Ciena CEO Takes $3M Extra in 2002
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