10:00 AM -- Maybe there's more to this corporate governance business than compliance hassles. Though Brocade Communications Systems Inc. (Nasdaq: BRCD) let ex-CEO Greg Reyes reign supreme for six years, they're pulling the ripcord on his golden parachute.
Last week, the company stopped paying Reyes as a consultant at CEO pay, an arrangement set up when he resigned under a cloud of accounting questions in January (see Brocade Switches CEOs, Restates and SEC Gets Formal With Brocade).
In a tersely worded SEC filing this week, the company had this to say:
The agreement and employment arrangement between the Company and Mr. Reyes was terminated on July 21, 2005. As of July 21, 2005, vesting of stock options granted to Mr. Reyes ceased, and any unvested options reverted to the stock plan under which they were granted. In addition, as of July 21, 2005, the Company is no longer obligated to make any further payments under the employment agreement.
Reyes's contract with Brocade was a typical old-school arrangement based on a misplaced sense of entitlement. Though Reyes ruled a company whose financials have been a source of embarrassment, criticism, and investigation, he seemed determined to keep his hand in the till (see Goldman Cites EMC, Bites Brocade).
In a new-school turnabout, Brocade's board insisted instead that Reyes sing for his supper. When that didn't happen, they squawked (see Brocade Blasts 'Consultant' Reyes). Then they shut the tap. In addition to stopping future pay, Brocade is looking to pay Reyes just $100,000 of the enormous compensation expense it had racked up on his behalf earlier this year:
The Company expects to reverse approximately $1.6 million of the approximately $1.7 million compensation expense that was accrued as of the second quarter of fiscal 2005 (the three months ended April 30, 2005) in connection with the accounting for the agreement and employment arrangement with Mr. Reyes.