Ciena CEO asked for 23% salary cut

In a meeting with board members on the company's executive compensation committee in November 2004, Ciena CEO Gary Smith asked for, and received, a 23% reduction in his base salary, according to the company's regulatory filings. Smith's annual salary was reduced from $650,000 (its 2003 and 2004 level) to $500,000 for fiscal 2005.

"This recommendation…was voluntarily offered by Mr. Smith and was not related to his or Ciena's performance," the filings said.

At the same time, the committee decided on its own to offer Smith a long-term compensation award for fiscal 2005 in the form of an option to purchase 700,000 shares of the company's stock--the same option he was granted in fiscal 2003. (In 2004, his long-term compensation was split between 230,000 common stock options and $405,600 in restricted stock options. On October 28, 2005, when the company's 2005 fiscal year ended, the 40,000 units of restricted stock Smith held were worth $94,800.)

Of those 700,000 stock options, half can only be vested if certain performance goals are met in two consecutive quarters of the company's 2006 fiscal year. Theoretically, if Ciena's stock grows at a rate of 5% to 10%, those 700,000 shares ultimately could be worth between $1.25 million and $3.18 million by the time they expire in 2014, according to Ciena.

"In determining the form and amount of this grant, the committee took into account Mr. Smith's performance and the importance of providing him with sufficient incentives to remain with Ciena," the filings said. "The committee also took into account information about recent stock option grants to the chief executive officers of similar companies and the advice of its independent compensation consultant."

Smith's 2004 base salary of $650,000 was more than double Chief Technology Officer Stephen Alexander's $300,000 salary and nearly twice Chief Financial Officer Joseph Chinnici's $350,000 salary.

As long-term compensation in fiscal 2005, Alexander and Chinnici also received options to purchase 250,000 in Ciena stock.

Neither Smith, Alexander nor Chinnici have received an annual bonus in the company's last three fiscal years.