Non-disclosure disclosure at Ciena Corp. …

July 12, 2010

We’re all for tougher disclosure requirements, but in the end, rules can do only so much if companies are intent on obfuscating. And some of them clearly are — like Ciena Corp. (CIEN), an optical-networking equipment-maker in the euphoniously named Linthicum, Maryland.

Here’s the complete substance of the 8-K it filed toward the end of last week:

“On July 1, 2010, Arthur D. Smith, Ph.D., notified Ciena Corporation (Ciena) of his decision to resign as an officer and employee of Ciena and its subsidiaries effective as of July 31, 2010. Dr. Smith currently serves as Ciena’s Senior Vice President and Chief Integration Officer. Following his resignation, Dr. Smith will be entitled to certain compensation benefits, subject to certain conditions relating thereto, each as previously disclosed in Ciena’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 5, 2010.”

That’s it — “certain compensation benefits, subject to certain conditions relating thereto.” Translation: Dear shareholder, go look it up; we can’t be bothered to explain — either that, or we don’t really want you to know. You decide, but just leave us alone. (A press release attached to the filing was no help.)

Moreover, if you do dig up that Feb. 5 filing, it consists in its entirety of two paragraphs of 311 words, and no copy of the actual contract — despite the fact that most companies do file the documents when disclosing new compensatory contracts with top executives (which are by definition material agreements under Securities and Exchange Commission regulations). No doubt Ciena gets good legal advice, but assuming companies have some leeway here, is there really a good reason not to include it?

Especially since it seems to be a moderately peculiar arrangement, related to Smith’s role heading up the integration of acquired optical networking and carrier Ethernet assets: Smith could choose to resign at any time on or after July 31 this year, and in return for depriving the company of his continued services, would be entitled to “receive his current salary and benefits; to participate in Ciena’s incentive bonus plan; and to vest as to his outstanding equity awards in accordance with their existing terms” through Dec. 31 (unless he gets another job first). He also gets to keep medical, dental and vision benefits at the same time.

Any payments under those terms would offset a $350,000 lump-sum payment on Dec. 31 (or upon starting a new job) — the equivalent of a year’s salary — plus an annualized bonus payment under Ciena’s incentive bonus plan equaling 75% of his base salary,” presumably meaning another $262,500. In return, he can’t compete or try to hire Ciena employees for one year. In other words, Smith was bound to get some $612,500 in pay and severance between July 31 and the end of the year, whenever he left the company.

We’ve read enough employment and severance agreements to know this kind of disclosure leaves out a lot of potentially relevant details. For example, when it comes to the “general release of claims against Ciena and his compliance with a one-year non-competition and non-solicitation covenant,” exactly what kind of work can’t Smith do for a year? Which employees is he barred from soliciting? The implication is all of them, but might it be significant if that isn’t the case?

In the end, we have no view on whether Smith deserves this send-off. But it doesn’t seem like a monumental task for Ciena to provide a little more detail, or even the agreement itself. Failing to do so comes of very much like disdain for the company’s shareholders.

And it raises a real question: If the company has so little interest in clarifying a straightforward development like this one, should investors wonder about its other disclosures?

Image source: naunasse via Flickr

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