Ex-CEOs Cash In

It pays to leave your job as a CEO these days. In fact, it pays quite well.

Last week, Hewlett-Packard Co. (NYSE: HPQ) revealed that it paid CEO Carly Fiorina $21 million, including stock, in severance after the board of directors arranged for her departure (see HP Plots New Course).

Today, Brocade Communications Systems Inc. (Nasdaq: BRCD) divulged in a Securities and Exchange Commission (SEC) filing that it will pay former CEO Greg Reyes $910,000 annually over the next two years for him to act as consultant to the board of directors and to current CEO Mike Klayko.

Reyes will receive $520,000 in salary and $390,000 in incentives in his new role. He stepped down as CEO and chairman last month following Brocades conclusion of an internal audit that focused on stock options (see Brocade Switches CEOs, Restates ). Results of an SEC inquiry, which is the typical follow-up to an internal audit, are pending.

Reyes, Klayko, and new director Dave House vaguely discussed Reyes’s role during a conference call to announce his departure as CEO and chairman last month. Reyes said he would work on “strategy and vision" and "customer-related activities” as a consultant.These deals have some analysts scratching their heads. “It seems very unusual to me, a terrible waste of shareholders’ money,” one financial analyst says of Reyes’s new deal. The analyst says Fiorina’s deal is also outrageous, but less so when you take into consideration the size of the company. HP brought in $80 billion in revenue last year compared to Brocade’s $596 million in revenue (see HP Storage Down, But Improving and Brocade Sales Hit $155.6M ).

In his new job, Reyes will be paid at least as much as Klayko, who is set to receive $520,000 in salary with a target bonus of $390,000 this year. Reyes will also receive expenses, including reimbursement for using his private plane when on company business. Brocade reimbursed Reyes $360,000 last year for use of his plane as CEO.

Reyes agreed to relinquish his position on Brocade’s board when the company votes new board members later this year.

Brocade did not respond to questions regarding Reyes's compensation by press time.

— Dave Raffo, Senior Editor, Byte and Switch0