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Employment

Ciena CEO Takes $3M Extra in 2002

In a proxy statement filed today with the U.S. Securities and Exchange Commission (SEC), Ciena Corp. (Nasdaq: CIEN) reveals a $3 million payment made to CEO Gary Smith as the result of an employment deal struck back in 1999.

Smith, the highest paid executive at Ciena last year, was promised the money back in 1999, when he was VP of Sales and Marketing, according to a footnote in the filing: "[I]n order to induce him to remain with the Corporation, the Corporation entered into an agreement with him that provided that if he remained in the Corporation's employ until at least August 18, 2002, he would be paid an incentive bonus of $3,000,000."

What makes the number stand out is the fact that Smith, who made over $20 million on sales of Ciena shares back in 2000, was the only exec to be paid any kind of bonus at Ciena last year. In a year when Ciena suffered layoffs that cut 44 percent of staff (see 2002 Top Ten: Pink Slips), Smith's boss, Patrick Nettles, the ex-CEO who now serves as board chairman, cut his own salary significantly, according to the filing. Nettles made $561,538, for 2002, but the year before, he'd made $700,000.

Ciena's not the only company haunted by employment agreements made in better times. Last week, SEC filings revealed rich payments to ADC Telecommunications Inc. (Nasdaq: ADCT) CEO Richard Roscitt as a result of a deal struck in February 2001 that grants Roscitt a total over $4 million, to be made in yearly payments through 2004 (see Exec Pay Defies Downturn).

Industry observers say figures like these aren't anything new, different, or unexpected. "It's a case of supply and demand," says one financial analyst, who asked not to be named. "I agree it might not look so good to some shareholders, but there is a lack of really capable people with the right experience to do some of these jobs."

"The elite few are still hard to find," says Craig Millard, co-founder and managing director of The Millard Group, an executive recruitment firm based in Connecticut. While some companies might balk at big signing bonuses, cash payments continue to be made, particularly in light of the reduced value of stock options, which used to count as more compensation than they do today.

Still, in today's testy times, proxies with big bonuses are apt to get closer scrutiny. "I might have more concern if it wasn't a prearranged bonus, but... certainly people are taking a closer look at things... A lot more scrutiny's being applied to everything now," says Joe Gladue, analyst at Chapman Co.

— Mary Jander, Senior Editor, Light Reading
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Scott Raynovich 12/5/2012 | 12:46:55 AM
re: Ciena CEO Takes $3M Extra in 2002 >As an institutional investor, I will never own a >share of Ciena stock as long as Martin is CEO.


Who is Martin?
steve 12/5/2012 | 12:46:55 AM
re: Ciena CEO Takes $3M Extra in 2002 Oh please give me a hanky....

Two thoughts.

It certainly is Martin's perogative to take the cash, he negotiated a good deal, and it was certainly due him. but....

As an institutional investor, I will never own a share of Ciena stock as long as Martin is CEO. By not restucturing this deal until happier times(wasnt he head of SALES and Marketing!), tells me he has his own interests way ahead of the company's or the shareholders.

So take the cash and happy sailing, but without me...and a lot of other investors..

steve 12/5/2012 | 12:46:54 AM
re: Ciena CEO Takes $3M Extra in 2002 whooops..Martin..Smith..Sorry about that..still in depression over Raiders
steve 12/5/2012 | 12:46:51 AM
re: Ciena CEO Takes $3M Extra in 2002 Sure...he can try all the plays he stole from Oakland...nothing else seems to be working...
hookedonphotonics 12/5/2012 | 12:46:51 AM
re: Ciena CEO Takes $3M Extra in 2002 Maybe Jon Gruden should try being a CEO of fiber company! Hehehe.
metroshark 12/5/2012 | 12:46:49 AM
re: Ciena CEO Takes $3M Extra in 2002 The truth of the matter is most of the highly touted executives are no different than other people in terms of their vision, skill set, etc. Some of them have better connections, but other than that, it is mostly a matter of luck.

Also, 90% of the executives who are brought to top positions with great hopes usually fail and leave their posts within a few years with "compensation" packages that enable them to retire comfortably if they choose to. The other 10% who actually achieve success (either through their own contributions or pure luck) are wildly publicized by the media.
mellonHead 12/5/2012 | 12:46:45 AM
re: Ciena CEO Takes $3M Extra in 2002 >By not restucturing this deal until happier >times(wasnt he head of SALES and Marketing!), >tells me he has his own interests way ahead of >the company's or the shareholders.

>So take the cash and happy sailing, but without >me...and a lot of other investors..

I too have concluded these guys don't have the shareholder's interest at heart. In spite of recently passing a shareholder resolution not to reprice employee stock options they went ahead and did just this recently. How do they do get away with this? Cancel the previous options and reissue new ones and hence it is not considered repricing? It seems to completly violate the spirit of what was intended.

It amazes me that a company would stick it to their shareholder base this way after the pummelling the stock price has taken. You can't
really argue they are worried about losing employees if they don't do this -- where are their
employees going to go? LU, ALA, NT? I don't think so.

It certainly takes balls for management to do this to the real owners of the company in the current environment.

I am starting to see why Warren Buffett thinks
stock options are such a big scam.
steve 12/5/2012 | 12:46:39 AM
re: Ciena CEO Takes $3M Extra in 2002 What they are doing has become pretty common lately and is known as the "Sprint" method. A company cancels underwater options and waits 6 months and one day to reissue options at the then prevailing price. Employee takes the risk that stock price ( = new option strike price) will not rise dramatically in 6 month period.

Effectively you are repricing options, although you can change the grant amounts, or any other features, if the company chooses.

Btw, the company's directors do this, not the management, but we know how that works...
B2Itried 12/5/2012 | 12:46:36 AM
re: Ciena CEO Takes $3M Extra in 2002 Hey even Alexi Yashin is on the Ottawa Senators Payroll.

Look even the Senators have filed for Bankrupty protection.

Q: So why would a CEO be any different then a Hockey Player.

A: At least a hockey player will fight once in a while and only CEO's run

B2
tiadakola 12/5/2012 | 12:46:26 AM
re: Ciena CEO Takes $3M Extra in 2002 balto (OT)

oh boo hoo...look at the positive from my standpoint...get to hear all you Raider fans whine for another year...just like last year, and the year before, and the year before...
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