the employee is still employed at the time of vesting).
What would you advise other companies considering the use of an employee share plan?
When thinking of setting up a new global plan such as an all-employee share purchase plan, it is worth considering whether to start small and then extend the plan to more employees and countries in subsequent years. There are so many different factors and considerations to manage when setting up a plan, it is often better to focus on ensuring the basic structure and processes work (thereby fulfilling the objectives of the Plan) than trying to achieve everything including optional ‘nice to have’ features at the same time.
In addition, as there are so many different functions and speciality areas involved in setting up and managing a plan, it is essential to identify and work with stakeholders from each area as early as possible. Such stakeholders may include local payrolls, global and local HR, local finance, group accounting and treasury and of course the communication team or specialists.
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