PROXY STATEMENT 2019 Annual Meeting of Stockholders
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
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Ciena Corporation
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PROXY STATEMENT 2019 Annual Meeting of Stockholders
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Patrick H. Nettles, Ph.D. Executive Chairman of the Board of Directors | ||||
Message from our Board of Directors Dear Fellow Stockholders: Ciena’s strong business and financial performance in 2018 reflects the consistent execution of our strategy and the ability to leverage our competitive strengths – diversification, innovation leadership and global scale. The result is that we are a global market leader, with #1 or #2 share in every segment in which we participate. We have a diverse portfolio across systems, components, software and services. We sell into a broad set of geographies and customers, with a focus on meeting demand in higher-growth market applications. We are forcing the pace of innovation with our significant R&D investment capacity and Adaptive Network vision for next-generation networks. And, we are delivering sustained industry-leading revenue growth, gaining market share, improving our profitability and strengthening our balance sheet. Our management and our Board believe strongly that good corporate governance and high ethical standards are essential to Ciena’s success. In 2018, we took several meaningful steps to improve our existing strong governance practices, including: • As part of our ongoing commitment to Board refreshment and diversity, we appointed a new director, Joanne B. Olsen. In accordance with our bylaws, Ms. Olsen will stand for election at the Annual Meeting. • We substantially increased our minimum stock ownership requirements for executive officers and directors and added a holding requirement until the relevant minimum ownership level is achieved. • We issued our first public Corporate Social Responsibility (CSR) Report. • We refreshed our Principles of Corporate Governance and revised the charters for each of our standing Board Committees. As we look to the future, we are very pleased with the maturity and strength of Ciena’s business and believe we have a strong platform for continued success. This confidence allowed us to provide a new set of three-year financial targets for how we intend to manage the business going forward. It also allowed us to continue our commitment to returning capital to our stockholders, by replacing our previous share repurchase program with a new program to repurchase up to $500 million of our shares over the next few years. I encourage you to read more about our Board of Directors, Ciena’s corporate governance practices and our executive compensation in the attached proxy statement. Thank you for your continued support of Ciena and your participation in this year’s Annual Meeting. On behalf of the Board of Directors,
Patrick H. Nettles, Ph.D. |
Ciena Corporation
7035 Ridge Road
Hanover, Maryland 21076
Date: March 28, 2019 Record Date: February 1, 2019 Time: 3:00 p.m. Eastern Time Attendance: www.virtualshareholdermeeting.com/ciena2019 |
To the Stockholders of Ciena Corporation:
The 20162019 Annual Meeting of Stockholders of Ciena Corporation will be held on March 24, 201628, 2019 at 3:00 p.m. Eastern Time. Our Annual Meeting will be a virtual meeting held over the Internet. You will be able to attend the Annual Meeting, vote your shares electronically and submit your questions during the live webcast of the meeting by visiting
Items of Business | ||||
1. Elect two members of the Board of Directors from the nominees named in the attached proxy statement to serve as Class I directors for three-year terms ending in |
2. Ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending October 31, |
3. Conduct an advisory vote on our named executive officer compensation, as described in these proxy materials; |
4. Consider and act upon such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof. | ||||
These matters are more fully described in the proxy statement accompanying this notice.
You are entitled to notice of, and are eligible to vote at, this year’s Annual Meeting if you were a stockholder of record as of the close of business on January 28, 2016 are entitled to notice of, and to vote at, this year’s Annual Meeting. February 1, 2019.
In accordance with Securities and Exchange Commission rules, we are furnishing these proxy materials and our Annual Report to Stockholders for fiscal 2015 to our stockholders2018 via the Internet. We believe that posting these materials on the Internet enables us to provide stockholders with the information that they need more quickly. It also lowers our costs of printing and delivering these materials and reduces the environmental impact of our Annual Meeting. On February 10, 2016,12, 2019, we mailed to stockholders as of the record date a notice containingwith instructions on how to access our Annual Meeting materials and vote via the Internet, or by mail or telephone.
We believe that your vote, and the vote of every Ciena stockholder, is important. Whether or not you plan to participate in the Annual Meeting, we encourage you to review the accompanying proxy statement for information relating to each of the proposals and to cast your vote promptly.
By Order of the Board of Directors,
David M. Rothenstein
Senior Vice President, General Counsel and Secretary
Hanover, Maryland
February 10, 2016
Page Proposal No. 2 Relationship with Independent Registered Public Accounting FirmTABLE OF CONTENTSTABLE OF CONTENTSSectionPage Section 1 4 6 11 11 11 11 14 14 15 15 17 19 20 20 21 22 22 — Amendment to the 2008 Omnibus Incentive Plan23 24 25 26 28 29 48 49 49 50 53 54 55 55 61 62 63 63 64 65 66 67 70 70 70 71
This summary highlights information that is contained elsewhere in this proxy VOTING OVERVIEW Board Vote Page 1. Elect two Class I Director nominees and one Class II Director nominee FOR each nominee 4 2. FOR 23 3. Advisory vote on named executive officer compensation(“Say-on-Pay”) FOR 62 FISCAL 2018 COMPENSATION HIGHLIGHTS Base Salaries Did not increase the base salary of the CEO Increased the base salary of two NEOs in connection with their appointment to executive leadership team and assumption of larger organizational roles Target Cash Incentives Did not increase the target cash incentive opportunities for the CEO or the other NEOs Equity Award Values Equity Award Structure Continued to structure the equity awards so that 60% of the target award value for the CEO, and 50% of the target award value for the other NEOs, was allocated toat-risk, performance-based equity Introduced market stock units as a component of performance-based equity, based on a relative TSR goal measured over a three-year performance period CEO FY 2018 Target Total Direct Compensation Mix At-Risk Performance-Based Compensation 59% 10% 46% 31% 13% Time-Based Compensation 41% Base Salary Time-Based Equity (RSUs) Target Annual Cash Incentive Performance-Based Equity (PSUs/MSUs)CIENA CORPORATION7035 RIDGE ROADHANOVER, MARYLAND 21076________________________PROXY STATEMENT________________________ANNUAL MEETING OF STOCKHOLDERSTO BE HELD ON MARCH 24, 2016 SUMMARYOur Board of Directors has made thesematerials availablestatement. It does not include all information necessary to make a voting decision and you via the Internet or, upon your request, has delivered printed versions of these materials to you by mail. We are furnishingshould read this proxy statement in its entirety before casting your vote. Proposals
Recommendation Increased the values of annual equity awards for the CEO and the other NEOs in order to better align with the market values for their positions and due to the addition of new members to the executive leadership team 
2019 Proxy Statement 1
CORPORATE GOVERNANCE AND STOCKHOLDER OUTREACH
Stockholder Outreach
We believe that strong corporate governance practices should include regular outreach and conversations with the solicitation by our Board of Directors of proxies to be voted atstockholders, with whom we regularly discuss our 2016 Annual Meeting. The Annual Meeting will be held on March 24, 2016 at 3:00 p.m. Eastern Time, or at any adjournment thereof. As described below, this year’s Annual Meeting will bebusiness, financial performance and industry dynamics. During fiscal 2018, we engaged with a completely virtual meetingnumber of stockholders to be held overobtain feedback on their perception and understanding of our business, markets and industry. These engagements have helped to shape our long-term targets and communications to stockholders around the Internet.
Fiscal 2018 Governance Changes
CATEGORY | WHAT WE’VE DONE | |
| Board Composition | ❖ Appointed a new independent director | |
❖ Three of nine directors are female | ||
| Return of Capital to Stockholders | ❖ Repurchased 4.3 million shares for $111 million pursuant to previous share repurchase program | |
❖ Authorized new $500 million share repurchase program | ||
❖ Mitigated dilution by electing to cash settle 2018 convertible notes at maturity and exercising an early conversion option on 2020 convertible notes | ||
❖ Changed tax withholding method for employee stock awards to repurchase and retire shares and reduce dilution | ||
| Stock Ownership Guidelines | ❖ Substantially increased the minimum ownership requirements, including 5x base salary for CEO and 5x cash retainer fornon-employee directors | |
❖ Added a holding requirement until the relevant minimum ownership level is achieved | ||
| Policies and Charters | ❖ Updated Principles of Corporate Governance | |
❖ Issued first Corporate Social Responsibility (CSR) Report | ||
❖ Updated Charters of standing Board committees |
Existing Strong Governance Structure
❖ Seven of nine directors are independent ❖ Standing committees comprised solely of independent directors ❖ Lead Independent Director ❖ Separate Chairman and CEO roles ❖ Code of Ethics for Directors | ❖ Annual Board and committee self-assessments ❖ Proxy access bylaw ❖ Majority voting in uncontested director elections ❖ Limits on annual director compensation ❖ Independent directors meet without management present |
2 2019 Proxy Materials containing instructions on how to access our proxy materials, including this proxy statementStatement
FISCAL 2018 PERFORMANCE AND BUSINESS HIGHLIGHTS
Business Highlights
❖ Established and communicated new three-year financial targets ❖ Grew annual revenue fromnon-service provider customers to 35%, from the Asia Pacific region by 21%, and from Webscale/Data Center Interconnect (DCI) and submarine verticals by 140% and 25%, respectively ❖ Acquired and integrated two companies, Packet Design and DonRiver, into our software automation business | ❖ Added 55 new customers for our industry-leading WaveLogic Ai coherent chipset ❖ Significantly improved the balance sheet by eliminating all convertible debt and refinancing our existing term loan ❖ Returned capital to stockholders by repurchasing 4.3 million shares for $111 million |
Financial Performance
10% |
Achievedover 10% annual revenue growth
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22% |
Generated adjusted earnings per share representing22% annual growth | |||||
32% |
Reduced adjusted operating expense as a percentage of revenue to32.1% |
19% |
Increased adjusted net income by19% year-over-year, to$211M | |||||
2.0x
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Reduced gross debt-to-EBIDTA leverage ratio to2.0x
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47% | Generated total stockholder return of47%
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REVENUE FY2017 FY2018 ADJ. OPERTATING EXPENSE AS % OF AREVENUE ADJ. OPERATING INCOME ADJ. NET INCOME ADJ. EARNINGS PER SHARE GROSS DEBT-TO- EBIDTA LEVERAGE RATIO
Contained above, and our Annual Report to Stockholders for fiscal 2015. The Notice of Internet Availability of Proxy Materials also provides instructions on how to vote over the Internet, by mail or by telephone. If you received a Notice of Internet Availability of Proxy Materials by mail, you will not receive a printed copy of the proxy materials in the mail unless you specifically request these materials. Other stockholders, in accordance with their prior requests, have received e-mail notification of how to access our proxy materials and vote over the Internet, or have been mailed paper copies of our proxy materials and a proxy card or a vote instruction form from their bank or broker.
2019 Proxy Statement 3
Election of Class I Overview Our Board of Directors currently consists of nine directors divided into three classes. Each class of our Board of Directors serves a staggered three-year term. At the Annual Meeting, Effective October 16, 2018, the Board of Directors increased the size of the Board from eight to nine directors and appointed Joanne B. Olsen to fill the newly created vacancy in Class II of the Board. The term of office for Class II directors continues until the 2020 Annual Meeting, or until their successors are duly elected and qualified. Our bylaws, however, limit the term of office of any director elected by the Board of Directors to fill a vacancy to a term that lasts until the first annual meeting following election. Ms. Olsen is therefore a nominee for election at the Annual Meeting. Our bylaws also provide that any director so elected will serve the remainder of the term of the class to which such director was elected. Accordingly, if elected by stockholders at the Annual Meeting, Ms. Olsen will serve the remainder of her term as a Class II director until the 2020 Annual Meeting, or until her successor is elected and qualified, or until her earlier death, resignation or removal from the Board. Michael J. Rowny, who is a current Class I director, has not been nominated and is not standing for re-election as a director and accordingly the size of the Board of Directors will be reduced from nine directors to eight directors following the Annual Meeting. This decision was made in consultation with Mr. Rowny and was not due to any performance issues or any disagreement relating to Ciena’s operations, policies, or practices. We would like to thank Mr. Rowny for his many years of service on the Board and his many important contributions to Ciena. The Board intends to continue its ongoing review of its composition and approach to refreshment over time and expects to add a new independent director in 2019. Director Qualifications The Governance and Nominations Committee reviews candidates for service on the Board and recommends nominees for election to fill vacancies on the Board of Directors, including nomination forre-election of directors whose terms are due to expire. In discharging The Governance and Nominations Committee also seeks to ensure that the Board of Directors is composed of individuals of diverse backgrounds, including with respect to gender, who have a variety of complementary experience, skills and relationships relevant to Ciena’s In nominating candidates to fill vacancies created by the expiration of the term of a director, the Governance and Nominations Committee determines whether the incumbent director is willing to stand forre-election. If so, the Governance and Nominations Committee evaluates his or her performance to determine suitability for continued service, taking into consideration, among other things, each director’s contributions to the Board, the value of the continuity of his or her service, and the individual’s familiarity with Ciena’s business, operations 4 PROPOSAL NO. 1ELECTION OF CLASSDIRECTORSand Class II Directorsthreetwo directors will be elected to fill positions in Class I, whose term expires at the Annual Meeting. Lawton W. Fitt and Patrick H. Nettles, Ph.D. and Michael J. Rowny,, each of whom is a current Class I director, are the nominees for election at the Annual Meeting. The nomination of these directors to stand for election at the Annual Meeting has been recommended by the Governance and Nominations Committee and has been approved by the Board of Directors. Each of the nominees for Class I, if elected, will serve for a three-year term expiring at the 20192022 Annual Meeting, or until his or her successor is elected and qualified, or until such director’s earlier death, resignation or removal from the Board.5itsthis responsibility, to nominate candidates for election to the Board of Directors, the Governance and Nominations Committee endeavors to identify, recruit and nominate candidates characterized bywho possess a combination of wisdom, maturity, sound judgment, excellent business skills, maturity and high integrity. In particular, the Governance and Nominations Committee seeks individuals with a record of accomplishment and senior leadership experience in their chosen fields who display the independence of mind and strength of character to be committed to representing the long-term interests of our stockholders.business.business and industry. This diversity of background and experience includes ensuring that the Board includes individuals with experience or skills sufficient to meet the requirements of the various rules and regulations of theThe New York Stock Exchange and the SEC,Securities and Exchange Commission (the “SEC”), such as the requirements to have a majority of independent directors and an audit committee financial expert. The Governance and Nominations Committee Charter requires the Committee to develop and use criteria for maintaining a balanced board of directors representing a diversity of characteristics and to recommend criteria, establish procedures for, and conduct an annual review of the Board and the diversity and other characteristics of individual directors and report to the Board on the results of the review.orand markets. 2019 Proxy Statement
BOARD COMPOSITION AND DIVERSITY
Skills and Experience Strategic Planning Experience International Business Experience Other Public Company Board Service M&A Experience Industry Experience Accounting and Financial Expertise Senior Leadership Experience Independence and Gender Diversity Independence 75% Independence Gender Diversity 38% Female
The above charts reflect information for all nominees and continuing directors.Each of the nominees has consented to serve if elected. However, if any of the persons nominated by the Board of Directors fails to stand for election, or declines to accept election, or is otherwise unavailable for election prior to our Annual Meeting, proxies solicited by our Board of Directors will be voted by the proxy holders for the election of any other person or persons as the Board of Directors may recommend, or our Board of Directors, at its option, may reduce the number of directors that constitute the entire Board of Directors.
2019 Proxy Statement 5
Information for each person nominated for election as a director at the Annual Meeting, including age, term of office and business experience, including directorships during the past five years, as well as for each director continuing service on DIRECTOR NOMINEES Class I Director Nominees with Terms Expiring in 2022 Lawton W. Fitt Director Since November 2000 • Audit Committee (Chair) Age65 Professional Highlights Ms. Fitt Skills and • Substantial investment banking experience and expertise in structuring and negotiating acquisition and financing transactions • Understanding of the capital markets • Brings a strong financial background to her service as • Significant experience in the areas of raising capital, financial oversight and enterprise risk • Executive management experience • Service as a director and member of the audit committee of other Other Current Board Experience • The Carlyle Group LP • Micro Focus International PLC • The Progressive Corporation, Chairperson Previous Board Experience • ARM Holdings PLC • Thomson Reuters Corporation 6 Information Regarding Nominees and Continuing Directorstheour Board, is set forth below. In addition, for each person, we have included information regarding the business or other experience, qualifications, attributes or skills that factored into the determination by the Governance and Nominations Committee and by our Board of Directors that each such person should serve as a director on our Board.Nominees for Election to Board — Class I Directors with Terms Expiring in 2019
age 62, has served as a DirectorChairperson of CienaThe Progressive Corporation since November 2000.May 2018. From October 2002 to March 2005, Ms. Fitt served as Director of the Royal Academy of Arts in London. From 1979 to October 2002, Ms. Fitt was an investment banker with Goldman Sachs & Co., where she was a partner from 1994 to October 2002,2002.a managing director from 1996 to October 2002. Ms. Fitt currently serves on the boards of directors of The Carlyle Group LP and The Progressive Corporation, and she has previously served on the boards of directors of Thomson Reuters, Overture Acquisition Corporation and Frontier Communications Company. She also serves as a director or trustee of several non-profit organizations.The Board believes that Ms. Fitt’s substantialQualifications together with her understanding are significant assets for the Board. Ms. Fitt bringsChairpersonChair of the Audit Committee along with significantanalysis. The Board also believes it benefits from Ms. Fitt’s previous executiveanalysis and from her servicecompanies.companies 2019 Proxy Statement
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| Patrick H. Nettles, | ||||||
Director Since April 1994 • Executive Chairman Age75 | Professional Highlights Dr. Nettles Skills and • Founder and former Chief Executive Officer of Ciena • Significant institutional and industry knowledge • Provides key insight and advice in the Board’s consideration and oversight of corporate strategy and management • Executive management experience with Ciena, along with | • Experience as a public company Other Current Board Experience • Trustee for the California Institute of Technology • Trustee for the Georgia Tech Foundation, Inc. • The Progressive Corporation Previous Board Experience • Axcelis Technologies, Inc., Independent Chairman of the board • Apptrigger, Inc. • Optiwind Corp. | ||||
Class II Director Nominee with Term Expiring in 2020
Joanne B. Olsen | ||||||
Director Since October 2018 • Compensation Committee • Governance and Nominations Committee Age60 | Professional Highlights Ms. Olsen previously served as Executive Vice President of Global Cloud Services and Support at Oracle from November2016 until her retirement in August 2017. In that role, she drove Oracle’s cloud transformation services and support strategy, partnering with leaders across all business units. Ms. Olsen previously served as Senior Vice President and leader of Oracle’s applications sales, alliances, and consulting organizations in North America from 2012 through November2016, and from 2010 through 2012 served in various general management positions at Oracle. Ms. Olsen began her career with IBM, where, between 1979 and 2010, she held a variety of executive management positions across sales, global financing and hardware. | Skills and Qualifications • Significant industry experience and knowledge of cloud infrastructure applications • Senior leadership experience with large, multinational technology companies • International business experience and insight into doing business in key international markets • Executive management experience across a range of sales, services and alliances • Experience as a public company director Other Current Board Experience • Teradata Corporation |
2019 Proxy Statement 7
CONTINUING DIRECTORS
Class II Directors with Terms Expiring in 2020
Judith M. O’Brien | ||||||
Director Since July 2000 • Compensation Committee (Chair) • Governance and Nominations Committee Age68 | Professional Highlights Since February 2018, Ms. O’Brien has served as a |
Skills and • Experience working in a private law firm focused on technology companies • Service as a venture capital professional andas in-house general counsel | • Important perspective with respect to the overall technology sector and in identifying and assessing legal and regulatory • Expertise in assessing and structuring strategic transactions, including capital raising opportunities, intellectual property matters, acquisitions, joint ventures and strategic • Brings extensive knowledge and experience in the areas of executive compensation and corporate governance to her service as Other Current Board Experience • MagicCube, Inc • Theatro Labs, Inc. Previous Board Experience • Adaptec, Inc. • Inform, Inc. | ||
Gary B. Smith | ||||||
Director Since October 2000 Age58 | Professional Highlights Mr. Smith Mr. Smith Skills and Qualifications •As | • Has led • Unique perspective on the strategic and operational challenges and opportunities faced by • Almost 30 years of experience in the telecommunications industry, during which time he has lived and worked on four continents • Global industry sales and marketing experience Other Current Board Experience • CommVault Systems, Inc. Previous Board Experience • Avaya, Inc. |
8 2019 Proxy Statement
Class III Directors with Terms Expiring in 2021
Bruce L. Claflin | ||||||
Director • Audit Committee • Compensation Committee Age67 | Professional Highlights Mr. Claflin served as President and Chief Executive Officer of 3Com Corporation from January 2001 until his retirement in February 2006. Mr. Claflin joined 3Com as President and Chief Operating Officer in August 1998. Prior to 3Com, Mr. Claflin served as Senior Vice President and General Manager, Sales and Marketing, for Digital Equipment Corporation. Mr. Claflin also worked for 22 years at IBM, where he held various sales, marketing and management positions, including general manager of IBM PC Company’s worldwide research and development, product and brand management, as well as president of IBM PC Company Americas. Skills and • Prior service as a Chief Executive Officer of a technology company in an adjacent industry provides the Board with a high level of expertise and experience in the operations of a global, high technology • Provides strategic insights | • Previous management and oversight experience relating to sales, marketing, research and development, supply chain management and • Experience in international business transactions, risk management, executive compensation and a business-oriented approach to resolving operational • Service as | ||||
Other Current Board Experience • IDEXX Laboratories, Inc., Previous Board • Advanced Micro Devices (AMD) |
T. Michael Nevens | ||||||
Director • Audit Committee Age69 | Professional Highlights Since 2006, Mr. Nevens has served as senior adviser to Permira Advisers, LLC, an international private equity fund. He has served as Chairman of NetApp, Inc. since 2009. From 1980 to 2002, Mr. Nevens held various leadership positions at McKinsey & Co., most recently as a director (senior partner) and as managing partner of the firm’s Global Technology Practice. He also served on the board of the McKinsey Global Skills and • Substantial experience with and exposure to a wide variety of companies and their corporate strategies, both as a private equity | adviser and management consultant, provides the Board with expertise in the areas of strategic and long-term business planning and competitive • Provides the Board with insight on corporate governance changes affecting public • Experience as a director of other global, high technology Other Current Board Experience • NetApp, Inc., Chairman Previous Board Experience • Altera Corporation |
2019 Proxy Statement 9
Patrick T. Gallagher | ||||||
Director Since May 2009 • Lead Independent Director • Compensation Committee • Governance and Nominations Committee (Chair) Age64 | Professional Highlights Mr. Gallagher currently serves as Chairman of Harmonic Inc. From March 2008 until April 2012, Mr. Gallagher was Chairman of Ubiquisys Ltd. From January 2008 until February 2009, Mr. Gallagher was Chairman of Macro 4 plc, and from May 2006 until March 2008, served as Vice Chairman of Golden Telecom Inc. From 2003 until 2006, Mr. Gallagher was Executive Vice Chairman and served as Chief Executive Officer of FLAG Telecom Group and, prior to that role, held various senior management positions at British Telecom. Skills and Qualifications • Extensive international business experience provides the Board with expertise and an important perspective regarding international transactions and markets • Experience as a senior executive of major European telecommunications service providers offers the Board insight into carrier customer perspectives as well as industry opportunities, marketing and sales strategies and operational challenges outside of the United States | • Industry knowledge and prior management expertise provide the Board with significant industry knowledge and expertise in submarine and wireless network applications and strategic growth market opportunities for Ciena • Experience as a public company director in both the U.S. and Europe provide strong background as lead independent director and Chair of the Governance and Nominations Committee Other Current Board Experience • Intercloud SAS, Chairman • Harmonic, Inc., Chairman Previous Board Experience • Sollers JSC |
Proposal No. 1 — Recommendation of the Board of Directors |
The Board of Directors recommends that you vote “FOR” the election of the two Class I nominees and the Class II nominee listed above |
10 2019 Proxy Statement
Ciena has adopted a number of policies and practices In accordance with the current listing standards of CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORSsome of which are described below, whichthat highlight itsour commitment to sound corporate governance principles. Ciena also maintains a corporate governance page on its website that includes additional related information, as well as Ciena’sour bylaws, codes of conduct, principles of corporate governance, and the charters for each of the Audit Committee, Compensation Committee and Governance and Nominations Committee. The corporate governance pagestanding committees of the Board of Directors. This information can be found by clicking on the “Corporate Governance” linkpage of the “Investors” section of our website atwww.ciena.com.www.ciena.com.theThe New York Stock Exchange, the Board of Directors, on an annual basis, affirmatively determines the independence of each director or nominee for election as a director. The Board of Directors has determined that, with the exception of Dr. Nettles and Mr. Smith, both of whom are employees and executive officers of Ciena, all of its members during fiscal 2018 are or during their tenure were “independent directors,” using the definition of that term in the listed company manual of theThe New York Stock Exchange. Also, as more fully described below, all members of the Board’s standing Audit, Compensation and Governance and Nominations Committees more fully described below,are independent directors, and all members of the Board’s standing Audit and Compensation Committees are independent directors in accordance with the additional listing standards applicable listing standards.to those committees.
The Board of Directors has adopted a procedure for receiving and addressing communications from all interested parties, including Ciena’s stockholders. Interested parties may send written communications to the entire Board of Directors (or any committee thereof), Ciena’s Ciena Corporation 7035 Ridge Road Hanover, Maryland 21076 Attention: Corporate Please address any communication bye-mail Our General Counsel serves as Corporate Secretary and determines, in his discretion, whether the nature of the communication is such that it should be brought to the attention of the Board of Directors or a committee thereof, the lead independent director,Lead Independent Director, or all of the independent directors serving on the Board, by addressing communications to to:Secretary. CommunicationSecretary should be addressed toir@ciena.com and marked with “Attention: Corporate Secretary” in the “Subject” field. subject line.lead independent directorLead Independent Director, or all of the independent directors. As a general matter, the Corporate Secretary does not forward spam, junk mail, mass mailings, job inquiries, surveys, business solicitations or advertisements, or offensive or inappropriate material.10
The Board of Directors has adopted Principles of Corporate Governance and other corporate governance Proxy Access Our bylaws include a “proxy access” provision by which eligible stockholders may nominate director candidates for inclusion in our proxy statement and proxy card. Proxy access may be used by a stockholder or group of up to 20 stockholders who own at least 3% of our Codes of EthicsCiena has adopted a Code of Business Conduct and Ethics that is applicable to all of its directors, officers and employees. The Code of Business Conduct and Ethics reflects Ciena’s policy of dealing with all persons, including our customers, employees, investors, and suppliers, with honesty and integrity. All new employees are required to complete training on our Code of Business Conduct and Ethics, and we conduct both recurring employee affirmations with respect to our Code of Business Conduct and Ethics and periodic training and communication related to specific topics contained therein.In accordance with the Sarbanes-Oxley Act of 2002, Ciena has also adopted a Code of Ethics for Senior Financial Officers that is specifically applicable to Ciena’s Chief Executive Officer, Chief Financial Officer and Controller. Its purpose is to deter wrongdoing and to promote honest and ethical conduct, and compliance with the law, particularly as it relates to the maintenance of Ciena’s financial records and the preparation of financial statements filed with the SEC.A copy of both Ciena’s Code of Business Conduct and Ethics and its Code of Ethics for Senior Financial Officers can be found on the “Corporate Governance” page of the “Investors” section of our website at www.ciena.com. You may also obtain copies of these documents without charge by writing to: Ciena Corporation, 7035 Ridge Road, Hanover, Maryland 21076, Attention: Corporate Secretary.Principles of Corporate Governance, Bylaws and Other Governance DocumentsOurdocumentspolicies that supplement certain provisions of our bylaws and relate to among other things, the composition, structure, interaction and operation of the Board of Directors. Some of theour key governance featurespolicies and practices are summarized below.❖ Principlesoutstanding common stock continuously for a minimum of Corporate Governance, bylawsthree years to nominate up to the greater of 20% of the Board of Directors or two directors, subject to certain limitations. The Board of Directors believes this provision reflects a balanced approach to proxy access that provides a meaningful proxy access right, mitigates the risk of abuse, and otherprotects the interests of all of our stockholders. The full text of our proxy access bylaw can be found as an exhibit to the Current Report on Form8-K filed by Ciena with the SEC on January 27, 2017. 2019 Proxy Statement 11
| ❖ | Stock Ownership Requirements |
To align the interests of Ciena’s executive officers and members of the Board of Directors with those of our stockholders, and to promote our commitment to sound corporate governance, documents are summarized below.
Position | Stock Ownership Requirement | |
CEO | 5x base salary | |
Executive Chairman | 5x base salary | |
Executive Officers | 2x base salary | |
Non-Employee Directors | 5x cash retainer | |
We also added a requirement that our executive officers andnon-employee directors hold 50% of all shares of Ciena common stock acquired from Ciena equity awards (net of any shares withheld for taxes or payment of exercise price), until they achieve the applicable minimum ownership level.
Each executive officer andnon-employee director is subject to these guidelines, provided he or she has five years to attain the requisite stock ownership from the date such individual first becomes subject to the guidelines. Shares that count toward satisfaction of the stock ownership guidelines include: (i) shares owned outright by such person or his or her immediate family members residing in Director Elections.the same household; (ii) shares held in trust for the benefit of such person or his or her family; (iii) shares held through our Deferred Compensation Plan; and (iv) shares purchased on the open market. Unexercised stock options, whether or not vested, unvested restricted stock units, and unearned and unvested performance stock units or market stock units, do not count toward the satisfaction of the guidelines. The guidelines may be waived, at the Compensation Committee’s discretion, if compliance would create hardship or prevent compliance with a court order.
| ❖ | Majority Vote Standard in Director Elections |
Ciena’s bylaws and Principles of Corporate Governance provide that, in the case of an uncontested election, each director be elected by the vote of a majority of the votes cast by holders of shares present in person or represented by proxy at the Annual Meeting. For this purpose, “a majority of the votes cast” means that the number of votes cast “FOR” a director’s election exceeds the number of votes cast “AGAINST” that director’s election. In the case of a contested election (i.e., an election in which the number of candidates exceeds the number of directors to be elected), however, directors will be elected by plurality vote.
As a condition of their nomination, incumbent directors andeach director nominees areis required to submit to Ciena an irrevocable resignation that becomes effective only if (i) that person fails tothe nominee does not receive a majority vote in(in an election;uncontested election) and (ii) the Board of Directors accepts his or herthe resignation. Should anyIf the director failfails to receive a majority of the requisite votes, cast in an uncontested election, the Governance and Nominations Committee will promptly consider the resignation and recommend to the Board whether to accept or reject it, or whether other action should be taken. No later than 90 days following the date of the certification of the election results, the Board of Directors will disclose its decision by press release and aForm 8-K filed with the SEC. The Board of Directors will provide a full explanation of the process by which the decision was reached and, if applicable, the rationale for rejecting the resignation. If a resignation is accepted by the Board, the Governance and Nominations Committee will recommend to the Board whether to fill the vacancy or to reduce the size of the Board of Directors.
Any director whose resignation is being considered is not permitted to participate in the recommendation of the Governance and Nominations Committee or the decision of the Board as to his or her resignation. If the resignations of a majority of the members of the Governance and Nominations Committee were to become effective as a result of the voting, the remaining independent directors will appoint a special committee among themselves for the purpose of considering the resignations and recommending whether to accept or reject them.
| ❖ | Selection of Board Members; Vacancies |
For any director elected by the Board of Directors to fill a vacancy, Ciena’s bylaws limit the term of office of such person to the period from election until the first annual meeting following election, at which time such person is required to stand for election by the stockholders to serve out the remainder of the term of the class to which such person was elected.
| ❖ | Service on Other Boards of Directors |
The Board of Directors believes that directors should not serve on the boards of more than four other public companies in addition to our Board of Directors, and that the CEO should not serve on more than two other boards of public
12 2019 Proxy Statement
companies in addition to our Board of Directors. In the event that a director wishes to join the board of directors of another public company in excess of this limit, our Board, in its sole discretion, will determine whether service on the additional board of directors is likely to interfere with the performance of the director’s duties to Ciena, taking into account a number of factors. In addition, time constraints and demands of potential director nominees are reviewed and factored into the individual, the naturedecisions of his or her other activities, and such other factors or considerations as our Board deems relevant. In selecting nominees for election as a director, the Governance and Nominations Committee and the Board will take into account the other demands on the time of a candidate and will avoid candidates whose other responsibilities might interfere with effective service on our Board of Directors.
| ❖ | Change in Principal Occupation of Director or Change Affecting Independence |
In some cases when a director changes his or her principal occupation, the change may result in an increased workload, actual or apparent conflicts of interest, or other consequences that may affect his or her ability to continue to serve on Ciena’sthe Board of Directors. As a result, the Board of Directors has determined that when a director substantially changes his or her principal occupation, including by retirement, or there is a change in circumstances that causes an independent director to no longer be considered independent under New York Stock Exchange rules, that director willis required to tender his or her resignation to the Board of Directors. In considering the notice of resignation, the Governance and Nominations Committee will weigh such factors as it deems relevant and recommend to the Board of Directors whether the resignation should be accepted, and the Board will act promptly on the matter, with any acceptance of such resignation to be promptly publicly disclosed.
| ❖ | Term Limits and Mandatory Retirement Age |
The Board of Directors does not believe it should establish a maximum length of service or a mandatory retirement age for directors. The Board believes that the skill set and perspectives of its members should remain sufficiently current and broad in dealing with current and changing business dynamics, and therefore seeks to align the interestsmaintain a balance of Ciena’s executive officers and directors with thosevarying lengths of Ciena’s stockholders,service and to illustrate and promote our commitment to sound corporate governance, we maintain stock ownership guidelines for our executive officers and non-employee directors. These guidelines require such persons to hold shares of Ciena common stock of a value equal toages. While the lesser of a multiple of their annual base salary or annual retainer, as applicable, Board recognizes that term limits and/or a fixed numbermandatory retirement age could assist in this regard, they may have the unintended consequence of shares as follows:
Prohibition Against Pledging Ciena Securities and Hedging Transactions |
In accordance with Ciena’s Insider Trading Policy,
our executive officers and| ❖ | Committee Responsibilities |
The Board of Directors has three standing committees: the Audit Committee, the Compensation Committee and the Governance and Nominations Committee. Each committee meets regularly and has a written charter that can be found on the “Corporate Governance” page of the “Investors” section of our website at
www.ciena.com. At each regularly scheduled Board meeting, the| ❖ | Executive Sessions |
Our independent directors on the Board of Directors and the standing committees thereof meet regularly in executive session without employee-directors or other executive officers present. The lead independent director,Lead Independent Director, or the chairpersonChair of such committee, presides at these meetings.
| ❖ | Outside Advisors |
The Board of Directors and each of its standing committees may retain outside advisors and consultants at its discretion and at Ciena’s expense. Management’s consent to retain outside advisors is not required.
| ❖ | Annual Assessment of Board Effectiveness |
To ensure that our Board of Directors and its committees are performing effectively and in the best interests of Ciena and its stockholders, the Board performs an annual assessment, overseen by the Governance and Nominations Committee, of itself, its committees and each of its members.
2019 Proxy Statement 13
Copies of our Principles of Corporate Governance and bylaws can be found on the “Corporate Governance” page of the “Investors” section of our website at
www.ciena.com.www.ciena.com.
We have adopted a number of practices and policies that highlight Ciena’s commitment to social and environmental responsibility and that seek to promote sustainability in the operation of our Boardbusiness. These practices are designed to position Ciena as a supplier of choice to our customers, an employer of choice to our existing and prospective employees, and a neighbor of choice in our communities around the globe. We are committed to the ethical and environmentally responsible operation of our business and have undertaken a number of initiatives to reduce our environmental impact and to ensure a healthy and safe workplace. We have achieved and hold a number of industry-recognized global certifications related to our systems addressing environmental standards and health and safety standards. We enforce a number of related policies in our workplace, and we expect our suppliers and business partners to adhere to these requirements and to promote these values. Among other things, we work with an independent sustainability partner to conduct maturity assessments of key suppliers representing a significant portion of our supplier expenditures, and we use the findings from these assessments as the basis of identifying areas of future opportunity or development with respect to our practices and those of our supply chain.
We maintain the following applicable policies:
| ❖ | Corporate Social Responsibility Policy |
We maintain a Corporate Social Responsibility Policy that seeks to promote the operation of our business in an ethical and socially responsible way and that reflects our commitment to the corporate social responsibility principles laid out in the Responsible Business Alliance Code of Conduct and the United Nations Global Compact. In fiscal 2018, we issued our first Corporate Social Responsibility (CSR) Report, which is published on our website at www.ciena.com.
| ❖ | Environmental, Health and Safety Policy |
We maintain an Environmental, Health and Safety Policy that seeks to promote the operation of our business in a manner that is environmentally responsible and protective of the health and safety of both our employees and the public.
Copies of these policies and related information can be found on the “Social Responsibility” page of the “About” section of our website at www.ciena.com.
Code of Business Conduct and Ethics
We maintain a Code of Business Conduct and Ethics that sets standards of conduct for all of Ciena’s directors, officers and employees. The Code of Business Conduct and Ethics reflects Ciena’s policy of dealing with all persons, including our customers, employees, investors, and suppliers, with honesty and integrity. All new employees are required to complete training on our Code of Business Conduct and Ethics, and we conduct recurring employee affirmations with respect to our Code of Business Conduct and Ethics and periodic training and communication related to specific topics contained therein.
Code of Ethics for Directors
We maintain a Code of Ethics for Directors, does not havewhich supplements the obligations of directors under the Code of Business Conduct and Ethics and sets additional standards of conduct for our directors. The Code of Ethics for Directors outlines responsibilities of our directors with respect to their fiduciary duties, conflicts of interest, treatment of confidential Ciena information, communications and other compliance matters.
Code of Ethics for Senior Financial Officers
In accordance with the Sarbanes-Oxley Act of 2002, we maintain a formal policy on whether the rolesCode of Ethics for Senior Financial Officers that is specifically applicable to Ciena’s Chief Executive Officer, Chief Financial Officer and Chairman should be separate, Ciena has separately maintained these positions since 2001. Separating the Executive ChairmanController. Its purpose is to deter wrongdoing and Chief Executive Officer roles allows us efficiently to developpromote honest and implement corporate strategy that is consistentethical conduct, and compliance with the Board’s oversight role, while facilitating strong day-to-day executive leadership. law, particularly as it relates to the maintenance of Ciena’s financial records and the preparation of financial statements filed with the SEC.
Each of these documents can be found on the “Corporate Governance” page of the “Investors” section of our website atwww.ciena.com. Copies of these documents may also be obtained without charge by writing to: Ciena Corporation, 7035 Ridge Road, Hanover, Maryland 21076, Attention: Corporate Secretary.
14 2019 Proxy Statement
Lead Independent Director
Mr. Smith currentlyGallagher serves as Chief Executive Officer and Dr. Nettles, who previously served as Chief Executive Officer until Mr. Smith assumed that role in 2001, serves as Executive Chairman.
Separation of Chairman and CEO Roles
Although the Board of Directors does not have a formal policy on separation of the roles of Chief Executive Officer and Chairman, Ciena has kept these positions separate since 2001. Separating the Executive Chairman and Chief Executive Officer roles allows us efficiently to develop and implement corporate strategy that is consistent with the Board’s oversight role, while facilitating strongday-to-day executive leadership. Mr. CashSmith currently serves as Ciena’s lead independent director.
The Board believes that its leadership structure is appropriate for Ciena. Through the role of the lead independent director,Lead Independent Director, the independence of the Board’s committees, and the regular use of executive sessions of the independent directors, the Board is able to maintain independent oversight of our business strategies, annual operating plan and other corporate activities. These features, together with the role and responsibilities of the lead independent directorLead Independent Director described above, work to ensure a full and free discussion of issues that are important to Ciena and its stockholders. At the same time, the Board is able to take advantage of the unique blend of leadership, experience and knowledge of our industry and business that Dr. Nettles brings to the role of Executive Chairman.
The Board of Directors believes that risk management is an important part of establishing, updating and executing Ciena’s business strategy. The Board, as a whole and at the committee level, has oversight responsibility relating to risks that could affect the corporate strategy, business objectives, compliance, operations and the financial condition and performance of the company. The Board focuses its oversight on the most significant risks facing Among other things, the Board annually reviews and considers Ciena’s long-term strategic plan, its annual financial and operating plan, and its enterprise risk management program. The Board and its committees also receive regular reports from members of senior management on areas of material risk to the company, including strategic, operational, financial, legal and regulatory risks. The Board’s leadership structure, with a Board Oversight of Riskthe companyCiena and on its processes to identify, prioritize, assess, manage and mitigate those risks. The Board also receives an annual report from senior management on the status of any material risks as part of Ciena’s enterprise risk management program. While the Board has an oversight role, management is principally tasked with direct responsibility for management and assessment of risks and the implementation of processes and controls to mitigate their effects on the company.lead independent director,Lead Independent Director, separate Executive Chairman and CEO, independent Board committees with strong chairs,Chairs, the active participation of committees in the oversight of risk, and open communication with management, supports the risk oversight function of the Board. 2019 Proxy Statement 15
Each standing committee of the company’s internal audit functionBoard has the following risk oversight responsibilities and its independent registered public accounting firm, as well as the company’s systems of internal controls and disclosure controls and procedures. The Compensation Committee is responsible for overseeing the management of risks relating to the company’s executive compensation and overall compensation and benefit strategies, plans, arrangements, practices and policies. The Governance and Nominations Committee oversees the management
| Audit Committee | Oversee management of financial risks associated with: ❖ accounting matters ❖ liquidity and credit risks ❖ corporate tax positions ❖ insurance coverage ❖ cash investment strategy ❖ financial results Oversee financial and business process systems Oversee management of risks relating to the performance of the company’s internal audit function and its independent registered public accounting firm Oversee whistleblower complaints and internal investigations Oversee the company’s systems of internal controls and disclosure controls and procedures Oversee IT risk management and cybersecurity matters | |||
| Compensation Committee | Oversee management of risks associated with: ❖ executive compensation ❖ overall compensation and benefit strategies ❖ compensation and benefit plans and arrangements ❖ compensation practices and policies ❖ Board of Directors’ compensation | |||
| Governance and Nominations Committee | Oversee management of risks associated with: ❖ corporate governance practices ❖ compliance and ethics program ❖ director independence ❖ Board composition ❖ Board performance ❖ annual assessment of Board effectiveness Review and assess allocation of responsibility for risk oversight among the Board and its standing committees | |||
16 2019 Proxy Statement
The table below details the composition of Ciena’s standing Board committees as of the end of fiscal Other I (2019) Lawton W. Fitt Chairperson, The Progressive Corporation Yes Chair 3 I (2019) Patrick H. Nettles, Ph.D. Executive Chairman, Ciena Corporation No 1 I (2019) Michael J. Rowny Chairman, Rowny Capital Yes ❖ 0 II (2020) Judith M. O’Brien Partner, King & Spalding LLP Yes Chair ❖ 0 II (2020) Joanne B. Olsen Former EVP Global Cloud Services & Support, Oracle Yes ❖ ❖ 1 II (2020) Gary B. Smith CEO, Ciena Corporation No 1 III (2021) Bruce L. Claflin Former CEO, 3Com Corporation Yes ❖ ❖ 1 III (2021) Patrick T. Gallagher Chairman, Harmonic, Inc. Yes ❖ Chair 2 III (2021) T. Michael Nevens Senior Advisor, Permira Advisors, LLC Yes ❖ 1 Fiscal 2018 Meetings Board: 7 9 8 7 Each of our directors attended at least 75% Audit Committee The Audit Committee falls within the definition of “audit committee” under Section 3(a)(58)(A) of the Securities Exchange Act of 1934 Among its responsibilities, the Audit Committee appoints and establishes the compensation for Ciena’s independent registered public accounting firm, approves in advance all engagements with Ciena’s independent registered public accounting firm to perform audit andnon-audit services, reviews and approves the procedures used by Ciena to prepare its periodic reports, reviews and approves Ciena’s critical accounting policies, discusses audit plans and reviews results of the audit engagement with Ciena’s independent registered public accounting firm, obtains and reviews a report of Ciena’s independent registered public accounting firm describing certain matters required by the listing standards of The Audit Committee is also responsible for a variety of other functions, including oversight of Ciena’s financial and business process systems, including completion of the upgrade of Ciena’s corporate enterprise resource planning platform, and oversight of IT security matters. Governance and Nominations Committee The Governance and Nominations Committee reviews, develops and makes recommendations regarding various CommitteesComposition and Meetings of the Board of Directors and MeetingsDuringits Committees2015,2018 and the number of Board of Directorsand committee meetings held ten meetings. The threeduring fiscal 2018. Mr. Smith and Dr. Nettles do not serve on standing committees of the Board of Directors held meetings as follows:the Audit Committee held eight meetings;the Compensation Committee held eight meetings; andthe Governance and Nominations Committee held six meetings.Directors. Class Name Principal Occupation Independent Committee
Memberships
Current
Public
Boards AC CC GNC ofin the aggregate of the total number of meetings of the Board of Directors and the committees on which he or she served during fiscal 2015.2018. Ciena encourages, but does not require, members of the Board of Directors to attend the Annual Meeting, and seveneight of Ciena’s then ten directors attendedparticipated in the virtual Annual Meeting last year.Composition of Standing CommitteesThe table below details the composition of Ciena’s standing Board committees as of fiscal 2015 year-end. Mr. Smith and Dr. Nettles do not serve on committees of the Board of Directors.DirectorAudit CommitteeCompensation CommitteeGovernance and Nominations CommitteeHarvey B. CashXChairpersonBruce L. ClaflinXXLawton W. FittChairpersonPatrick T. GallagherXXT. Michael NevensXJudith M. O’BrienChairpersonXMichael J. RownyX(“Exchange(the “Exchange Act”). The Board of Directors has determined that each member of the Audit Committee meets both the independence criteria established by the SEC underRule 10A-3 under the Exchange Act and qualifies under the independence standards of theThe New York Stock Exchange. The Board of Directors has determined that each member of the Audit Committee is financially literate, as interpreted by the Board in its business judgment. The Board has also determined that each of Ms. Fitt and Mr. Rowny is an “audit committee financial expert” as defined in Item 407(d)(5) ofRegulation S-K of the Exchange Act and an “independent director” as independence for audit committee members is defined in theThe New York Stock Exchange listing standards.theThe New York Stock Exchange, reviews the independence of Ciena’s independent registered public accounting firm, and oversees Ciena’s internal audit function and Ciena’s accounting processes, including the adequacy of its internal controls over financial reporting.reporting and, where it determines to do so, makes recommendations to the Board of Directors with respect to rotation of the lead partner or the independent registered public accounting firm. Ciena’s independent registered public accounting firm and internal audit department report directly to the Audit Committee. The Audit Committee14also reviews and considers any related person transactions in accordance with our Policy on Related Person Transactions and applicable rules of theThe New York Stock Exchange.aspects ofmatters related to the Board of Directors, including its size, composition, standing committees and practices. The Governance and Nominations Committee also reviews and implements corporate governance policies, practices and procedures. The Governance 2019 Proxy Statement 17
and Nominations Committee conducts an annual review of the performance and effectiveness of the Board of Directors, its standing committees, and its individual members. The Governance and Nominations Committee is also responsible for making recommendations to the Board of Directors regarding the compensation, composition and independence of itsnon-employee members. The members of the Governance and Nominations Committee are all independent directors under applicable rules of theThe New York Stock Exchange.
The Governance and Nominations Committee may also consider recommendations for nomination from other sources and interested parties, including Ciena’s officers, directors and stockholders. In considering these recommendations, the Governance and Nominations Committee utilizesapplies the same standards described in “Director Qualifications” above, and considers the current size and composition of the Board, and the needs of the Board and its committees. When appropriate, the Governance and Nominations Committee may retain executive recruitment firms to assist in identifying suitable candidates. Stockholders who wish to recommend potential nominees may address their recommendations in writing to Ciena Corporation, 7035 Ridge Road, Hanover, Maryland 21076, Attention: Corporate Secretary. For a description of the process by which stockholders may nominate directors in accordance with our bylaws, please see “Stockholder Proposals for 20172020 Annual Meeting” below.
Compensation Committee
The Compensation Committee has responsibility, authority and oversight relating to the development of Ciena’s overall compensation strategy and compensation programs. The Compensation Committee establishes our compensation philosophy and policies, and it administersoversees compensation plans for our executive officers andnon-executive employees. Beginning with our fiscal 2018 director compensation program, the Committee also has oversight responsibility for the compensation program for Ciena’snon-employee directors. The Compensation Committee seeks to ensure that our compensation policies and practices promote stockholder interests and support our compensation objectives and philosophy. Ciena’s compensation program for our executive officers focuses on addressing the following principal objectives:
attract and retain talented personnelexecutives by offering competitive compensation packages;
motivate our executive officers to achieve strategic and tactical objectives, including the profitable growth of Ciena’s business;
align executive compensation with stockholder interests;
reward our executive officers for individual, functional and corporate performance; and
promote apay-for-performance culture.
In making compensation decisions, the Compensation Committee also seeks to promote teamwork among and high morale within our executive team.
The Compensation Committee determines the compensation of our executive officers. As part of this determination, the Compensation Committee annually evaluates the performance of our CEO Mr. Smith, and our Executive Chairman Dr. Nettles, and considers evaluations by or recommendations from our CEO regarding theour other executive officers. The Committee also receives information and advice from its compensation consultant, as described below. The Committee reviews and has final authority to approve and make decisions with respect to the compensation of our executive officers. Our executive officers, including our CEO, do not participate in the determination of their own compensation, and with the exception of our CEO, do not play any role in determining or recommending the amount of executive officer compensation. For detailed information regarding the Compensation Committee, its determination of the form and amount of compensation paid to our executive officers, including the “Named Executive Officers,” and Mr. Smith’s role in such determination, pleasedeterminations, see “Compensation Discussion and Analysis” below.
The members of the Compensation Committee qualify as “outside“non-employee directors” within the meaning of Section 162(m) of the Internal Revenue Code, qualify as “non-employee directors” within the meaning of Rule 16b-3 under the Exchange Act and are
Compensation Consultant.
To assist it in carrying out its responsibilities, the Compensation Committee is authorized to retain the services of independent advisors. For purposes of advice and consultation with respect to the compensation of our executive officers during fiscal 2015,2018, the Committee engaged Compensia, Inc., a national compensation consulting firm. Prior to engaging Compensia, the Committee considered and assessed Compensia’s independence. To ensure Compensia’s continued independence and to avoid any actual or apparent conflict of interest, the Committee does not permit Compensia to be engaged to perform any services for Ciena
18 2019 Proxy Statement
beyond those services provided to the Committee; which includes, with respect to compensation of our non-employee directors, the review by the Governance and Nominations Committee of the report requested by the Compensation Committee. The Committee has sole authority to retain or terminate Compensia as its executive compensation consultant and to approve its fees and other terms of engagement. The Committee regularly, but not less than annually, considers the independence of its compensation consultant and determines whether any related conflicts of interest require disclosure.
In establishing executive compensation for fiscal 2015,2018, the Compensation Committee relied upon Compensia to:
assist in the selection of a group of peer companies;
provide information on compensation paid by such peer companies to their executive officers;
analyze compensation survey data to supplement publicly available information on compensation paid by peer companies;
advise on alternative structures or forms of compensation and allocation considerations;
advise on appropriate levels of compensation for the Named Executive Officers (“NEOs”) and the other members of the executive team; and
prepare “tally sheets” showing, for each executive officer, all elements of compensation received in previous fiscal years, equity grant detail, the projected value of vested and unvested equity awards outstanding, and a competitivecomparative analysis of compensation relative to the peer group.
In addition to its advisory work regarding executive compensation during fiscal 2015,2018, Compensia was also engaged by the Compensation Committee to provide assistance in evaluating the compensation of thenon-employee members of our Board of Directors directors as set forth below, and to participate in orand provide assistance with respect to the Committee’s annual compensation risk assessment, to review Ciena’s methodology for calculating its initial CEO pay ratio measure, and itsto review of the Compensation“Compensation Discussion and AnalysisAnalysis” included in thesethis proxy materials.
Messrs.Compensation Committee Interlocks and Insider Participation Cash, Claflin and Gallagher and Ms.Mses. O’Brien and Olsen, who comprised the Compensation Committee as of the end of fiscal 2015,2018, are independent directors and were not, at any time during fiscal 2015,2018, or at any other time, officers or employees of Ciena. During fiscal 2015,2018, no member of the Compensation Committee was an executive officer of another entity on whose compensation committee or board of directors an executive officer of Ciena served. 2019 Proxy Statement 19
Our director compensation program is designed both to attract and to fairly compensate highly qualified,non-employee directors to represent our stockholders on the Board of Directors and to act in the stockholders’ best interests. The Our Board of Directors includes two Ciena executive officers: Dr. Nettles, who serves as our Executive Chairman of the Board, and Mr. Smith, who serves as our Chief Executive Officer. Dr. Nettles does not receive cash compensation for his service as a director, and Mr. Smith does not receive any compensation for his service as a director. Information regarding equity compensation to Dr. Nettles during fiscal DIRECTOR COMPENSATIONGovernance and Nominations Committee, which consists solely of independent directors, has primary responsibility for reviewing and recommending any changes to our director compensation program with compensation changes approved or ratifiedfor fiscal 2018 was recommended by the fullCompensation Committee and approved by our Board of Directors. Our executive officers do not play any role in determining or recommending the amount ofnon-employee director compensation, except that Mr. Smith and Dr. Nettles vote on the recommendations of the Governance and Nominations committeeCompensation Committee in their capacities as members of the Board of Directors.1620152018 can be found in the tabular disclosure below. Information regarding the determination of Mr. Smith’s compensation can be found in the “Compensation Discussion and Analysis” and “Executive Compensation Tables” below.
For the purpose of determining Cash Our cash compensation program fornon-employee directors for fiscal Annual Retainer —Non-Employee Director $60,000 Additional Annual Retainer — Lead Independent Director $ Additional Annual Retainer — Audit Committee $35,000 $15,000 (other Additional Annual Retainer — Compensation Committee $25,000 $10,000 (other Additional Annual Retainer — Governance and Nominations Committee $15,000 $6,000 (other Under this program, ournon-employee directors are not entitled to receive meeting attendance fees unless the Board, or any standing Board committee, is required to hold an unusually high number of meetings. In the event that the Board or a standing Board committee holds more than ten meetings in a fiscal year, eachnon-employee director (as applicable) will be entitled to receive an additional $1,500 per meeting for the The retainer fees set forth above are paid in quarterly installments. Meeting attendance fees, when applicable, are generally paid promptly following the end of the fiscal year. 20 Fiscal 20152018 Board Compensation Boardnon-employee director compensation for fiscal 2015,2018, the Compensation Committee engaged Compensia to assist in evaluating the competitiveness of our director compensation program. This evaluation was then reviewed by our Governance and Nominations Committee. The Governance and NominationsCompensation Committee considered an overview of the corporate governance environment as well as recent trends and developments relating to director compensation. The Governance and NominationsCompensation Committee also specifically considered both the amounts payable under and the various components of our director compensation program, as well as the aggregate director compensation cost, in comparison to the boards of directors of the same group of peer companies that the Compensation Committee used in determining executive officer compensation. After considering those factors and based on the factors above and the recommendationsrecommendation of the Governance and NominationsCompensation Committee, ourthe Board of Directors approved adid not make any changes to director compensation program for fiscal 2015 that:increased the annual cash retainer payable to non-employee directors from $50,000 to $60,000;made no other changes to the cash compensation payable to directors, including for directors serving upon committees or as chairpersons thereof; andmade no changes to the initial equity awards granted to new directors upon election or the annual equity awards granted to existing directors.2018.Compensation.20152018 was as follows: Cash Compensation Amount ($)Cash Compensation 10,000 20,000 (Chairperson)(Chair)members)directors) (Chairperson)(Chair)members)directors) (Chairperson)(Chair)members)directors)Chairperson,Chair, or an additional $1,000 per meeting for other directors.members. In the event that the Board, or a standing Board committee, creates a special committee or subcommittee that holds more than three meetings in a fiscal year, eachnon-employee director serving on that committee or subcommittee will be entitled to receive an additional $1,000 per meeting. Directors are also reimbursed for reasonableout-of-pocket expenses incurred in connection with attendance at Board and committee meetings.We pay the 2019 Proxy Statement
Equity Compensation.
Our equity compensation program fornon-employee directors and Dr. Nettles for fiscal 20152018 was as follows:
| Equity Compensation | Target Delivered Value ($) | |
Initial RSU Award — Upon Director Election or Appointment | $ | |
Annual RSU Award —Non-Employee Directors and Executive Chairman | $ | |
In order to control for possible volatility in our stock price on any one particular trading day, the actual number of shares underlying restricted stock unit (“RSU”) awards granted in order to achieve the applicable “target delivered value” in the table abovedirectors is determined based on the average closing price of Ciena’s common stock over the30-day period immediately prior to the date of the grant. Initial equity awards are made in connection with initial election or appointment to the Board of Directors, with the target delivered value prorated for the fiscal year based on the date of election or appointment. Initial equity awards vest in equal annual installments over a three-year period.on or about theone-year anniversary of the grant date. Annual equity awards are made on the date of each Annual Meeting of stockholdersStockholders and vest in equal annual installments over a three-year period.on or about theone-year anniversary of the grant date. Vesting of the RSU awards is subject to acceleration upon the director’s death, disability, retirement, or upon or in connection with a change in control of Ciena. Delivery of the shares upon vesting is subject to any applicable instruction provided by the director under the Directors’ Restricted Stock DeferralDeferred Compensation Plan described below.
Director Compensation Limits
Our 2017 Omnibus Incentive Plan (“2017 Plan” below) imposes a $500,000 limit on the compensation that can be awarded to understand certain proposed changesanon-employee director in any given fiscal year, including the sum of (i) cash compensation and (ii) the grant date fair value of equity compensation under the 2017 Plan. This limitation, however, would not apply to the 2008 Plan approved byextent anon-employee director has been or becomes an employee of Ciena during such fiscal year. In addition, the Board and recommendedretains discretion to stockholdersprovide further exceptions for approval, including establishing annual limitsone or more individualnon-employee directors in extraordinary circumstances, such as service on cash and equity compensation for non-employee directors and shorteninga special transaction or litigation committee of the minimum vesting period from three years to one year for awardsBoard, provided that the director that is the subject of restricted stock and restricted stock units to non-employee directors and Executive or Non-Executive Chairs that vest solely by the passage of time.
The following table and the accompanying footnotes describe the “total compensation” Director Compensation Tablereceivedearned by ournon-employee directors and by Dr. Nettles during fiscal 2015:2018:Director Compensation Table Fees Earned orPaid in Cash Stock Awards All OtherCompensation Total Name ($)(1) ($)(2) ($)(3) ($) Patrick H. Nettles, Ph.D. — $ 168,172 $ 315,884 $ 484,056 Harvey B. Cash $ 95,000 $ 168,172 — $ 263,172 Bruce L. Claflin $ 85,000 $ 168,172 — $ 253,172 Lawton W. Fitt $ 95,000 $ 168,172 — $ 263,172 Patrick T. Gallagher $ 76,000 $ 168,172 — $ 244,172 T. Michael Nevens $ 75,000 $ 168,172 — $ 243,172 Judith M. O’Brien $ 91,000 $ 168,172 — $ 259,172 Michael J. Rowny $ 75,000 $ 168,172 — $ 243,172
Director Compensation Table
| Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | All Other Compensation ($)(3) | Total ($) | ||||||||||||||||
Patrick H. Nettles, Ph.D. |
| — | $ 190,879 |
| $ 163,448 | $ 354,327 | ||||||||||||||
Harvey B. Cash (4) |
| $ 23,501 | $ 190,879 |
| — | $ 214,380 | ||||||||||||||
Bruce L. Claflin |
| $ 85,000 | $ 190,879 |
| — | $ 275,879 | ||||||||||||||
William D. Fathers (5) |
| $ 38,000 | $ 190,879 |
| — | $ 228,879 | ||||||||||||||
Lawton W. Fitt |
| $ 95,000 | $ 190,879 |
| — | $ 285,879 | ||||||||||||||
Patrick T. Gallagher |
| $ 105,500 | $ 190,879 |
| — | $ 296,379 | ||||||||||||||
T. Michael Nevens |
| $ 75,000 | $ 190,879 |
| — | $ 265,879 | ||||||||||||||
Judith M. O’Brien |
| $ 91,000 | $ 190,879 |
| — | $ 281,879 | ||||||||||||||
Joanne B. Olsen |
| $ 19,000 | $ 97,521 |
| — | $ 116,521 | ||||||||||||||
Michael J. Rowny |
| $ 75,000 | $ 190,879 |
| — | $ 265,879 | ||||||||||||||
| (1) | Reflects the aggregate dollar amount of all cash compensation earned for service as a director, including the retainers and meeting attendance fees described in “Cash Compensation” above. |
| (2) | The amounts set forth in the “Stock Awards” column represent the aggregate grant date fair value of RSU awards granted during fiscal |
2019 Proxy Statement 21
granted under the |
| (3) | Non-employee directors do not receive any perquisites or other personal benefits or property as part of their compensation. Dr. Nettles does not receive cash compensation for his service as a director; the amount reported as “All Other Compensation” for Dr. Nettles reflects (a) his |
| (4) | Mr. Cash passed away on |
| (5) | Mr. Fathers resigned from the Board of Directors on June 11, 2018. |
The following table sets forth, on an aggregate basis, information related to the outstanding Outstanding Equity Awards at FiscalYear-End Aggregate Number of Unvested Shares or Units (#) Patrick H. Nettles, Ph.D. 10,775 Harvey B. Cash (1) — Bruce L. Claflin 10,775 William D. Fathers (2) — Lawton W. Fitt 10,775 Patrick T. Gallagher 10,775 T. Michael Nevens 10,775 Judith M. O’Brien 10,775 Joanne B. Olsen 3,091 Michael J. Rowny 10,775 Mr. Cash passed away on April 10, 2018. Mr. Fathers resigned from the Board of Directors on June 11, 2018. Deferral of Director Compensation We maintain the Generally, deferral elections may only be made for awards to be granted in a subsequent calendar year. Directors can elect the amount deferred, the deferral period, and the form of distribution of their 22 Outstanding Equity Awards for Directors at FiscalYear-Endunexercised stock options and unvested RSU awards held by each of thenon-employee directors and by Dr. Nettles as of the end of fiscal 2015.2018. We have not granted stock options to ournon-employee directors since fiscal 2006. A significant portion Stock Awards Name (1) (2) stock options held byCiena Corporation Deferred Compensation Plan, which allows our U.S.-based directors and reported in the table below were “out-of-the-money,” based upon the $24.14 closing market price per share of our common stock(as well as of the last trading day of fiscal 2015.Outstanding Equity Awards at Fiscal Year-End Unexercised Option Awards Stock Awards AggregateNumber ofSharesUnderlyingExercisableOptions AggregateNumber ofSharesUnderlyingUnexercisableOptions AggregateNumber ofUnvestedSharesor UnitsName (#) (#) (#) Patrick H. Nettles, Ph.D. 3,214 — 16,617 Harvey B. Cash 3,214 — 16,617 Bruce L. Claflin 6,428 — 16,617 Lawton W. Fitt 3,214 — 16,617 Patrick T. Gallagher — — 16,617 T. Michael Nevens — — 14,317 Judith M. O’Brien 3,214 — 16,617 Michael J. Rowny 3,214 — 16,617 Directors’ Restricted Stock Deferral PlanThe Directors’ Restricted Stock Deferral Plan allows non-employee directorscertain U.S.-based senior management employees) to defer receiptelements of all or a portiontheir annual compensation. Directors may defer up to 100% of the shares of our common stock underlying RSU awards granted in connection with their service on the Board of Directors. annual cash retainer and annual equity compensation.shares.compensation. If a director elects to defer any portion of an RSU award, upon the vesting of that award, we credit a stock account with the amount deferred. There are no other investment options under the plan and allAll such accounts are distributed in shares of ourCiena common stock. Distributions may be made in a lump sum or installments, as designated by the participating director, subject to early distribution of vested awards in a lump sum in the event of the participant’s death or termination of service, a change in control of Ciena or termination of the plan. 2019 Proxy Statement
Ratification of AMENDMENT TO CIENA’S 2008 OMNIBUS INCENTIVE PLAN AND RE-APPROVAL OF THE MATERIAL TERMS OF PERFORMANCE BASED COMPENSATION UNDER THE 2008 OMNIBUS INCENTIVE PLANOverviewWe are requesting that our stockholders vote in favorthe proposed amendment to our 2008 Omnibus Incentive Plan, which we sometimes refer to in this proposal as the “2008 Plan,” and to re-approve the material termsAppointment of performance-based compensation thereunder. Our 2008 Plan is our only equity incentive compensation plan under which we are granting equity incentive awards, such as stock awards, to directors, officers and employees. As of January 1, 2016, 4,045,388 shares remained available for issuance under the 2008 Plan.2008 Plan AmendmentOn January 28, 2016, upon recommendation of the Compensation Committee, the Board of Directors approved an amendment to the 2008 Plan to reflect changes intended to better align the 2008 Plan with market practices for director compensation and to incorporate evolving governance standards. The proposed amendment (i) adds a comprehensive “clawback” provision to the 2008 Plan, (ii) incorporates a $500,000 maximum limit on the sum of cash compensation and equity compensation (based on grant date fair value) that a non-employee director may receive in a fiscal year, subject to limited exceptions in extraordinary circumstances, and (iii) reduces the minimum vesting period from three years to one year for awards of restricted stock and restricted stock units to non-employee directors and Executive or Non-Executive Chairs that vest solely by the passage of time. The Board’s approval of the amendment was made subject to stockholder approval at the Annual Meeting. A copy of the proposed amendment of the 2008 Plan is attached asIndependent Registered Public Accounting Firm Annex A to this proxy statement.The proposed amendment of the 2008 Plan would amend the 2008 Plan as follows:Clawback Provision. The proposed amendment of the 2008 Plan would add a more comprehensive clawback provision to the 2008 Plan that provides that any award granted pursuant to the 2008 Plan will be subject to mandatory repayment by the grantee to Ciena (i) to the extent set forth in the 2008 Plan or an award agreement or (ii) to the extent the grantee is, or in the future becomes, subject to (A) any Ciena or affiliate “clawback” or recoupment policy that is adopted by Ciena, including to comply with the requirements of any applicable laws, rules or regulations, or (B) any applicable laws that impose mandatory recoupment, under circumstances set forth in such applicable laws.Non-Employee Director Compensation Limit. The proposed amendment would impose a $500,000 limit on the compensation that can be awarded to a non-employee director in any given fiscal year, including the sum of (i) cash compensation and (ii) the grant date fair value of equity compensation under the 2008 Plan. This limitation, however, would not apply to the extent a non-employee director has been or becomes an employee of Ciena during such fiscal year. In addition, the Board retains discretion to provide further exceptions for one or more individual non-employee directors in extraordinary circumstances, such as service on a special transaction or litigation committee of the Board, provided that the director that is the subject of such exception may not participate in any decision with respect thereto.Minimum Vesting Provision for Awards to Non-Employee Directors and Executive or Non-Executive Chairs. The proposed amendment of the 2008 Plan would shorten the minimum vesting period from three years to one year for awards of restricted stock and restricted stock units to non-employee directors and Executive or Non-Executive Chairs that vest solely by the passage of time.Why You Should Vote for the 2008 Plan AmendmentWe believe that the 2008 Plan is important to our continued growth and success. The purpose of the 2008 Plan is to attract, motivate and retain highly qualified officers, directors, key employees and other key individuals. We believe that providing these individuals with an opportunity to acquire a direct proprietary interest in the operations and future success of20Ciena will motivate them to serve Ciena and to expend maximum effort to improve our business and the results of our operations. We believe that equity awards under the 2008 Plan are a valuable incentive to participants and benefit stockholders by aligning more closely the interests of participants in the 2008 Plan with those of our stockholders.All of the changes included in the proposed amendment of the 2008 Plan are designed to align with evolving governance and compensation practices. Specifically, we ask stockholders to vote for the proposed amendment to the 2008 Plan for the following reasons:The proposed amendment gives us an additional mechanism to “claw back” equity compensation from grantees in certain circumstances. As described in these proxy materials, we maintain a compensation recoupment policy that applies to our equity incentive plan awards, cash incentive plan awards, sales incentive plan compensation and severance benefit plan payments.The policy generally provides for the recoupment of certain benefits in the event that Ciena is required to prepare an accounting restatement due to material noncompliance, as a result of misconduct, with any financial reporting requirement under applicable securities laws. The proposed amendment of the 2008 Plan would add a provision that gives us the ability to recoup equity awards from grantees if and to the extent required by applicable law or any “clawback” policy that we adopt in the future. For example, we intend to revise our “clawback” policy as needed to comply with the additional requirements of Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) regarding the mandatory recoupment of incentive compensation after the SEC issues final regulations implementing those requirements. Pursuant to the proposed amendment, any award granted under the 2008 Plan will be subject to mandatory repayment by the grantee if and to the extent required by our “clawback” policy, as such policy may be revised in the future, including to comply with the final rules issued by the SEC under Section 954 of the Dodd-Frank Act.We believe that it is important to disclose to our stockholders, and for our stockholders to approve, a maximum annual limit on future awards that we may grant to our non-employee directors. We selected $500,000 as the maximum value that may be awarded to our non-employee directors under the 2008 Plan per fiscal year because we believe it places a meaningful limit on awards to our non-employee directors. While our actual director compensation in recent years has been considerably lower than this proposed limit, we believe that setting a limitation at this level provides us with a reasonable degree of flexibility for the remainder of the plan term,or extensions thereof, to make adjustments that we may in the future deem appropriate or necessary for our non-employee director compensation program to remain competitive in the market.Reducing the minimum vesting period for equity awards to non-employee directors and Executive or Non-Executive Chairs gives us flexibility to grant equity awards that better align with market practices for director compensation and enhances our ability to attract and to fairly compensate highly qualified, independent directors. The 2008 Plan provides that restricted stock and restricted stock units subject to time-based vesting conditions may not vest in full in less than three years from the date of grant. Only a limited number of shares, equal to five percent (5%) of the shares authorized under the 2008 Plan, may be granted with (or subsequently modified to contain) terms that do not meet this minimum vesting period. As described in these proxy materials, under our director compensation program, initial equity awards and annual equity awards granted to our non-employee directors and Executive Chairman vest in equal annual installments over a three-year period. The proposed amendment of the 2008 Plan gives us the flexibility to grant equity awards to non-employee directors and Executive or Non-Executive Chairs that have a shorter vesting period. Specifically, under the proposed amendment, we will have the ability to grant equity awards to non-employee directors and Executive or Non-Executive Chairs that vest in full one year from the date of grant, without the shares subject to such awards counting toward the shares that are exempt from the minimum vesting period requirement. We believe that having the flexibility to grant equity awards to non-employee directors and Executive or Non-Executive Chairs that vest in full one year from the date of grant better aligns our plan with market practices for director compensation and enables us to offer a compensation program that is more competitive in the market. We believe that this amendment to the 2008 Plan will enhance our ability to attract and to fairly compensate highly qualified, independent directors to represent stockholders on the Board and to act in the stockholders’ best interests.2008 Plan Design Highlights Ciena’s Commitment to Compensation Best Practices. The 2008 Plan includes a number of important provisions, summarized below, that are designed to protect our stockholders’ interests and that reflect Ciena’s commitment to best practices and effective management of equity compensation:21Plan Limits and Additional Shares. The 2008 Plan authorizes a fixed number of shares and requires stockholder approval to increase the maximum number of securities that may be issued thereunder. The 2008 Plan does not contain an evergreen provision or other feature which periodically adds new shares for grant thereunder. The 2008 Plan contains limitations on the maximum number of shares that may be awarded to, and the maximum amount that may be earned by, any individual under the 2008 Plan per 12-month period. The proposed amendment to the 2008 Plan would add a limitation on the sum of cash compensation and grant date fair value of equity compensation that may be awarded to a non-employee director per fiscal year, as described above.Application of Fungible Share Ratio for Counting Grant of Full Value Awards. Under the 2008 Plan, every share underlying RSUs and PSUs is subject to a fungible share ratio that reduces the number of shares remaining available for issuance under the plan by a factor greater than one. The current fungible share ratio is 1.31 shares for each full value share awarded.Reasonable Share Counting Provisions. In general, when awards granted under the 2008 Plan expire or are canceled without having been fully exercised, the shares reserved for those awards will be returned to the share reserve and will be available for future awards. However, shares of common stock that are delivered to the grantee or withheld by Ciena as payment of the exercise price in connection with the exercise of a stock option or payment of the tax withholding obligation in connection with any award, are not returned to the share reserve.Minimum Vesting Periods on Full Value Awards. The 2008 Plan provides that restricted stock and stock units subject to time-based vesting conditions may not vest in full in less than three years from the date of grant. The proposed amendment to the 2008 Plan would reduce the foregoing minimum vesting period from three years to one year for awards of such restricted stock units to non-employee directors and Executive or Non-Executive Chairs. Restricted stock and restricted stock units subject to performance-based vesting conditions may not vest in full in less than one year from the date of grant. These minimum vesting periods are subject to exceptions where vesting has occurred due to (i) a participant’s death, disability or retirement, or (ii) a change in control of Ciena. Only a limited number of shares, equal to five percent (5%) of the shares authorized under the 2008 Plan, may be granted with (or subsequently modified to contain) terms that do not meet the minimum vesting period restrictions above.No Discount Stock Options or Stock Appreciation Rights (SARs). All stock options and stock appreciation rights will have an exercise price equal to or greater than the fair market value of our common stock on the date the stock option or stock appreciation right is granted. To date, we have not granted any stock appreciation rights under the 2008 Plan.No Repricing. Under the 2008 Plan, repricing of stock options and SARs (including reduction in the exercise price of stock options or replacement of an award with cash or another award type) is prohibited without stockholder approval.Change in Control Definition and Recoupment Mechanism. Our 2008 Plan has a definition of change in control (referred to as a “corporate transaction” in the 2008 Plan) that we believe is considered to be reasonable by ISS. The 2008 Plan also includes a mechanism that allows Ciena to recoup or “claw back” certain equity compensation in situations requiring forfeiture under the Sarbanes-Oxley Act of 2002 and circumstances where the grantee engaged in certain misconduct. The proposed amendment to the 2008 Plan would add an additional mechanism to the 2008 Plan that would allow Ciena to recoup or “claw back” certain equity compensation, as described above.Stockholder Approval Required for Certain Amendments. Amendments that will materially increase the benefits under the 2008 Plan (including changing the vesting restrictions described above), or that will materially increase the aggregate number of shares that may be issued under the plan, are prohibited without stockholder approval.Section 162(m) Eligibility. Under the 2008 Plan, the Compensation Committee maintains the flexibility to approve equity and cash awards eligible for treatment as performance-based compensation under Section 162(m) of the Internal Revenue Code.22Why You Should Vote to Re-approve the Material Terms of Performance-based Compensation under the 2008 PlanWe are requesting that our stockholders vote to re-approve the material terms of performance-based compensation under the 2008 Plan for purposes of Section 162(m) of the Internal Revenue Code. The purpose of asking stockholders to re-approve the material terms relating to performance-based compensation under the 2008 Plan is to enable us to continue to grant incentive awards under the 2008 Plan that are structured in a manner intended to qualify as tax-deductible performance-based compensation under Section 162(m) of the Internal Revenue Code.Section 162(m) of the Internal Revenue Code limits to $1 million the deductions we can take in determining our federal income tax for compensation paid to our CEO, and, pursuant to IRS guidance, the three other most highly compensated executive officers of Ciena (other than the chief financial officer). There is an exception to this limitation for compensation that is “performance-based” as defined in the Internal Revenue Code and applicable regulations. For compensation to constitute qualified performance-based compensation under Section 162(m) of the Internal Revenue Code, in addition to certain other requirements, as described in more detail below, stockholders must approve the material terms under which the performance-based compensation will be paid (including the performance goals). For purposes of Section 162(m) of the Internal Revenue Code, the material terms of performance-based compensation include (i) the employees eligible to receive compensation under the 2008 Plan, (ii) a description of the business criteria on which the performance goals are based and (iii) the maximum amount of compensation that can be paid to an employee as performance-based compensation during a specified time period. Each of these aspects of the 2008 Plan is discussed below and approval of this proposal will constitute approval of each of these aspects of the 2008 Plan for purposes of Section 162(m) of the Internal Revenue Code. For the avoidance of doubt, approval of this Proposal No. 2 will not in any way impact or increase the number of shares available for awards under the 2008 Plan.Equity Awards Outstanding and AvailableThe table below includes information as of January 1, 2016 with respect to our (i) equity incentive compensation awards outstanding, and (ii) shares remaining available for grant under our 2008 Plan:Equity Awards Outstanding and Available Summary Stock options outstanding (1) 2,159,700 RSUs and PSUs outstanding 5,565,021 Shares remaining available for grant under 2008 Plan (2) 4,045,388 Weighted average exercise price of outstanding options $ 24.61 Weighted average exercise price of exercisable options $ 24.32 Weighted average remaining term of outstanding options 3.69 years
PwC has audited our consolidated financial statements annually since Ciena’s incorporation in 1992. A representative of PwC is expected to attend this year’s Annual Meeting. He or she will have the opportunity to make a statement, if desired, and will be available to respond to appropriate questions. In making its recommendation to the Board of Directors to select PwC as
Our bylaws do not require that stockholders ratify the appointment of our independent registered public accounting firm. We are seeking ratification because we believe it is a matter of good corporate governance. In the event that stockholders fail to ratify the appointment, the Audit Committee will reconsider whether to retain PwC, but may ultimately determine to retain PwC as our independent registered public accounting firm. Even if the appointment is ratified, the Audit Committee, in its sole discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that it is advisable to do so.
Proposal No. 2 — Recommendation of the Board of Directors |
The Board of Directors recommends that you vote “FOR” the ratification of the appointment of PwC as our independent registered public accounting firm for fiscal 2019 |
2019 Proxy Statement 23
The following table shows the fees that PwC billed to Ciena for professional services rendered for fiscal years Fiscal 2017 Fiscal 2018 Audit Fees $ 3,696,825 $ 3,905,000 Audit-Related Fees — 627,425 Tax Fees 14,540 108,560 All Other Fees — — Total Fees $ 3,711,365 $ 4,640,985 Audit Fees. Audit-Related Fees. Tax Fees. All Other Fees. Pre-Approval of The Audit Committeepre-approves all services provided by our independent registered public accounting firm, including audit services (such as statutory audit engagements as required under local law of foreign jurisdictions) andnon-audit services. For audit services with respect to Ciena Corporation, each year our independent registered public accounting firm provides the Audit Committee with an engagement letter outlining the scope of the audit services proposed to be performed during the year, which must be accepted by the Audit Committee before the audit commences. Our independent registered public accounting firm also submits an audit services fee proposal, which must be approved by the Audit Committee before the audit commences. Each year, management also submits to the Audit Committee certainnon-audit services for which it recommends the independent registered public accounting firm be engaged to provide, and an estimate of the fees to be paid for each. Management and the independent registered public accounting firm must each confirm to the Audit Committee that the performance of thenon-audit services on the list would not compromise the independence of our registered public accounting firm and would be permissible under applicable legal requirements. The Audit Committee must approve both the list ofnon-audit services and the budget for each such service before commencement of the work. Our management and our independent registered public accounting firm report to the Audit Committee at each of its regular meetings as to thenon-audit services actually provided by the independent registered public accounting firm and the approximate fees incurred by Ciena for those services. To ensure prompt handling of unexpected matters, the Audit Committee has authorized its In compliance with the Audit Committee’s internal policy and auditor independence rules of the SEC, all audit and permissiblenon-audit services provided by PwC to Ciena for the fiscal years 24 RELATIONSHIP WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM20142017 and 2015. Fiscal Fiscal Fee Category 2014 2015 Audit Fees $ 3,858,814 $ 4,183,000 Audit-Related Fees $ 85,500 $ 200,295 Tax Fees $ — $ — All Other Fees $ 26,240 $ 601,865 Total Fees $ 3,970,554 $ 4,985,160 2018. Fee Category Fiscal 2014 and 2015 auditAudit fees reflect PwC’s integrated audits of financial statements for Ciena Corporation and separate audits of the financial statements of its Canadian subsidiary.Corporation.Fiscal 2014The audit-related fees in fiscal 2018 reflect auditor services relatingfees related to consultations as to the accounting treatment for certain transactions, including our term loan facility and amended and restated asset-backed loan facility. Fiscal 2015 audit-related fees reflect auditor services in connection with our acquisition of Cyan, Inc.DonRiver Holdings, LLC on October 1, 2018 and services related toour compliance with the new facilities leases in Ottawa, Canada.Accounting Standards Codification 606 - Revenue from Contracts with Customers.There were noFees for fiscal 2014 or fiscal 2015 tax fees.2018 include fees related to our compliance with the U.S. Tax Cuts and Job Act.Fiscal 2014 andThere were no other fees in fiscal 2015 fees relate to advisory services in support2017 or fiscal 2018.management’s strategy and assessment of (a) requirements and capabilities with respect to a system re-engineering project relating to Ciena’s enterprise resource planning platform, and (b) sales and operations planning procedures.Services30Pre-Approval of ServicesChairpersonChair to amend or modify the list of approved permissiblenon-audit services and fees. If the ChairpersonChair exercises this delegation of authority, she reports the action taken to the Audit Committee at its next regular meeting.20142017 and 20152018 werepre-approved by the Audit Committee. 2019 Proxy Statement
The information contained in this report shall not be deemed to be “soliciting material” or “filed” or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that Ciena specifically incorporates it by reference into a document filed under the Securities Act of 1933 or the Exchange Act. The Audit Committee During fiscal In this context, the Audit Committee hereby reports as follows: 1. The Audit Committee has reviewed and discussed Ciena’s audited financial statements for fiscal 2. The Audit Committee has discussed with 3. The Audit Committee has received from PwC the written disclosures and the letter 4. Based on Submitted by the members of the Audit Committee: Lawton W. Fitt Bruce L. Claflin T. Michael Nevens Michael J. RownyAUDIT COMMITTEE REPORToverseesis composed entirely ofnon-management directors. The members of the Audit Committee meet the independence and financial literacy requirements of the NYSE and additional, heightened independence criteria applicable to members of the Audit Committee under SEC and NYSE rules. The Audit Committee assists the Board in fulfilling its oversight responsibilities, including by assessing and monitoring the quality and integrity of Ciena’s accounting systems and practices, financial information and financial reporting practices, potential financial, legal and regulatory exposures, systems of internal controls, internal audit function and the independent audit process. Ciena’s management is responsible for Ciena’s financial reporting process on behalf of the Board of Directors,statements, and management has the primary responsibilityits independent registered public accounting firm is responsible for planning and conducting an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Audit Committee operates under a written charter that describes the scope of its responsibilities, and which is available on the reporting process, including“Corporate Governance” page of the system of internal controls.“Investors” section at www.ciena.com.2015,2018, the Audit Committee metdiscussed with PricewaterhouseCoopers LLP (“PwC”), Ciena’s independent registered public accounting firm,PricewaterhouseCoopers LLP, at times the overall scope and plans for the audit. The Audit Committee met regularly with PwC, with and, at times, without management present, to discuss the results of itsPwC’s examinations, evaluations of Ciena’s internal controls over financial reporting and the overall quality of Ciena’s financial reporting practices. The Audit Committee also met with Ciena’s management periodically during fiscal 20152018 to consider the adequacy of Ciena’s internal controls over financial reporting and discussed these matters with PricewaterhouseCoopers LLP and Ciena senior management, finance and internal audit personnel. The Committee also discussed Ciena’s disclosure controls and procedures with senior management and PricewaterhouseCoopers LLP.procedures.20152018 with management and with PricewaterhouseCoopers LLP.PwC.PricewaterhouseCoopers LLPPwC the matters required to be discussed by Auditing Standards No. 16, as amended (AICPA, Professional Standards, Vol. 1. AU section 380), asunder the rules adopted by the Public Company Accounting Oversight Board (“PCAOB”) in Rule 3200T.. from PricewaterhouseCoopers LLP required by applicable requirements of the PCAOB regarding PricewaterhouseCoopers LLP’sPwC’s communications with the audit committeeAudit Committee concerning independence, and has discussed with PricewaterhouseCoopers LLPPwC its independence.the Audit Committee’s review of the audited financial statements and theits review and discussions described in this report, the Audit Committee recommended to the Board of31Directors that the audited financial statements for fiscal 20152018 be included in Ciena’s Annual Report onForm 10-K for fiscal 20152018, for filing with the SEC.(Chairperson)(Chair) 2019 Proxy Statement 25
The following table sets forth, as of OWNERSHIP OF SECURITIESJanuary 15, 2016,February 1, 2019, the beneficial ownership of Ciena’s common stock for the following persons:
each stockholder (including any group as such term is used in Section 13(d)(3) of the Exchange Act) known by us to beneficially own more than 5% of our common stock;
our Chief Executive Officer and theeach other Named Executive OfficersOfficer (as that term is defined in the “Executive Compensation Tables” below);
each of our directors and director nominees; and
all of our directors and executive officers as a group.
Certain information in the table concerning beneficial owners other than our directors and executive officers is based on information contained in filings made by such beneficial owners with the SEC.
Under SEC rules, beneficial ownership of a class of capital stock includes any shares of such class as to which a person, directly or indirectly, has or shares voting power or investment power and also any shares as to which a person has the right to acquire such voting or investment power within 60 days through the exercise or conversion of any stock option, stock award, or other similar right. Beneficial ownership reported by certain stockholders of greater than 5% of our common stock also includes shares underlying outstanding convertible notes issued by Ciena as set forth in the footnoted details. If two or more persons share voting power or investment power with respect to specific securities, each such person is deemed to be the beneficial owner of such securities. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of such acquisition rights. As a result, the percentage of outstanding shares held by any person in the table below does not necessarily reflect the person’s actual voting power. As of January 15, 2016,February 1, 2019, there were 137,383,262156,336,210 shares of Ciena common stock outstanding.
| Number of Shares Owned (1) | Right to Acquire (2) | Beneficial Ownership Total (3) | Percent of Outstanding Shares (%) | ||||||||
| Name of Beneficial Owner | |||||||||||
| More than 5% Stockholders | |||||||||||
| Loomis, Sayles & Company, L.P. (4) | 12,430,336 | — | 12,430,336 | 9.0 | % | ||||||
| BlackRock, Inc. (5) | 8,945,792 | — | 8,945,792 | 6.5 | % | ||||||
| Invesco, Ltd. (6) | 7,707,034 | — | 7,707,034 | 5.6 | % | ||||||
| Vanguard Group, Inc. (7) | 7,202,472 | — | 7,202,472 | 5.2 | % | ||||||
| Number of Shares Owned (1) | Right to Acquire (2) | Beneficial Ownership Total (3) | Percent of Outstanding Shares (%) | ||||||||
| Name of Beneficial Owner | |||||||||||
| Directors & Named Executive Officers | |||||||||||
| Patrick H. Nettles, Ph.D. (8) | 384,244 | 9,714 | 393,958 | * | |||||||
| Gary B. Smith | 329,132 | 144,000 | 473,132 | * | |||||||
| James E. Moylan, Jr. | 299,564 | 35,000 | 334,564 | * | |||||||
| François Locoh-Donou | 91,137 | 20,000 | 111,137 | * | |||||||
| Philippe Morin | 215,988 | — | 215,988 | * | |||||||
| David M. Rothenstein | 190,993 | — | 190,993 | * | |||||||
| Harvey B. Cash | 21,813 | 53,817 | 75,630 | * | |||||||
| Bruce L. Claflin | 39,495 | 9,678 | 49,173 | * | |||||||
| Lawton W. Fitt | 1,071 | 53,817 | 54,888 | * | |||||||
| Patrick T. Gallagher | 24,693 | — | 24,693 | * | |||||||
| T. Michael Nevens | 2,948 | — | 2,948 | * | |||||||
| Judith M. O’Brien (8) | 17,659 | 39,317 | 56,976 | * | |||||||
| Michael J. Rowny | 3,571 | 53,817 | 57,388 | * | |||||||
| All executive officers and directors (17 persons) | 1,809,265 | 559,160 | 2,368,425 | 1.72 | % | ||||||
| Name of Beneficial Owner | Number of Shares Owned (1) | Right to Acquire (2) | Beneficial Ownership Total (3) | Percent of Outstanding Shares (%) | ||||||||||||||||
More than 5% Stockholders | ||||||||||||||||||||
BlackRock, Inc. (4) |
| 17,899,503 |
| - |
| 17,899,503 |
| 11.45 | % | |||||||||||
The Vanguard Group, Inc. (5) |
| 12,173,982 |
| - |
| 12,173,982 |
| 7.79 | % | |||||||||||
Directors & Named Executive Officers |
|
| ||||||||||||||||||
Patrick H. Nettles, Ph.D. (6) |
| 406,590 |
| 9,649 |
| 416,239 |
| * | ||||||||||||
Gary B. Smith |
| 249,872 |
| 24,592 |
| 274,464 |
| * | ||||||||||||
James E. Moylan, Jr. |
| 270,301 |
| 16,653 |
| 286,954 |
| * | ||||||||||||
Rick L. Hamilton |
| 5,752 |
| 5,465 |
| 11,217 |
| * | ||||||||||||
Scott A. McFeely |
| 24,420 |
| 5,189 |
| 29,609 |
| * | ||||||||||||
David M. Rothenstein |
| 214,832 |
| 5,863 |
| 220,695 |
| * | ||||||||||||
Bruce L. Claflin |
| 61,608 |
| 14,454 |
| 76,062 |
| * | ||||||||||||
Lawton W. Fitt |
| 3,928 |
| 84,720 |
| 88,648 |
| * | ||||||||||||
Patrick T. Gallagher |
| 43,030 |
| 3,149 |
| 46,179 |
| * | ||||||||||||
T. Michael Nevens |
| 31,616 |
| 3,149 |
| 34,765 |
| * | ||||||||||||
Judith M. O’Brien (6) |
| 10,527 |
| 60,812 |
| 71,339 |
| * | ||||||||||||
Joanne B. Olsen |
| - |
| - |
| - |
| * | ||||||||||||
Michael J. Rowny |
| 3,571 |
| 84,720 |
| 88,291 |
| * | ||||||||||||
All executive officers and directors (17 persons) |
| 1,538,048 |
| 335,691 |
| 1,873,739 |
| 1.20 | % | |||||||||||
| * | |
Represents less than 1% of outstanding shares. |
| (1) | Excludes shares that may be acquired through the exercise of stock options, the vesting of restricted stock units or other convertible equity incentive awards. |
26 2019 Proxy Statement
| (2) | Except as otherwise set forth in the footnotes below, for our executive officers, represents shares of common stock that can be acquired upon the |
| (3) | Except as indicated in the footnotes to this table or as set forth in the SEC reports identified below, we believe the persons named in this table, based on information they have furnished to us or the SEC, have sole voting and investment power with respect to all shares of common stock reported as beneficially owned by them, subject to community property laws where applicable. |
| (4) |
Stockholder’s address is 55 East |
| (5) | |
Stockholder’s address is 100 Vanguard Blvd, Malvern, PA 19355. Ownership information is based solely on a Schedule 13G/A filed by stockholder with the SEC on February |
| (6) | |
Voting and investment power is shared with spouse. |
2019 Proxy Statement 27
During fiscal ELEMENTS OF ASSESSMENT review of plans, policies and procedures relating to the components of our various compensation programs review of incentive-based cash and equity compensation features identification of any regional or functional distinctions in our compensation programs identification of compensation design features that could potentially encourage excessive or imprudent risk taking, and identification of business risks that these features could potentially encourage consideration of the presence or absence of appropriate controls, oversight or other factors that mitigate potential risks consideration of risks related to our compensation policies and practices and the potential for such risks to result in a material adverse effect on Ciena as a whole Although the In addition, the assessment identified significant controls and other mitigating factors that serve to offset elements of Ciena’s compensation policies and practices that may introduce CONTROLS AND MITIGATING FACTORS Based on the assessment and factors described above, the Compensation Committee determined that the risks associated with Ciena’s compensation policies and practices are not reasonably likely to result in a material adverse effect on Ciena. 28 The following “Compensation Discussion and Analysis” describes our executive compensation program and the compensation-related decisions for fiscal Gary B. Smith President and Chief Executive Mr. Smith joined Ciena in 1997 James E. Moylan, Jr. Senior Vice President Financial Officer (CFO) Mr. Moylan joined Ciena as CFO in December 2007. Rick L. Hamilton Senior Vice President, Planet Software Mr. Scott A. McFeely Senior Vice President, Global Mr. David M. Rothenstein Senior Vice President, General Counsel and Secretary Mr. Rothenstein joined Ciena in 2001 and has served as General Counsel since November 2008. Compensation Discussion & Analysis Table of Section Page 31 32 33 33 Participants in 33 34 35 36 37 37 38 38 38 38 39 39 42 Factors and Process in 42 42 43 46 46 46 46 46 47 47 Required Reimbursement for Personal Use of Corporate Memberships or Tickets 47 47 47 48 30 Contained below and elsewhere in this proxy statement are certainnon-GAAP measures of Ciena’s financial performance for fiscal 2017 and 2018. These measures, along with their corresponding GAAP measures and reconciliations thereto, have been previously disclosed in exhibits to Ciena’s Current Report on Form8-K furnished with the SEC on December 7, 2017 and December 13, 2018. Also see“Non-GAAP Measures” below for more information on the use of these measures. Fiscal 2018 Executive Compensation ❖ 77% of CEO target total direct compensation was in the form of equity awards and 59% was performance-based ❖ CEO did not receive an increase to either base salary or target bonus opportunity ❖ Increased the values of annual equity awards to CEO and other NEOs in order to better align with the market values for their positions and due to the addition of new members to executive leadership team ❖ Introduced market stock units (“MSUs”) as a component of performance-based equity, based on a relative TSR goal measured over a three-year performance period ❖ Based on outstanding performance against fiscal 2018 objectives, NEOs received bonuses at 125% of target and earned performance stock units (“PSUs”) at 119% of target Strong Pay Practices ❖ Core governance principles and practices are employed to align executive compensation with stockholder interests ❖ Annual cash incentive bonuses are based on combination of corporate financial and operating objectives ❖ Equity awards make up a significant portion of overall executive compensation, incorporate meaningful performance-based elements and are tied to different performance objectives than annual cash incentive bonuses Fiscal 2018 Company Performance ❖ Increased annual revenue ❖ Generated $1.39 adjusted earnings per share, representing 22% year-over-year growth ❖ Achieved strong year-over-year revenue growth fromnon-service provider customers, the Asia Pacific region, and the Webscale/DCI and submarine market verticals ❖ Acquired and successfully integrated two companies into our Blue Planet software automation business ❖ Significantly improved the balance sheet, eliminating all convertible debt, refinancing our existing term loan, and ending the year in a positive cash position ❖ Returned capital to stockholders by repurchasing 4.3 million shares for $111 million under stock repurchase program ❖ Generated total stockholder return (“TSR”) of 47% Why you should vote FOR our “Say-on-Pay” Proposal ❖ At our 2018 Annual Meeting of Stockholders, 98% of stockholder votes cast were in favor of our executive compensation program ❖ Key elements of our executive compensation program remain essentially unchanged ❖ Our overall fiscal 2018 executive compensation was reasonable and appropriate in light of Ciena’s business and financial performance ❖ See Proposal No. 3 for additional information on our annual advisory“Say-on-Pay” vote Fiscal 2018 Executive Compensation Highlights of our executive compensation program for fiscal 2018 include: Base Salaries Did not Increased the Equity Award Values Equity Award Structure Continued to structure Introduced MSUs as a component of of our CEO’s target total direct compensation was in the form of equity awards CEO FY 2018 Target Total Direct Compensation Mix At-Risk Performance-Based A detailed discussion relating to each element of executive compensation and the decisions summarized above is included in The following discussion provides additional detail and analysis regarding the Committee’s specific decisions relating to compensation of our NEOs for fiscal 2018, including the background, considerations and other factors that influenced such decisions. 32 The Committee’s fiscal WHAT WE DO WHAT WE DON’T DO Offer income taxgross-ups Permit “single trigger” change in Provide excise tax Allow for hedging or pledging of company securities Participants, Comparative Framework and Compensation Committee. The Committee Independent Compensation Consultant Chief Executive Officer Peer Group. Following Removed four companies from the existing peer group:Brocade Communications because of its then-pending acquisition by Broadcom;Frontier Communications because its revenue and headcount now exceeded the desired ranges;Harris because its revenue, market capitalization and headcount now exceeded the desired ranges; andPolycom because of its acquisition by Siris Capital Group. Added three new companies –Akamai Technologies,CA andCitrix Systems – because each was within one of the expanded range of comparable companies intended to include the software industry categories and met several of the applicable criteria. Based on this analysis and the selection process set forth below, the Committee determined that the following peer group constituted an appropriate comparative reference for determining executive compensation in fiscal Fiscal 2017 Peer Group Primary Selection Criteria Refinement Criteria Fiscal 2018 Peer Group ARRIS Group Brocade Communications Cadence Design Systems CommScope Holding EchoStar F5 Networks Finisar Frontier Communications Harris Juniper Networks NETGEAR Polycom ViaSat Viavi Solutions Xilinx Revenue ~0.5x to ~2.0x Ciena’s last four quarters revenue Market capitalization ~0.33x to ~3.0x Ciena’s 30-day average market cap Industry Communications Equipment Systems Software Application Software Internet Software & Services Key business and/or Employee headcount Peers of current and Companies listed as peers Akamai Technologies ARRIS Group CA Cadence Design Systems Citrix Systems CommScope Holding EchoStar F5 Networks Finisar Juniper Networks NETGEAR ViaSat Viavi Solutions Xilinx The following charts illustrate a comparison of Ciena to the Peer Group Revenue ($MM) Market Capitalization ($MM) Employee Headcount (#) 34 The Committee noted that Ciena was slightly above the Market Data In any given year, and for any particular NEO, the Committee may consider a range of subjective or qualitative factors in setting his or her compensation, including: the role the executive plays and the importance of such individual to differences in each executive’s tenure and experience; the responsibilities and particular nature of the functions performed or managed by the executive; our CEO’s recommendations and his assessment of the executive’s performance; the risk that such individual would leave Ciena if not appropriately compensated and motivated; and the likely cost and difficulty that would be encountered in recruiting a replacement. The Committee’s consideration of any particular factor may range from inapplicable to significant, depending upon the individual and period under consideration. The Committee does not assign relative weights or rankings to such factors. Rather, the Committee relies upon its members’ knowledge and judgment in assessing the various qualitative and quantitative inputs it receives as to each individual and makes compensation decisions accordingly. In determining fiscal Gary B. Smith Has successfully served as our CEO for over 17 years One of the longest-tenured CEOs in the telecommunications industry Continued to demonstrate outstanding strategic leadership of and direction for Ciena, including strong leadership of our executive team and our company Ensured that Ciena delivered another year of outstanding performance in fiscal 2018 Continued to expand and diversify our customer base, particularly in the Asia Pacific region and with Webscale and international Tier 1 service provider customers Enhanced Ciena’s broader articulation of corporate strategy, including the publication of longer-term financial targets James E. Moylan, Maintained excellent relationships and communications with the financial community and our stockholders Provided effective management and leadership over the finance and accounting, global business operations, information technology, internal audit, investor relations, tax and treasury organizations, including new leadership and approaches within information technology and treasury Supervised the implementation of our first stock repurchase program Led significant improvements to our balance sheet and capital structure, including settling our 2018 convertible notes, exercising an early conversion option on 2020 convertible notes and refinancing our existing term loan Ensured preparation for successful adoption of ASC 606, the new revenue recognition accounting standard Successfully transitioned to leading our Blue Planet Automation Software and Services business Aligned the Blue Planet portfolio strategy with Ciena’s Adaptive Network vision, leveraging a closed loop automation system Identified the acquisitions of Packet Design and DonRiver and supervised the integration of their solutions and services offerings into an integrated portfolio Developed and implemented a targetedgo-to-market strategy focused on top strategic customers Focused on building abest-in-class IT professional services business Exhibited strong leadership of the Global Products & Services division, which encompasses the global engineering, supply chain, product line management and quality organizations Assumed responsibility for our global attached services business and supervised a series of related transformation initiatives to increase efficiencies, reduce costs and improve customer satisfaction Oversaw industry-leading technology innovation from the engineering organization Ensured that the product lifecycle management and supply chain organizations continued to drive meaningful product design and transformation cost reductions • Successfully focused on developing features and growing sales orders for our packet networking portfolio David M. Rothenstein Demonstrated strong performance as General Counsel and Secretary, including with respect to leading engagement with our Board of Directors Managed the structuring, negotiation and integration of the Packet Design and DonRiver acquisitions Made several significant enhancements and improvements to our global compliance and ethics program Led an analysis of our real estate portfolio in the context of workforce planning, workspace evolution and site utilization Continued to serve as the Chair of our Disclosure Committee and our Corporate Compliance Committee, and as executive sponsor of our enterprise risk management (ERM) and corporate social responsibility (CSR) programs Internal Equity.The Committee seeks to promote strong teamwork We provide stockholders with the opportunity to cast an annual advisory vote on the compensation of our named executive officers. From time to time, we seek input from our stockholders relating to executive compensation matters and expect to continue to consider input from stockholders, as well as the outcome of our annualsay-on-pay votes when making future executive compensation decisions. See “Proposal No. 3” below for this year’s“say-on-pay” proposal. Last year, approximately 98% of the stockholder votes cast on this proposal were voted in favor of the proposal. The Committee believes that this substantial majority of votes cast affirms stockholders’ support for our approach to executive compensation and, as a result, did not set or change fiscal 2018 executive compensation as a direct result of last year’s stockholder vote. 36 RISK ASSESSMENT OF COMPENSATION PRACTICES2015,2018, at the request and direction of the Compensation Committee, management conducted an assessment of the risks associated with Ciena’s compensation policies and practices. This assessment included:❖ ❖ ❖ ❖ ❖ ❖ components of our various compensation programs;review of incentive-based equity and cash compensation features;identification of any regional or functional distinctions in our compensation programs;identification of compensation design features that could potentially encourage excessive or imprudent risk taking, and identification of business risks that these features could potentially encourage;consideration of the presence or absence of controls, oversight or other factors that mitigate potential risks; andconsideration of risks related to our compensation policies and practices and the potential for such risks to result in a material adverse effect on the company as a whole.AlthoughCompensation Committee considered all elements of our compensation programs, were considered,it paid particular attention was paid in fiscal 20152018 to any additions, modifications or revisions to such programs during the current and preceding fiscal years, and how these changes affected the strengths, weaknesses or controls associated withrelated to such programs. Year-over-year changes included the introduction of market stock unit (MSU) awards as a component of long-term incentive compensation for the executive officers, as well as design changes to Ciena’s Cash Incentive Bonus Plan and Sales Incentive Compensation Plan. The Compensation Committee also focused its assessment on performance-based incentive compensation programs involving variable payouts and compensation programs impacting our executive team. In substantially all cases, compensation programs were found to be centrally designed and administered and, excluding sales incentive compensation, substantially identical across function and geography. ObjectivesAnd, the objectives used to determine incentive compensation were found to be based primarily on Ciena’s reported financial results and other performance-based corporate performance goals used to manage the business or derived from Ciena’s annual operating plan approved by the Board of Directors.risk, including:risk.❖ oversight of major incentive compensation programs and decision-making by the Compensation Committee, which, in most cases, retains the ability to adjust elements of incentive compensation in its discretion ❖ robust internal controls over financial reporting and compensation practices regularly reviewed and/or tested by internal auditors and subject to testing as part of the annual independent integrated audit by our external auditors ❖ appropriate segregation of duties ❖ Audit Committee oversight and review of financial results andnon-GAAP adjustments used in certain components of incentive compensation ❖ presence of and training relating to corporate standards of business conduct and ethics ❖ substantial alignment of compensation and benefits for executive andnon-executive salaried employees ❖ stock ownership guidelines that were amended during fiscal 2018 to substantially increase minimum ownership requirements and which are designed to ensure alignment of interests with stockholders ❖ a recoupment or “clawback” feature for incentive compensation awarded under Ciena’s 2017 Plan that, in addition to being applicable to those executive officers covered by the requirements of the Sarbanes-Oxley Act of 2002, is applicable to any award recipient who knowingly, or through gross negligence, engages in or fails to prevent misconduct resulting in materialnon-compliance with financial reporting requirements under the securities laws oversight of major incentive compensation programs and decision-making by the Compensation Committee, which, in most cases, retains the ability to adjust elements of incentive compensation in its discretion;robust internal controls over financial reporting and compensation practices regularly reviewed and/or tested by internal auditors and subject to testing as part of the annual independent integrated audit by our external auditors;appropriate segregation of duties;Audit Committee oversight and review of financial results and non-GAAP adjustments used in certain components of incentive compensation;presence of and training relating to corporate standards of business conduct and ethics;substantial alignment of compensation and benefits for executive and non-executive salaried employees;34stock ownership guidelines applicable to executive officers designed to ensure alignment of interests with stockholders; anda recoupment or “clawback” feature for incentive compensation awarded under Ciena’s 2008 Plan that, in addition to being applicable to those executive officers covered by the requirements of the Sarbanes-Oxley Act of 2002, is applicable to any award recipient who knowingly, or through gross negligence, engages in or fails to prevent misconduct resulting in material non-compliance with financial reporting requirements under the securities laws. 2019 Proxy StatementCOMPENSATION DISCUSSION AND ANALYSIS20152018 made by the Compensation Committee of the Board of Directors (the “Committee”) for the Named Executive Officers (the “NEOs”) who are set forth below:
Officer (CEO)
and has served as CEO since
May2001. 
Finance and Chief 
François Locoh-Donouand Chief Operating Officer (since November 1, 2015)BlueLocoh-DonouHamilton joined Ciena in August 2002 2016
and has served as in his current
role since February 2017.
Products Group from August 2011 through October 2015.
Philippe MorinFormer Senior Vice President, Global Sales and Field OperationsServicesMorinMcFeely joined Ciena in March 2010
and has served in the abovehis current role from August 2011 until his resignation as of
since November 1, 2015. 
January 2019 Proxy Statement 2935As previously disclosed, Mr. Morin resigned as an executive officer and employeeCiena, effective as of November 1, 2015, the beginning of our fiscal 2016. Also effective as of November 1, 2015, Mr. Locoh-Donou was appointed as our Senior Vice President and Chief Operating Officer.ContentsOverviewFiscal 2014 Performance HighlightsIn determining our executive compensation program for fiscal 2015, the Committee considered, among other things, Ciena’s business and financial performance in fiscal 2014. Fiscal 2014 was a strong year in which we continued to generate differentiated financial performance while delivering steady progress toward our longer-term strategic objectives and financial targets. In particular, we strengthened our platform for growth and increased profitability by further diversifying our business across network providers of every type and in additional high-growth geographies. Our continued efforts were rewarded with increased market share and industry recognition of our technology leadership.Highlights of our performance in fiscal 2014 included: v We were ranked by Infonetics (in its global 2014 Service Provider Vendor Report) as the overall #1 optical supplier, including taking the leading spots for Packet-Optical Systems, Optical Transport and Switching, and Transport SDN and Control Planev Ovum identified us as the market leaderthe Data Center Interconnect marketCompensation-Setting ProcessNorth AmericaDetermining Fiscal 2018 Equity Awards 2019 Proxy Statement v Ourgrew to $2.29 billion, representingover 10% year-over-year, from $2.8 to $3.1 billion, and gained over 2% global market sharev Our adjusted operating expense as a percentage of revenue improved to 35.6% 2019 Proxy Statement 31 vOur adjusted operating income grew to $148.2 million, a 28% year-over-year increasevOur adjusted operating margin increased to 6.5%
36vWe launched our 8700 Packetwave Platform, a multi-terabit packet switching platform for high-density metro networks and inter-data center wide area networks, which received top honors in Broadband Technology Report’s 2014 Diamond Innovation AwardsvWe established a new internal software division to underpin our strategic technology focus on flexible and software-enabled network architectures, and introduced a new set of software solutions including a VNF online marketplacevWe entered into a strategic global partnership with EricssonvWe developed new relationships with several key international customers and expanded our relationships with Vodafone and Liberty Global, enabling us to increase our year-over-year international revenue by 12%Fiscal 2015 Executive CompensationIn the context of our strong business and financial performance in fiscal 2014, the Committee considered the compensation program for our executive officers in light of the public filings, compensation surveys such as the Radford High Technology Executive Compensation Survey and the IPAS Global High Technology Survey, and other published market data relating to comparable executive positions in our peer group of companies (collectively, the “Market Data”). The Market Data showed that each element of compensation for our executives was at or above the market median in the aggregate, with variation by individual executive. Specifically with respect to long-term incentive compensation, the Committee had made good progress in recent years in improving the retention profile of our executives, with the average target value of equity awards to our executives now being approximately at the mid-point of our 50th to 75th percentile target value range for the first time in several years. At the same time, however, the Market Data for fiscal 2015 showed that market annual equity values had increased substantially over the previous year. The Committee believed that, after finally aligning executive equity compensation with the peer group and with Ciena’s strong performance in fiscal 2014, it was important to ensure that equity compensation of our executives for fiscal 2015 kept pace with that of similarly situated executives in the peer group. Accordingly, the Committee concluded that market increases with respect to equity compensation were appropriate for fiscal 2015, but that it was otherwise necessary to make significant changes to or increases in our executive compensation program for fiscal 2015.The Committee took the following actions with respect to fiscal 2015 executive compensation:vDetermined not to increase the base salary of the CEO orother NEOs;base salary of two NEOs in connection with their appointment to executive leadership team and assumption of larger organizational roles vDetermined Target Cash Incentives Did not to increase the target cash incentive opportunity ofopportunities for the CEO or the other NEOs;NEOsvDeliveredIncreased the values of annual equity awards with increases in grant date fair values from fiscal 2014 awards (13% for the CEO and 26% for the other NEOs as a group)in order to better align with the market increase in target equity award values;values for their positions and due to the addition of new members to the executive leadership team v the equity awards so that 60% of the target award value for the CEO, and 50% of the target award value for the other NEOs, was allocated toat-risk, performance-based stock units (PSUs), with attainment linked to objectives critical to achieving both longer-term growth and nearer-term profitability, and ultimate deliveryequityshares subject to additional service (vesting) requirements.These decisions resulted in an overall CEO compensation package whereby:v75% of our CEO's target total direct compensation was in the form ofperformance-based equity, which linked his compensation directly to the value of our common stock; andvApproximately 59% of our CEO's target total direct compensation, including cash incentive bonus and PSU awards, was completely “at-risk” based on oura relative TSR goal measured over a three-year performance against measurable performance objectives.period37CEO FY 2015Target Total Direct Compensation Mix
of our CEO’s target total direct compensation was completely“at-risk” based on our performance against measurable objectives At -RiskCompensation59%
Compensation 59% 10% 46% 31% 13% Time-Based Compensation 41%Base Salary Time-Based Equity (RSUs) Target Annual Cash Incentive Performance-Based Equity (PSUs)(PSUs/MSUs) the “Elements of Compensation” below. 2019 Proxy Statement2015 executive2018 compensation programdecision-making reflects the following core governance principles and practices that we employ to align executive compensation with stockholder interests. Also listed below are certain compensation practices that we do not employ because we believe they would not serve our stockholders’ long-term interests.What We Doþ 
Ensure independence in establishing our executive compensation program . Executive compensation is reviewed and established annually by the Committee, which consists solely of independent directors. The Committee relies upon input from a compensation consultant who is retained directly by the Committee, whose independence is assessed annually, and who does not perform additional consulting or other services for Ciena or its management. þ
Align pay with performance . A significant portion of the potential compensation of our NEOs is not guaranteed but is linked to the achievement of short-term or long-term corporate and financial performance goals. We incorporate upside potentialour cash and equity incentive plans for outstanding performance and downside risk for under-performance.control benefitsþ Align compensation with stockholder interests . We maintain compensation plans that are transparent, easily understood and meet fiduciary commitments to our stockholders. þImpose a clawback policygross-ups. We maintain a compensation recoupment policy that applies to our equity incentive plan awards, cash incentive plan awards, sales incentive compensation and severance benefit plan payments.þ Maintain stock ownership requirements . Like directors, our NEOs are subject to stock ownership requirements to align further the interests of our leadership with those of our stockholders. þ Use rigorous performance goals Maintain a compensation recovery (“clawback”) policy Assess risks relating to our executive compensation program . The Committee annually conducts a risk assessment to determine whether any of our executive or other compensation programs create risks that are reasonably likely to have a material adverse effect on Ciena.38What We Do (cont’d)þUse rigorous performance goals. We use objective performance-based goals in our cash and equity incentive plans that are rigorous, directly aligned with the financial and operational objectives established in our strategic plan and our annual operating plan approved by the Board, and designed to motivate executive performance. þProvide only a limited set of executive perquisites. Our NEOs are eligible for the same benefits as salaried employees and receive only limited perquisites, generally consisting of annual physical examinations as well as tax preparation and financial planning services, both of which are made available to other senior employees.What We Don’t DoýOffer income tax gross-ups. We do not provide income gross-ups for any compensation elements or personal benefits, except for certain limited expenses related to relocation.ýProvide excise tax gross-ups. We do not provide excise tax gross-ups for benefits under our change in control severance agreements.ýPermit “single trigger” change in control benefits. We do not provide for the payment of severance benefits based solely on a change in control of Ciena. Rather, our change in control severance agreements are “double trigger” arrangements that require a termination or constructive termination of employment directly prior to or following a change in control of Ciena before severance benefits are triggered.ýAllow for hedging or pledging of company stock. Our insider trading policy prohibits our NEOs and directors from pledging Ciena stock or engaging in short sales of Ciena stock and other similar transactions that could be used to hedge the risk or offset any decrease in the value of Ciena stock ownership.Recent “Say on Pay” VoteIn addition to the compensation practices above, we provide stockholders with the opportunity to cast an annual advisory vote on the compensation of our named executive officers. See “Proposal No. 4” below for this year’s “say-on-pay” proposal. Last year, approximately 89% of the stockholder votes cast on this proposal were voted in favor of the proposal. The Committee believes that this substantial majority of votes cast affirms stockholders’ support for our approach to executive compensationas a result, did not set or change fiscal 2015 executive compensation as a direct result of last year’s stockholder vote. Management regularly engages with stockholders relating to executive compensation matters and expects to continue to consider input from stockholders and the outcome of our annual say-on-pay votes when making future executive compensation decisions.The following discussion provides additional detail and analysis regarding the Committee’s specific decisions relating to compensation of our NEOs for fiscal 2015, including the background, considerations and other factors that influenced such decisions.Participants and Comparative Frameworkhas oversight ofoversees Ciena’s compensation programs and has final authority to approve and make decisions with respect to the compensation of ourCiena’s executive officers. For a discussion regarding the Committee’s compensation philosophy and the principal objectives of our compensation programs, see “Corporate Governance and the Board of Directors -– Composition and Meetings of the Board of Directors and its Committees – Compensation Committee” above.directly by the Committee and, in order to maintain its independence, does not perform additional consulting or other services for Ciena or its39management. The Committee assesses the independence of its compensation advisor on an annual basis. For a discussion regarding Compensia, the scope of its engagement by the Committee and its involvement in our compensation-setting process, see “Corporate Governance and the Board of Directors -– Composition and Meetings of the Board of Directors and its Committees – Compensation Committee” above.peer group data,Market Data (as defined below), our CEO provides recommendations to the Committee with respect to the base salary, target bonus or commission percentage, and annual equity award for each executive officer. Because our CEO works most closely with and supervises our executive team, the Committee believes that his input provides critical insight in evaluating their performance. Our CEO also provides the Committee with additional information regarding the effect of market or competitive forces, changes in strategy or priorities upon an individual’s performance, and any other specific challenges faced or overcome by each person or the function that they lead during the prior fiscal year. We have identified below, with regard to any particular NEO or element of compensation, whether the Committee’s assessment of our CEO’s recommendations or other qualitative factors significantly affected the compensation components or level of compensation awarded to such NEO. 2019 Proxy Statement 33In establishingTo assist in the selection of a group of peer companies against which to compare existing and proposed executive compensation levels for fiscal 2015,2018, at the request of the Committee, considered thatCompensia screened all U.S.-based publicly traded companies in the existing peer group represented a relatively stable grouptechnology industry using several quantitative and qualitative criteria, including those listed below. In light of companies that served as a good comparator groupCiena’s strategy for purposes of executive compensation. The Committee also recognized the high degree of alignment between the existing peer group and those companies considered to be our peers for executive compensation purposes by the major proxy advisory firms. Nevertheless,increased investment in network automation software, the Committee believed that it was important to conduct a full assessment of the peer group and requested that Compensia prepare an analysis ofexpand the suitability of the companies comprising the peer group. In reaching its peer group determination, the Committee sought to ensure strong comparability by requiring that each peer company meet at least three of the following criteria: the comparability of a company’s business within the communications industry to Ciena; amount of revenue; market capitalization; total headcount; and total stockholder return (“TSR”). The Committee used a screen for revenue with a range of 0.5potential companies beyond communications equipment to 2.0 times Ciena’s revenue overinclude systems software, application software and internet software and services. Among the last four fiscal quarters, and a screen for market capitalization with a range of 0.3 to 3.0 times Ciena’s average market capitalization over the last 30 days prior to the analysis. Among thevarious criteria, the Committee considered revenue as the criterion with the highest relevance in selecting peer companies for purposes of comparing compensation.companies.itsCompensia’s analysis, the Committee determined to remove two companies (LSI and Tellabs) because they had been acquired during the previous year, and one company (Black Box) because it had fallen below the desired ranges for both revenue and market capitalization and had a negative one-year TSR. The Committee also determined to add three companies, all of which satisfied the quantitative measures and the industry criteria: Altera, a semiconductor company to replace LSI; CommScope Holding, a networking equipment peer that recently became a public company; and Frontier Communications, a U.S. network operator that is similar to another long-standing peer company, tw telecom. The Committee elected to retain the other 12 companies in the existing peer group. Committee:❖ ❖ 20152018 (the “Peer Group”):
Peer for Fiscal 2015 Executive Compensation
executive labor market
competitor
suggested peers
by Institutional Shareholder
Services Inc. (“ISS”), a
proxy advisory firmAltera CorporationJDS Uniphase CorporationArris Group, Inc.Juniper Networks, Inc.Brocade Communications Systems, Inc.NETGEAR, Inc.CommScope Holding Company, Inc.Polycom, Inc.EchoStar Corporationtw telecom inc.Finisar CorporationViaSat, Inc.Frontier Communications CorporationXilinx, Inc.F5 Networks, Inc. 40AttimePeer Group based on the assessment criteria of revenue, market capitalization and employee headcount, measured as of the date of the Committee’s assessment Ciena compared toin May 2017, with the revenue comparison based on revenue over the four fiscal quarters preceding the assessment.as follows:Comparison
2019 Proxy StatementPeer Group Comparison Revenue($)* Market Capitalization ($) Headcount(#) TotalStockholder Return(%)*Peer Group Average $2.50B $5.22B 5,995 33% Ciena $2.22B $2.40B 4,754 11% Percentile of Peer Group 58% 15% 63% 20% *over four fiscal quarters preceding assessment 50th percentilemedian of the proposed Peer Group for the revenue and headcount criteria andcriterion, significantly below the 50th percentilemedian of the proposed Peer Group for the market capitalization criterion, and TSR criteria.slightly below the median of the Peer Group for the headcount criterion. The Committee believed that this represented a reasonable and appropriate balance among the key quantitative criteria, particularly given its view that revenue has the highest relevance in selecting peer companies for purposes of comparing compensation.when determiningin establishing executive compensation for our NEOs, the CommitteeCompensia uses compensation data from public filings, compensation surveys such as the Radford High Technology Executive Compensation Survey and the IPAS Global High Technology Survey, and other published market data relating to comparable executive positions in the Peer Group (collectively, the “Market Data”). In considering the Market Data, the Committee recognizes that executive officers in different companies can play different roles, with different responsibilities and scopescopes of work, even though they may hold similar titles or nominal positions. Moreover, the Market Data does not yield qualitative factors that influence compensation, such as each executive officer’s performance during the period under consideration or their perceived importance to their respective companies’ business, strategy and objectives.objectives are not easily discernible from the Market Data. Accordingly, the Market Data is just one of a number of factors used by the Committee in determining executive compensation levels and it serves as a frame of reference for compensation. v❖ourCiena’s business strategy and objectives; ❖ v ❖ v ❖ v ❖ v ❖ v20152018 executive compensation, and in addition to the assessment of the Market Data and other specific factors described in the below discussion of the individual elements of compensation, the Committee broadly considered the following qualitative factors in making its compensation decisions for each NEO:NEO. Given their tenure, track record and experience, the Committee considered the NEOs to be highly desirable executives and thus potential candidates for recruitment by other companies. v❖. The Committee considered that Mr. Smith, having successfully served as our CEO for over 14 years, is one of the longest-tenured CEOs in the telecommunications industry. Mr. Smith had continued to demonstrate outstanding strategic leadership of and direction for Ciena, strong leadership of our executive team and effective communications with our various external stakeholders, all of which resulted in the fiscal 2014 business and financial performance described in the “Overview” above. He also successfully recruited and on-boarded a new member of the Board of Directors during the year. The Committee recognized that, given his tenure, track record and experience, Mr. Smith is a highly desirable CEO and thus a potential candidate for recruitment by other companies.41❖ vJrJr.. Our CEO and the Committee believed that Mr. Moylan in his capacity as CFO continues to maintain excellent relationships and communications with the financial community and our stockholders. He provided effective management and leadership over the finance and accounting, global business operations, information technology, internal audit, investor relations, tax and treasury organizations. He made outstanding progress in solidifying our capital structure, including the successful implementation of a new senior secured term loan facility and an amendment of our existing asset-based credit facility. Mr. Moylan also continued to lead the critical project to upgrade our corporate enterprise resource planning (ERP) system, and to serve as an executive co-sponsor of our enterprise risk management program. 2019 Proxy Statement 35 v❖François Locoh-DonouRick L. Hamilton. Our CEO and the Committee believed that Mr. Locoh-Donou demonstrated strong leadership and management of our Global Products Group, which encompasses the global engineering, supply chain, product line management, quality, and product marketing and solutions organizations. In particular, he led the GPG team in expanding our packet capabilities across the product portfolio, introducing the 8700 Packetwave platform, creating a new internal software division, and carefully managing R&D spend to improve the company’s operating leverage. In addition, Mr. Locoh-Donou successfully focused on improving the experience for our customers through the development of converged solutions and improvement in delivery lead times. v❖Philippe MorinScott A. McFeely. Mr. Morin was considered by our CEO and the Committee as having led our Global Field Organization to a successful year in fiscal 2014. In addition to the excellent supplier and market share rankings from the industry analysts and the other business and financial performance set forth in the “Overview” above, Mr. Morin led the GFO team in gaining momentum with our strategic partnership with Ericsson, expanding our relationship with the largest multiservice operator outside of North America, and successfully growing our year-over-year international revenue. The Committee recognized that this sales performance occurred in the context of volatile customer spending and intense competition within our industry sector. v❖. Mr. Rothenstein was regarded by our CEO and the Committee as having demonstrated strong performance as General Counsel and Secretary, including having successfully bolstered our Compliance & Ethics program, revised our Code of Business Conduct and Ethics, managed various commercial engagements with key customers, improved the intellectual property rights function, and led the negotiation for the development and lease of a new R&D facility in Ottawa, Canada. Mr. Rothenstein also continued to serve as the chair of our Disclosure Committee and our Corporate Compliance Committee, and as an executive co-sponsor of our enterprise risk management program. among, and high morale within our executive team. While the Committee does not use any quantitative formula or multiple for comparing or establishing compensation among the executive officers, it is mindful of internal pay equity considerations, and assesses the relationship of the compensation of each executive officer to other members of the executive team. The Committee also considers each fiscal year, on a relative basis, the aggregate portion of equity awards, in terms of economic value and allocation of shares, made to the executive team, in comparison to other eligible senior employees. 2019 Proxy Statement
Elements and Mix of Compensation Principal Elements of Compensation The principal elements of |
Element | Type | Form | Key Characteristics | Purpose | ||||||||||||
| Base Salary | Fixed | Cash | Annual adjustments based on individual performance, relative to market pay level and internal pay equity | Attracts, retains and rewards NEOs by providing a competitive fixed amount of compensation for service that reflects skill, responsibility and experience | ||||||||||||
Annual Cash Incentive | At-Risk | Cash | Variable cash compensation, based onpre-established financial, strategic and operational goals and individual performance | Focuses NEOs on achievement of our short-term financial and operational goals Aligns interests of NEOs with stockholders by promoting strong annual | ||||||||||||
Long-Term Equity Incentive | At-Risk | Restricted Stock Units | RSU equity awards based on continued service vest in quarterly increments over a four-year period | Retains NEOs through multi-year vesting of equity awards Motivates and rewards NEOs for the achievement of long-term corporate performance Aligns NEO and stockholder interests | ||||||||||||
PSU equity awards based onpre-determined financial, strategic and/or operational goals have aone-year performance period and vest in | ||||||||||||||||
| Market Stock Units | MSU equity awards based on TSR relative to a comparison index over a three-year period, and vest in full at end of | |||||||||||||||
We also provide severance and change in control related benefits for our NEOs, and other benefits such as a 401(k) plan, health and wellness benefits including an annual physical examination, and financial planning and tax preparation services. In addition, our NEOs participate in the Deferred Compensation Plan available to other senior management employees and standard employee benefit plans and programs available to our other employees.
2019 Proxy Statement 37
In determining the mix of compensation among these elements, the Committee does not assign specific ratios or other relative measures that dictate the total compensation mix to be awarded or targeted to the executive team, or the portion that is either at riskat-risk or otherwise subject to performance. Nevertheless, as illustrated by the charts below, the Committee continued to structure executive compensation in fiscal 20152018 so that a significant portion of the target total direct compensation of our CEO and the other NEOs was “at-risk”“at-risk”, or performance-based, with the actual value realized subject to the achievement of short-term or long-term corporate and financial performance goals. Approximately 59%60% of our CEO’s target total direct compensation for fiscal 20152018 was structured as performance-based.“at-risk” performance-based compensation. By linking a significant portion of our executives’ compensation to
CEO FY 2018 Target Total Direct Compensation Mix | NEO FY 2018 Target Total Direct Compensation Mix | |
 |  |
* Target Total Direct Compensation reflects annual base salary, annual cash incentive opportunity and grant date fair value of fiscal 20152018 equity awards.
In determining base salaries that reflectfor fiscal 2018, the performance, skill set and value of executive talent in the competitive marketplace is an important element in attracting, retaining and rewarding our executive officers.
Annual Base Salary
| Annual Base Salary ($) | ||||||||||
| Name | Fiscal 2017 | Fiscal 2018 | Percentage Increase | |||||||
| Gary B. Smith | $ 900,000 | $ 900,000 | 0% | |||||||
| James E. Moylan, Jr. | $ 525,000 | $ 525,000 | 0% | |||||||
| Rick L. Hamilton | $ 420,000 | $ 440,000 | 5% | |||||||
| Scott A. McFeely | $ 400,000 | $ 440,000 | 10% | |||||||
| David M. Rothenstein | $ 450,000 | $ 450,000 | 0% | |||||||
The above salary increases were made effective as of Ciena’s second quarter of fiscal 2018, in order to coincide with the timing of Ciena’s broad-based merit increase for Mr. Morin).non-executive
| Annual Base Salary | |||||||||
| Annual Base Salary ($) | |||||||||
| Name | Fiscal 2014 | Fiscal 2015 | Percentage Increase | ||||||
| Gary B. Smith | $ | 800,000 | $ | 800,000 | —% | ||||
| James E. Moylan, Jr. | $ | 450,000 | $ | 450,000 | —% | ||||
| François Locoh-Donou | $ | 420,000 | $ | 420,000 | —% | ||||
| Philippe Morin | $ | 500,000 | $ | 500,000 | —% | ||||
| David M. Rothenstein | $ | 400,000 | $ | 400,000 | —% | ||||
The annual operating plan approved by the Board. The Committee believes that its use of these objectives promotes executive focus on annual financial and operating results. Moreover, use of an incentive cash component of executive compensation enables target total cash compensation to remain
38 2019 Proxy Statement
The Committee considers potential incentive payments to each NEO at the “target” level (as reflected in “Annual Cash Incentive Bonus Plan” below), together with base salary, in determining the “target total cash compensation” payable to each executive.
The Committee reached a similar conclusion with respect toconsidered that the Market Data showed that, if paid at the target level, the overall target total cash compensation for oureach of the NEOs as with base salaries. Specifically, the Market Data showed that, other than our CEO, their total cash compensation as a group, if fully paid at the target level,except Mr. McFeely was at or above the market median of equivalent positions in the Peer Group. Althoughmarket. The Committee also noted that, as a result of its decision to increase the base salary of Mr. Smith’sMcFeely, his overall target total cash compensation approximatedwould be aligned with the 35
Annual Cash Incentive Opportunity
| Target Cash Incentive Compensation (as a percentage of base salary) | ||||||
| Name | Fiscal 2017 | Fiscal 2018 | Percentage Increase | |||
| Gary B. Smith | 125% | 125% | 0% | |||
| James E. Moylan, Jr. | 85% | 85% | 0% | |||
| Rick L. Hamilton | 75% | 75% | 0% | |||
| Scott A. McFeely | 75% | 75% | 0% | |||
| David M. Rothenstein | 75% | 75% | 0% | |||
| Annual Cash Incentive Opportunity | |||||
Target Cash Incentive Compensation (as percentage of base salary) | |||||
| Name | Fiscal 2014 | Fiscal 2015 | Percentage Increase | ||
| Gary B. Smith | 125% | 125% | —% | ||
| James E. Moylan, Jr. | 85% | 85% | —% | ||
| François Locoh-Donou | 85% | 85% | —% | ||
| Philippe Morin | 85% | 85% | —% | ||
| David M. Rothenstein | 70% | 70% | —% | ||
The Committee’s decisions with respect to annual base salaries and annual cash incentive bonus opportunities for fiscal 2018 resulted in target total cash compensation for the NEOs as set forth below.
Target Total Cash Compensation
| Target Total Cash Compensation ($) | ||||||||||
| Name | Fiscal 2017 | Fiscal 2018 | Percentage Increase | |||||||
| Gary B. Smith | $ 2,025,000 | $ 2,025,000 | 0% | |||||||
| James E. Moylan, Jr. | $ 971,250 | $ 971,250 | 0% | |||||||
| Rick L. Hamilton | $ 735,000 | $ 770,000 | 5% | |||||||
| Scott A. McFeely | $ 700,000 | $ 770,000 | 10% | |||||||
| David M. Rothenstein | $ 787,500 | $ 787,500 | 0% | |||||||
The amounts in the table above represent target total cash compensation for fiscal 2017 and fiscal 2018. For amounts actually earned or received by our NEOs during fiscal 2018, see “Summary Compensation Table” in the “Executive Compensation Tables” below.
Full-time employees, excluding our employees who receive sales commissions, generally are eligible to participate in our annual cash incentive bonus plan, which pays out a bonus upon the achievement of performance objectives established by the Committee andCommittee. This plan is used as the mechanism for delivering the annual cash incentive opportunity discussed above. The bonus plan, which is more fully described in the “Grants of Plan-Based Awards” section of the “Executive Compensation Tables,” provides the Committee with the flexibility to establish corporate, departmental or individual performance objectives upon which bonus payments are contingent.
The bonus plan is structured to focus and incent our executive officers to achieve bothon the achievement of a defined set of clearly definedshort-term financial and corporate performance goals and a specific financial goal, which again was our aggregate adjusted operating income for the fiscal year. As described below, theobjectives. The payout percentage under the bonus plan is determined by multiplying the level of achievement of the corporate performance goalsfinancial objective, which in recent years has been our aggregate adjusted operating income target for the fiscal year, by a multiplier based on the level of achievement of our adjusted operating income target.
Financial Objective | × | Corporate Multiplier | = | Bonus Payout Percentage | ||||
2019 Proxy Statement 39
Fiscal 20152018 Structure
In considering the fiscal 2015 annual operating2018 bonus plan, the Committee determined to fully fundrecognized that the then existing structure had been initially designed several years earlier, and at a time when Ciena was approaching break-even profitability. It noted a shift in a number of bonus-related dynamics associated with an increase in Ciena’s profitability since that time. Among these, the Committee considered that the range of actual performance against the financial objective has narrowed and that previous concerns about the potential for a disproportionate impact of a bonus payment on Ciena’s profitability had abated. In addition, the Committee considered its and management’s concerns about the lack of a realistic opportunity for a meaningful upside payout despite strong performance against a range of corporate goals and the adequacy of bonus plan at 100% of target for fiscal 2015.
Financial Objective | Corporate Objectives | |||
❖ Raised the minimum performance threshold to 70% (from 50% in fiscal 2017) ❖ Capped the payout at 130% performance (from 150% in fiscal 2017) ❖ Increased the payout slope for performance above target to2-to-1 (from1.5-to-1 in fiscal 2017) while retaining a1-to-1 payout slope for performance at or below target | ❖ Reduced the number of objectives to eight (from 10 in fiscal 2017) ❖ Raised the minimum performance threshold to 50% (from 30% in fiscal 2017) ❖ Added a multiplier above 1.0x for the highest levels of achievement, but conditioned its application on achievement of at least 80% of the financial objective |
These changes were intended to address more realistic ranges of possible actual performance against the incentivefinancial and corporate objectives, increase the minimum thresholds required in order to earn a bonus plan. We typically incorporate a 1-to-1 payout-for-performance slope inpayment, and provide an appropriate level of upside potential for outstanding performance against the plan. For fiscal 2015, however, based on the 100% plan funding decision above, the Committee designed the plan with a 1.5-to-1 payout-for-performance slope, which changed the allocation between our employees and stockholders of the relative risk and corresponding profit of under-performance and over-performance against our operating targets.objectives. As a result of this structure, our employees would receive a lower comparative sharethese changes, the maximum amount that could be paid under the bonus plan was 192% of the company’s profit in the event of under-performance against our operating targets, and a higher comparative share of the profit in the event of over-performance against those targets.target bonus. Overall, the fiscal 20152018 bonus plan was designed to balance and align the interests of our employees and stockholders, while incentivizing the company’s workforce to drive toward improved profitability and stockholder return.
Financial Objective | Corporate Objectives Multiplier | |||||||
Performance (%) | Total Target Bonus Earned (%) | Objectives Achieved (#) | Multiplier | |||||
< 70% | 0% | < 4 | 0.0x | |||||
70% | 70% | 4 | 0.8x | |||||
80% | 80% |
| 5 | 0.9x | ||||
90% | 90% | 6 | 1.0x | |||||
100% | 100% | 7 | 1.1x * | |||||
110% | 120% | 8 | 1.2x * | |||||
120% | 140% | * Only applies if achieve >80% of Financial | ||||||
130% | 160% | Objective; otherwise reverts to 1.0x | ||||||
Bonus payments are interpolated for performance results falling between the designated levels.
| Cash Incentive Bonus Plan Structure | |||||
| Fiscal 2014 | Fiscal 2015 | ||||
| Performance Goal Achieved | Target Bonus Payable (Paid at 85%) | Performance Goal Achieved | Target Bonus Payable | ||
| “Threshold” | 10% | 10% | 50% | 25% | |
| “Target” | 100% | 100% | 100% | 100% | |
| “Maximum” | ≥200% | 200% | ≥150% | 175% | |
| Number of Goals Achieved | Percent of Total Target Bonus Earned | Percent Performance Against Target | Multiplier | |||||
| 0 - 2 | 0% | <50% | 0.000x | |||||
| 3 | 30% | 50% | 0.250x | |||||
| 4 | 45% | 75% | 0.625x | |||||
| 5 | 60% | 100% | 1.000x | |||||
| 6 | 75% | 125% | 1.375x | |||||
| 7 | 90% | >150% | 1.750x | |||||
| 8 - 10 | 100% | |||||||
 | |||
 | |||
Financial goal
40 2019 Proxy Statement
Corporate Performance Goals. In connection with the Cyan acquisition, the Committee considered whether to adjust the existingThe fiscal 2018 corporate performance goals and the financial goal under the incentive bonus plan to incorporate the projected impact of Cyan’s business on those goals. Given the timing of the closing of the acquisition so late in our fiscal year and,were aligned with the exception of the business transformation objective discussed above, the desire not to adjust the existing goals during the middle ofCiena’s execution imperatives for the fiscal year, the Committee determined to exclude the financial contribution of the business acquired from Cyan in calculating performance under the bonus plan.
EXECUTION IMPERATIVES | OPTICAL LEADERSHIP | 1. Deliver at least two of three defined product releases or feature content | ||||
PACKET NETWORKING GROWTH | 2. Generate $160M in orders for Packet Networking products from customers other than AT&T | |||||
BLUE PLANET AUTOMATION SOFTWARE | 3. Generate $34M in orders for Blue Planet Automation Software and Services solutions portfolio, including orders from four of top 13 defined customers of $10M in aggregate | |||||
ONE CONTROL / MCP SOFTWARE MIGRATION | 4. Ensure that MCP domain controller software is in production in the networks of 25 defined customers | |||||
WEBSCALE CUSTOMER EXPANSION | 5. Generate $260M in revenue directly from Webscale customers | |||||
SUBMARINE MARKET EXPANSION | 6. Generate $215M in orders from submarine business | |||||
SERVICES TRANSFORMATION | 7. Achieve $34M in cost reductions across the Attached Services portfolio 8. Maintain and improve customer experience by attaining defined levels of deployment project completionon-time and customer satisfaction with technical support cases | |||||
Attainment of Fiscal 20152018 Cash Incentive Bonus. Ciena successfully achieved nine of the ten annual corporate performance goals described above, withgenerated adjusted operating income of $243.8$424.9 million in the aggregate for the fiscal year as
Attainment of Fiscal 2018 Cash Incentive Bonus
| Name | Fiscal 2018 Cash Incentive Bonus | ||||
| Gary B. Smith | $ 1,406,250 | ||||
| James E. Moylan, Jr. | $ 557,813 | ||||
| Rick L. Hamilton | $ 412,500 | ||||
| Scott A. McFeely | $ 412,500 | ||||
| David M. Rothenstein | $ 421,875 | ||||
2019 Proxy Statement 41
| Target Total Cash Compensation | |||||||||
| Target Total Cash Compensation ($) | |||||||||
| Name | Fiscal 2014 | Fiscal 2015 | Percentage Increase | ||||||
| Gary B. Smith | $ | 1,800,000 | $ | 1,800,000 | —% | ||||
| James E. Moylan, Jr. | $ | 832,500 | $ | 832,500 | —% | ||||
| François Locoh-Donou | $ | 777,000 | $ | 777,000 | —% | ||||
| Philippe Morin | $ | 925,000 | $ | 925,000 | —% | ||||
| David M. Rothenstein | $ | 680,000 | $ | 680,000 | —% | ||||
Factors and Process in the table above represent target total cashDetermining Fiscal 2018 Equity Awards
In determining equity compensation for fiscal 2014 and fiscal 2015. For amounts actually earned or received by our NEOs during fiscal 2015, see “Summary Compensation Table” in the “Executive Compensation Tables” below.
The market annualCommittee recognized that, for the first time in three years, the overall average equity value for chiefthe executive officers increased by 25% duringwasbelow its target range of between the 50th and 75th market percentiles for the value delivered to similar executives based on the Market Data. Ciena primarily competes with and hires executives from companies that period,are substantially larger in all relevant comparison metrics, and the market annual equity value for all other executives increased by an average 14%. The Committee determined that, after finally aligning executive equity compensation with the Peer Group and with Ciena’s strong performance in fiscal 2014, it was importanttherefore are not appropriate to ensure that equity compensation for our executives for fiscal 2015 kept pace with that of similarly situated executivesinclude in the Peer Group. TheThis dynamic requires the Committee also consideredto develop a peer group of industry-related companies with whom the Company does not directly compete but who represent an aggregate financial profile that places Ciena at or about the market median, with revenue as the most relevant criterion. As a result, in order to better reflect market dynamics and Ciena’s resulting challenge in attracting and retaining top executives, the Committee believes that it is appropriate to establish equity values for the executive officers using a target range at or significantly above median for the values delivered to similar executives.
Based on Compensia’s analysis, as well as Ciena’s strong fiscal 2014 business and financial performance described in the “Overview” above and the qualitative factors for each individual executive described in “Qualitative Factors” above. Taking all of these factors together, the Committee believed that it was appropriate to consider a reasonable increase in the individual and aggregate target equity values for the NEOs.
In determining fiscal 20152018 equity compensation, and in addition to the qualitative factors described above, the Committee considered, among other things, the following:
our CEO’s assessment of the overall responsibilities, performance, experience, expertise and value to Ciena of each individual, as well as the | |||
the existing, unvested equity holdings of each |
the potential impact of awards at the target equity values on key compensation governance metrics, including current and three-year average burn rate, equity overhang levels, and equity grant expense as a percentage of market capitalization; |
the specific number of shares resulting from the proposed target equity values using a range of possible grant date Ciena stock prices; and |
the number of shares remaining available for issuance under the |
As described above, based on the Market Data, the prior year’s equity values of our executives were below (and, in some cases, significantly below) the Committee’s target range for the value delivered to similar executives. In particular, the Committee noted that Mr. Smith’s equity value approximated only the 35th percentile of the equity values awarded to chief executive officers in the Peer Group in 2017. The Committee made its own similar evaluationagreed that, after taking steps to align executive equity compensation with the Peer Group and with Ciena’s strong business and financial performance in recent years, it was important to ensure that equity compensation for our CEO,executives kept pace with the market and that of similarly situated executives in the Peer Group. Accordingly, the Committee established values for the fiscal 2018 equity awards to the NEOs that represented year-over-year increases in grant date value, with variance by individual executive based upon its assessment of his responsibilities, performance, experience and value to Ciena, as well as considerationon market benchmarking for the applicable position. Specifically:
| ❖ | The grant date value of Mr. Smith’s fiscal 2018 equity award represented a 21% year-over-year increase. Given the continued overall market increase in CEO equity values, however, this award only positioned Mr. Smith’s equity value slightly above the market median and at the lower end of the Committee’s target range; |
42 2019 Proxy Statement
| ❖ | The grant date values of the fiscal 2018 equity awards granted to Messrs. Moylan and Rothenstein represented year-over-year increases of 5% and 17%, respectively; and |
| ❖ | Given that Messrs. Hamilton and McFeely had been promoted to the executive leadership team during fiscal 2017, the comparison of their year-over-year increases in equity values was not relevant and was not considered by the Committee. |
Overall, the Committee believed that the values of the qualitative factors described in “Qualitative Factors” above.
Based on the trailing30-day average of Ciena’s closing stock price prior to the grant date, the individual equity values established by the Committee were calculated into a target number of shares of Ciena’s common stock underlying each equity award as set forth below.
Fiscal 2018 Annual Equity Awards
| Name | Total Shares Underlying Award (#) | Grant Date Fair Value ($) | ||||
Gary B. Smith | 310,855 | $ | 6,797,777 | |||
James E. Moylan, Jr. | 71,736 | $ | 1,565,279 | |||
Rick L. Hamilton | 57,390 | $ | 1,252,250 | |||
Scott A. McFeely | 57,390 | $ | 1,252,250 | |||
David M. Rothenstein | 57,390 | $ | 1,252,250 | |||
The Committee decided to modify the allocation and structure of equity awards for the NEOs in fiscal 2018, with the goal of improving the alignment between the compensation of our NEOsexecutives and Ciena’s longer-term business and financial performance relative to the Committee decidedapplicable market. In recent years, the equity awards for our executives have been allocated between RSUs and PSUs. For fiscal 2018, however, in addition to the continued use of RSUs and PSUs, the same equity allocation in fiscal 2015 asawards for the executive officers included a long-term relative performance goal in the previous year. Specifically, 60%form of market stock units (MSUs). The MSUs were based on Ciena’s total stockholder return (TSR) over a period of three fiscal years as compared to the total return of a stock index comprised of companies in our CEO’s equity award was allocated to PSUs and 40% was allocated to RSUs. And, forsector. The following table illustrates the other NEOs, 50%key elements of each of the three equity vehicles.
| Equity Vehicle | Weighting (CEO) | Weighting (Other NEOs) | Metric(s) | Performance Period |
| Vesting | ||||||||||||||
Restricted Stock Units
| 40% | 50% | None | N/A | Quarterly (1/16th) over four years | |||||||||||||||
Performance Stock Units
| 36% | 30% | Sales Orders and Free Cash Flow | One Year (Fiscal 2018) | 50% after first year and 50% after second year | |||||||||||||||
Market Stock Units (NEW)
| 24% | 20% | Relative TSR | Three Years (Fiscal 2018 – 2020) | 100% after third year | |||||||||||||||
2019 Proxy Statement 43
The following table indicates the specific number of shares underlying the RSU awards were allocated to PSUs and 50% were allocated to RSUs.
Allocation of Fiscal 2018 Annual Equity Awards
| Name | RSUs (#) | Target PSUs (#) | Target MSUs (#) | ||||||||||||
| Gary B. Smith | 124,342 | 111,908 | 74,605 | ||||||||||||
| James E. Moylan, Jr. | 35,868 | 21,521 | 14,347 | ||||||||||||
| Rick L. Hamilton | 28,695 | 17,217 | 11,478 | ||||||||||||
| Scott A. McFeely | 28,695 | 17,217 | 11,478 | ||||||||||||
| David M. Rothenstein | 28,695 | 17,217 | 11,478 | ||||||||||||
RSUs
. The CommitteePSUs
. The CommitteeIn establishing performance goals and related target levels for the PSUs, the Committee intendedsought to align the interests of the executive officers with those of ourCiena’s stockholders by focusing their efforts on ensuring the long-termlonger-term growth of our business while achieving increased profitabilitycash generation in the near-term. The Committee also sought to avoid any overlap between the goals for the annual cash incentive bonus plan and the long-term equity compensation for the executive officers. Accordingly, the PSUs were to be earned based on two goals for fiscal 2015, each2018: an aggregate sales orders target of which$3.1 billion and a free cash flow target of $225 million. Each of these goals was derived directly from the targets set forth in our fiscal 2015 annual2018 operating plan, which was reviewed and approved by the Board of Directors:
Any portion of the PSUs not earned by the end of the performance period would be forfeited. The PSUs were designed such that 100% of the shares underlying the award would be earned upon the achievement of 100% of both the gross margin percentagesales orders target and the sales ordersfree cash flow target. Consistent with ourpay-for-performance philosophy, and to closely align the interests of the executive officers with our stockholders and to further incentivize them to overachieve against our fiscal 20152018 operating plan, wethe Committee incorporated upside earning potential to the PSUs for extraordinary performance and downside risk for under-performance against each of the two goals. Specifically, the Committee established the following minimum performance thresholds and maximum number of additional PSUs that could be earned for achievement against the gross margin percentagesales orders and sales ordersfree cash flow targets, as set forth inbelow:
44 2019 Proxy Statement
Fiscal 2018 PSU Performance Goals
| Aggregate Sales Orders (1/2 of Total PSUs) | Free Cash Flow (1/2 of Total PSUs) | |||||||
Aggregate Sales Orders ($B) | Target Earned (%) | Free Cash Flow ($M) | Target Earned (%) | |||||
| < $ 2.79 | 0% | < $ 150 | 0% | |||||
| “Threshold” | $ 2.79 | 50% | $ 150 | 25% | ||||
| “Target” | $ 3.10 | 100% | $ 225 | 100% | ||||
| “Maximum” | $ 3.41 | 200% | ³ $ 275 | 200% | ||||
The percentages of target PSUs earned are interpolated on a straight-line basis for results falling between the table below:
| Fiscal 2015 PSU Performance Goals | |||||
Adjusted Gross Margin Percentage (2/3 of Total PSUs) | Aggregate Sales Orders (1/3 of Total PSUs) | ||||
| Adjusted Gross Margin | Target PSUs Earned | Aggregate Sales Orders ($B) | Target PSUs Earned | ||
| < 40.0% | 0% | < $2.25 | 0% | ||
| “Threshold” | 40.0% | 37.5% | $2.25 | 60% | |
| “Target” | 42.5% | 100% | $2.50 | 100% | |
| “Maximum” | > 44.5% | 200% | > $2.75 | 150% | |
MSUs. As noted above, for the reasons set forth in both the “Overview” and “Context for Determining Fiscal 2015 Equity Compensation” above,first time the Committee established target valuesincorporated a relative performance goal as part of the fiscal 2015annual equity awards for the NEOsexecutive officers. The MSUs are based on Ciena’s TSR – i.e., its stock price appreciation – as compared to the total reported return (the “Return”) of the S&P North American Technology-Multimedia Networking Index (the “S&P Networking Index”) over a three-year measurement period covering Ciena’s fiscal 2018 through fiscal 2020 (the “Measurement Period”). The Committee selected the S&P Networking Index as the appropriate comparison index both because it is directly relevant to our business, consisting of several companies in our sector and including Ciena as a constituent, and because its overall performance has been closely correlated to that representedof Ciena in recent years. For purposes of determining the TSR for Ciena and the Return for the S&P Networking Index, and in order to mitigate the potential impact of stock price volatility, the beginning and ending values for each measure will be determined on an average basis over a 6% year-over-year aggregate increase inperiod of 90 calendar days prior to both the beginning and the end of the Measurement Period. For the same reasons as with the PSUs, the Committee incorporated upside earning potential to the MSUs for outperformance against the S&P Networking Index and downside risk for underperformance against the S&P Networking Index. Specifically, the applicable percentage of the target value and a 19% year-over-year aggregate increase in grant date fair value, as follows:
Fiscal 2018 MSU Performance Goal
Fiscal 2018-2020 Relative TSR (absolute percentage point difference) | Target MSUs Earned (%) | |
(50)% | 0% | |
(40)% | 20% | |
(30)% | 40% | |
(20)% | 60% | |
(10)% | 80% | |
Equal | 100% | |
10% | 120% | |
20% | 140% | |
30% | 160% | |
40% | 180% | |
³ 50% | 200% | |
The percentage of target equity values established byMSUs earned is interpolated on a straight-line basis for results falling between the Committee were calculated into a specificdesignated levels set forth above. The maximum amount of MSUs that can be earned is 200% of the target number of shares underlying the MSU award. However, if Ciena’s TSR during the Measurement Period is negative (as a result of a decline in our common stock price during such period), then the maximum number of shares than can be earned is 100% of the target number of shares underlying each equity award,the MSU award. To the extent earned, the MSUs will vest in full in December 2020 following the end of the Measurement Period, subject to the individual executive’s continued service with Ciena through the corresponding grant date fair values, as set forth below:vesting date. Any portion of the MSUs not earned at the end of the Measurement Period will be forfeited.
2019 Proxy Statement 45
| Fiscal 2015 Annual Equity Awards | |||||
| Name | Total Shares Underlying Award (#) | Grant Date Fair Value ($) | |||
| Gary B. Smith | 299,220 | $ | 5,562,500 | ||
| James E. Moylan, Jr. | 83,780 | $ | 1,557,470 | ||
| François Locoh-Donou | 83,780 | $ | 1,557,470 | ||
| Philippe Morin | 83,780 | $ | 1,557,470 | ||
| David M. Rothenstein | 53,860 | $ | 1,001,257 | ||
Overall, the Committee believed that nearer-term goals focused ontop-line revenue growth and bottom-line cash generation (via the PSU goals of sales orders and free cash flow), complemented by a longer-term goal focused on relative TSR, is an effective combination that will closely align the interests of the executive officers with those of shareholders and thereby enhance stockholder value.
Ciena had an overall strong year oftop-line revenue growth in the “Fiscal 2015 PSU Performance Goals” table above, the fiscal 2015 adjusted gross margin percentage target was 42.5% and the fiscal 20152018 but fell short of certain financial targets in its annual operating plan. Ciena generated aggregate sales orders target was $2.50 billion. In assessing Ciena’s performance against those two performance goals, as with the determination of performance under the fiscal 2015 incentive bonus plan, the Committee determined to exclude the financial contribution of the business acquired from Cyan. Even excluding the contribution of the Cyan business, Ciena had an outstanding year of financial performance$3.5 billion in fiscal 2015. Ciena reported an adjusted gross margin percentage of 44.9% in fiscal 2015,2018, and therefore the maximum 200% of the PSUs allocated to that goal were earned. Ciena also generated aggregate sales orders of $2.64 billion$162 million in free cash flow in fiscal 2015,2018, and therefore 128%37% of the PSUs allocated to that goal were earned. Based on the equal weighting of the two goals, approximately 176%119% of the total PSUs were earned. One-third of those PSUs vested in December 2015, and the remainder of the earned PSUs will vest in equal installments in December 2016 and December 2017.
Fiscal 2018 PSU Awards Earned
| Name | PSUs Earned (#) | |
Gary B. Smith | 132,611 | |
James E. Moylan, Jr. | 25,501 | |
Rick L. Hamilton | 20,401 | |
Scott A. McFeely | 20,401 | |
David M. Rothenstein | 20,401 | |
One-half of the PSUs earned during fiscal 2018 vested in December 2018, and the remainingone-half of the PSUs earned will vest in December 2019, subject to continued service.
We apply a consistent approach in our equity award practices by granting annual equity awards to our executive officers and directors at or around the same time each year. Annual equity awards to our NEOs are made by the Committee, and the grant date of these awards is the same day that the Committee meets to approve the awards. The Committee generally meets, approves and grants annual equity awards to the executive officers shortly afterpromptly following Ciena’s release of earnings for the fourth quarter and fiscal year. This practice began in fiscal 2007 and continued for annual equity awards in fiscal 2015,2018, with the fourth quarter earnings release on December 11, 20147, 2017 and executive andnon-executive awards granted on December 17, 2014.
Other Elements of and responsibility for defining and implementing a strategic, cross-functional approach to corporate infrastructure cost optimization, including with respect to real estate, information technology and human resources. Based upon the recommendation of our CEO, the Committee desired to link closely Mr. Rothenstein’s pay with performance of this additional responsibility over the next several years. Accordingly, the Committee established a target equity value to be delivered, which was then calculated into a specific number of shares of our common stock, based on the trailing 30-day average of Ciena’s closing stock price prior to the date of grant. Based on this approach, in December 2014 the Committee approved a supplemental PSU award to Mr. Rothenstein of 17,950 shares of our common stock, which award had a grant date fair value of $333,690. One-third of the grant amount may be earned at the end of each of fiscal years 2015, 2016 and 2017 based on achievement of a pre-determined performance goal for such fiscal year to be established by the Committee, with vesting of any PSUs earned to occur on December 20 following the relevant fiscal year. For fiscal 2015, the performance goal established by the Committee related to (i) achieving a defined target of annual cost savings from reductions or modifications to our corporate real estate portfolio and (ii) defining and launching our global workplace flexibility program. There was no upside opportunity related to this performance goal. The Committee determined that this performance goal was achieved in fiscal 2015, and therefore one-third of the supplemental PSUs awarded to Mr. Rothenstein were earned and vested in December 2015.
We maintain a U.S. Executive Severance Benefit Plan as part of our efforts to continue to enable the attractionattract and retention ofretain top executive talent. This plan, which is governed by the Employee Retirement Income Security Act of 1974, as amended, provides certain U.S.-based employees, including the NEOs and employees of the rank of vice president or above, with certain severance payments and benefits in the event of an involuntary separation of service by Ciena without “cause.” For additional information about the severance payments and benefits payable under this plan, as well as the estimated value of these payments and benefits, see “Payments Upon Involuntary Separation of Service for Other than Cause” below.
Each of the NEOs has a change in control severance agreement with Ciena. We have entered into these agreements upon the initial hiring of senior employees, upon promotion of existing employees to senior executive roles, and when the Compensation Committee determines it to be important for the retention of other key employees. These agreements with our executive officers, including the NEOs, are effective through November 2019, unless earlier terminated. We believe that these severance arrangements are important for retention of key employees and necessary to attract qualified executive officers, who may otherwise be deterred from taking a position with us by the possibility of being dismissed following a change ofin control, particularly given the level of acquisition activity in our industry.
Except for the conversion of certain performance-based equity into time-based awards, (i) the CEO receives no benefits under this agreement unless his employment is terminated without cause, or by him for good reason, within 90 days prior to or 18 months following the effective date of a change in control transaction, and (ii) the other NEOs receive no benefits under these
46 2019 Proxy Statement
agreements unless their employment is terminated without cause, or by the executive for good reason, within 90 days prior to or 12 months following the effective date of thea change in control transaction. We believe thisso-called “double trigger” structure strikes an appropriate balance between the potential compensation payable to executive officers and the corporate objectives described above. We also believe that were Ciena to engage in discussions or negotiations relating to a corporate transaction that our Board of Directors deems in the interest of stockholders, these agreements would serve as an important tool in ensuring that our executive team remains focused on the consummation of the transaction, without significant distraction or concern relating to personal circumstances such as continued employment.
For additional information about the severancepayments and benefits payable under these agreements, as well as the estimated value of these payments and benefits, see “Potential Payments uponUpon Termination or Change in Control” below.
We maintain a recoupment or “clawback” policy that applies to equity incentive awards under our 20082017 Plan, annual cash incentive plan awards, and sales incentive compensation. This policy, which is broader than currently required by applicable law, provides for recoupment of certain benefits in the event that Ciena is required to prepare an accounting restatement due to material noncompliance, as a result of misconduct, with any financial reporting requirement under applicable securities laws. Specifically, those executive officers subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, and any other recipient of covered incentive compensation who knowingly engaged in such misconduct, was grossly negligent in engaging in the misconduct, knowingly failed to prevent
In fiscal 2018, our Compensation Committee reviewed and updated our Perquisites Policy, reaffirming that our NEOs are eligible for the same benefits as salaried employees and receive only limited perquisites, generally consisting of annual physical examinations as well as tax preparation and financial planning services, both of which are made available to other senior employees.
Required Reimbursement for Personal Use of Corporate Memberships or Tickets
We maintain a policy requiring the NEOs to reimburse certain costs associated with any personal use of items such as corporate tickets to sporting or cultural events and personal use of any corporate membership at a golf or similar club. Specifically, any executive officer who makes personal use of such tickets is required to reimburse Ciena for the face value of the tickets used. Any executive who makes personal use of a club in which Ciena has a corporate membership must reimburse Ciena for the cost of any meals, merchandise, greens fees, lessons and other charges associated with his or her use and, in addition, reimburse Ciena for apro-rata share of the annual membership dues for each day on which he or she makes personal use of the facilities. To date, personal usage has been extremely limited as corporate memberships are maintained predominately in order to use these facilities for business-related functions. The annual dues for each of the three executive officers named individually on club memberships used by Ciena generally range from $8,000 to $15,000.
To align the interests of our executive officers and directors with those of our stockholders, and to promote our commitment to sound corporate governance, the Board has established stock ownership guidelines for the NEOs as set forth in “Principles of Corporate Governance, Bylaws and Other Governance Documents” above. During fiscal 2018 the Committee increased substantially the minimum ownership requirements for our executive officers and directors, and added a holding requirement for such individuals until the relevant minimum ownership is achieved.
We maintain the Ciena Corporation Deferred Compensation Plan, which allows a select group of management employees in the United States (including our NEOs) to defer up to 75% of base salary and up to 100% of other compensation, including cash incentive bonuses, commissions and RSU awards. The plan also allowsnon-employee directors to defer up to 100% of their annual cash retainer and annual RSU awards. The plan does not provide for any matching or discretionary contributions to participants except for restorative matching payments of foregone matching contributions that a participant would have received under the terms of our 401(k) Plan but for the participant’s deferrals into the plan.
2019 Proxy Statement 47
In accordance with our Insider Trading Policy, and as set forth in “Principles of Corporate Governance, Bylaws and Other Governance Documents” above, our executive officers and directors are prohibited from pledging Ciena securities and engaging in hedging transactions with respect to Ciena securities.
The Compensation Committee has reviewed and discussed the “Compensation Discussion and Analysis” with management, and, based on this review and discussion, has recommended to the Board of Directors that the “Compensation Discussion and Analysis” be included in this proxy statement and incorporated into Ciena’s Annual Report onForm 10-K for fiscal 2018 by reference from this proxy statement. Submitted by the members of the Compensation Committee: Judith M. O’Brien (Chair) Bruce L. Claflin Patrick T. Gallagher Joanne B. Olsen |
48 2019 Proxy Statement
The following tabular information, accompanying narrative disclosure and footnoted detail provide compensation-related information for our NEOs as of the end of fiscal COMPENSATION COMMITTEE REPORTThe Compensation Committee has reviewed and discussed the “Compensation Discussion and Analysis” with management, and, based on this review and discussion, has recommended to the Board of Directors that the “Compensation Discussion and Analysis” be included in this proxy statement and incorporated into Ciena’s Annual Report on Form 10-K for fiscal 2015 by reference from this proxy statement.Submitted by the members of the Compensation Committee:Judith M. O’Brien (Chairperson)Harvey B. CashBruce L. ClaflinPatrick T. Gallagher53EXECUTIVE COMPENSATION TABLES2015.2018. These executive compensation tables include all compensation awarded to or earned by each NEO for the fiscal years indicated below in which they served as an executive officer. Mr. Morin resigned as an officer and employee of Ciena, effective as of November 1, 2015, the beginning of our fiscal 2016. Mr. Locoh-Donou, who was appointed as our Senior Vice President and Chief Operating Officer effective as of November 1 2015, served as our Senior Vice President, Global Products Group during fiscal 2015.
The Summary Compensation Table below presents compensation earned by our Named Executive Officers for each of the last three fiscal years during which they served as executive officers in accordance with SEC rules.Summary Compensation TableSummary Compensation Table Salary Bonus StockAwards OptionAwards Non- EquityIncentive PlanCompensation All OtherCompensation Total Name and Principal Position Year ($)(1) ($) ($)(2) ($) ($)(3) ($)(4) ($) Gary B. Smith 2015 $ 800,576 — $ 5,562,500 — $ 1,070,000 $ 15,547 $ 7,448,623 President and CEO 2014 $ 788,076 — $ 4,934,689 — $ 749,000 $ 17,100 $ 6,488,865 2013 $ 750,576 — $ 3,746,093 — $ 937,500 $ 19,854 $ 5,454,023 James E. Moylan, Jr. 2015 $ 450,576 — $ 1,557,470 — $ 409,275 $ 7,950 $ 2,425,271 Sr. V.P., Finance and CFO 2014 $ 450,576 — $ 1,233,782 — $ 286,493 $ 7,650 $ 1,978,501 2013 $ 450,576 — $ 1,560,872 — $ 382,500 $ 7,650 $ 2,401,598 François Locoh-Donou 2015 $ 420,538 — $ 1,557,470 — $ 381,990 $ 10,103 $ 2,370,101 Sr. V.P., Global Products Group 2014 $ 420,538 — $ 1,233,782 — $ 267,393 $ 6,989 $ 1,928,702 2013 $ 409,273 — $ 1,300,935 — $ 315,000 $ 5,300 $ 2,030,508 Philippe Morin 2015 $ 407,641 — $ 1,557,470 — $ 366,483 $ 42,478 $ 2,374,072 Sr. V.P., Global Sales & Field Operations 2014 $ 463,718 — $ 1,233,782 — $ 291,936 $ 2,751 $ 1,992,187 2013 $ 495,361 — $ 1,300,935 — $ 367,869 $ 2,943 $ 2,167,108 David M. Rothenstein 2015 $ 400,512 — $ 1,334,948 — $ 299,600 $ 7,950 $ 2,043,010 Sr. V.P., General Counsel and Secretary 2014 $ 400,512 — $ 789,480 — $ 209,720 $ 7,650 $ 1,407,362 2013 $ 387,994 — $ 1,300,935 — $ 280,000 $ 9,244 $ 1,978,173
Summary Compensation Table
| Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | All Other Compensation ($)(5) | Total ($) | ||||||||||||||||||||||||||||
Gary B. Smith |
|
2018 |
|
$ |
917,307 |
|
|
— |
|
$ |
6,797,777 |
|
$ |
1,406,250 |
|
$ |
8,250 |
|
$ |
9,129,584 |
| ||||||||||||||
President and CEO | 2017 | $ | 900,000 | — | $ | 5,592,261 | $ | 1,125,000 | $ | 17,950 | $ | 7,635,211 | |||||||||||||||||||||||
| 2016 | $ | 875,576 | — | $ | 4,246,938 | $ | 1,068,750 | $ | 13,350 | $ | 6,204,614 | ||||||||||||||||||||||||
James E. Moylan, Jr. | 2018 | $ | 535,096 | — | $ | 1,565,279 | $ | 557,813 | $ | 12,597 | $ | 2,670,785 | |||||||||||||||||||||||
SVP and CFO | 2017 | $ | 525,000 | — | $ | 1,491,522 | $ | 446,250 | $ | 12,975 | $ | 2,475,747 | |||||||||||||||||||||||
| 2016 | $ | 506,826 | — | $ | 1,132,749 | $ | 423,938 | $ | 10,380 | $ | 2,073,893 | ||||||||||||||||||||||||
Rick L. Hamilton | 2018 | $ | 443,462 | $ | 300,000 | $ | 1,252,250 | $ | 412,500 | $ | 15,868 | $ | 2,424,080 | ||||||||||||||||||||||
SVP, Blue Planet Software | 2017 | $ | 420,000 | $ | 615,000 | $ | 1,087,817 | $ | 315,000 | $ | 53,830 | $ | 2,491,647 | ||||||||||||||||||||||
Scott A. McFeely | 2018 | $ | 438,462 | — | $ | 1,252,250 | $ | 412,500 | $ | 13,415 | $ | 2,116,627 | |||||||||||||||||||||||
SVP, Global Products and Services | 2017 | $ | 394,760 | — | $ | 511,230 | $ | 300,000 | $ | 17,298 | $ | 1,223,288 | |||||||||||||||||||||||
David M. Rothenstein | 2018 | $ | 458,654 | — | $ | 1,252,250 | $ | 421,875 | $ | 8,250 | $ | 2,141,029 | |||||||||||||||||||||||
SVP, General Counsel and Secretary | 2017 | $ | 450,000 | — | $ | 1,065,102 | $ | 337,500 | $ | 7,950 | $ | 1,860,552 | |||||||||||||||||||||||
|
| 2016
|
| $
| 438,060
|
|
| —
|
| $
| 809,217
|
| $
| 299,250
|
| $
| 9,474
|
| $
| 1,556,001
|
| |||||||||||||||
| (1) | Ciena has a 52 or53-week fiscal year, which ends on the Saturday nearest to the last day of October in each year. Ciena’s fiscal |
| (2) | Reflects a retention payment in fiscal 2018 of $300,000 and two retention payments in fiscal 2017 to Mr. Hamilton of $615,000 in the aggregate, each of which were part of hisnon-executive compensation arrangement upon hire. |
| (3) | The amounts set forth in the “Stock Awards” column represent the aggregate grant date fair value of |
| (4) | |
Non-Equity Incentive Plan Compensation reflects amounts earned by each Named Executive Officer under Ciena’s annual cash incentive bonus plan for fiscal |
2019 Proxy Statement 49
| (5) | |
All other compensation includes the following for each Named Executive Officer (as applicable) during fiscal |
| a. | For each Named Executive Officer, Section 401(k) plan matching contributions paid by us and generally available to all full-time U.S. |
| b. | For Mr. |
| c. | For Messrs. |
Non-Equity Incentive Plan Financial Objective × Corporate Objectives Multiplier = Bonus Payout Percentage Performance Against Target (%) Total Target Bonus Earned (%) Objectives Achieved (#) Multiplier < 70% 70% 80% 90% 100% 110% 120% * Only applies if achieve >80% of Financial Objective; otherwise reverts to 1.0x ³ 130% Based on the level of achievement of the fiscal Financial Objective Achieved Target Bonus Payable “Threshold” 70% 4 56% “Target” 100% 6 100% “Maximum” ³130% 8 192% The “threshold,” “target” and “maximum” values in the table below are calculated by multiplying each NEO’s base salary for fiscal Equity 50 Grants of Plan-Based AwardsThe following table sets forth information regarding non-equity incentive awards and equity awards granted to each of the NEOs during fiscal 2015. For fiscal 2015, non-equity incentive awards to the NEOs consisted of opportunities under our cash incentive bonus plan and equity awards consisted of restricted stock unit (“RSU”) and performance stock unit (“PSU”) awards. The actual amount of cash incentive compensation earned by the NEOs during fiscal 2015 is set forth in the “Non-Equity Incentive Compensation” column of the “Summary Compensation Table” above.Awards.Awards. Non-equity incentive plan awards for fiscal 20152018, which are identified as “Incentive Cash” in the “Grant of Plan-Based Awards” table below, represent the estimated range of potential payouts possible under our annual cash incentive bonus plan.plan at the time of award. The actual cash incentive bonus earned by the NEOs during fiscal 2018 is set forth in the“Non-Equity Incentive Compensation” column of the “Summary Compensation Table” above. The design of the plan for fiscal 2015,2018, including the use of a combination of ten corporate performance goals and our fiscal 20152018 adjusted operating income target and eight corporate performance goals to derive the total bonus payout percentage, is set forth in the table below and more fully described in “Compensation Discussion and Analysis” above. Assuming the satisfaction of the requisite number of corporate performance goals, and based Financial Objective Corporate Objectives Multiplier 0% < 4 0.0x 70% 4 0.8x 80% 5 0.9x 90% 6 1.0x 100% 7 1.1x * 120% 8 1.2x * 140% 160% 2015 adjusted operating income target,2018 financial objective and corporate objectives, bonuses under the cash incentive bonus plan werewould have been payable at each of the “threshold,” “target” and “maximum” levels as set forth below, with payments interpolated for results falling between the designated levels: Fiscal 2015Cash Incentive Bonus Plan Performance GoalAchieved TargetBonus PayableThreshold 50% 25% Target 100% 100% Maximum ≥150% 175% Fiscal 2018
Cash Incentive Bonus Plan Corporate
Objectives
Achieved 20152018 by his respective target bonus opportunity (expressed as a percentage of annual base salary) by the applicable target bonus payable factor above. See “Compensation Discussion and Analysis — Annual Cash Incentive Bonus Plan.”Awards. DuringAwards.Equity awards during fiscal 2015, we granted equity awards to our NEOs under our 2008 Plan in the form2018 consisted of RSUsRSU, PSU and PSUs.MSU awards. Each such stock award represents a contractual right to receive one share of our common stock. RSU awards granted to55the NEOs in fiscal 20152018 vest over a four-year term, withone-sixteenth of the grant amount vesting quarterly. 2019 Proxy Statement
PSU awards granted to the NEOs in fiscal 20152018 were structured such that (i) one-third100% of the total PSU shares granted were subject tounderlying the award would be earned upon the achievement of a fiscal 2015 aggregate100% of both the sales orders target and (ii) two-thirds of the total PSU shares granted were subject to the achievement of a fiscal 2015 aggregate adjusted gross marginfree cash flow target, each as more fully described in “Compensation Discussion and Analysis”Analysis — Equity Award Allocation and Structure — PSUs” above. With respectThe PSU awards incorporate upside earning potential to the PSUs allocatedfor extraordinary performance and downside risk for under-performance against each of the two goals. Specifically, the PSU awards are subject to the following minimum performance thresholds and maximum number of additional PSUs that could be earned for achievement against the sales orders and free cash flow targets, as set forth below:
Fiscal 2018 PSU Performance Goals
| Aggregate Sales Orders (1/2 of Total PSUs) | Free Cash Flow (1/2 of Total PSUs) | |||||||||||
Aggregate Sales Orders ($B) | Target PSUs Earned (%) | Free Cash Flow ($M) | Target PSUs Earned (%) | |||||||||
< $ 2.79
|
|
0%
|
|
< $ 150
|
|
0%
|
| |||||
“Threshold”
|
$ 2.79
|
|
50%
|
|
$ 150
|
|
25%
|
| ||||
“Target”
|
$ 3.10
|
|
100%
|
|
$ 225
|
|
100%
|
| ||||
“Maximum”
|
$ 3.41
|
|
200%
|
|
> $ 275
|
|
200%
|
| ||||
MSU awards granted to the NEOs in fiscal 2018 were based on Ciena’s TSR — i.e., its stock price appreciation — as compared to the total reported return (the “Return”) of the S&P Networking Index over a three-year measurement period covering Ciena’s fiscal 2018 through fiscal 2020 (the “Measurement Period”). For purposes of determining the TSR for Ciena and the Return for the S&P Networking Index, the beginning and ending values for each measure will be determined on an average basis over a period of 90 calendar days prior to both the beginning and the end of the Measurement Period. The MSU awards incorporate upside earning potential to the MSUs for outperformance against the S&P Networking Index and downside risk for underperformance against the S&P Networking Index. Specifically, the applicable percentage of the target number of MSUs earned will be determined based on the absolute percentage point difference between Ciena’s TSR as compared to the Return for the S&P Networking Index during the Measurement Period, as set forth below:
Fiscal 2018 MSU Performance Goal
| Fiscal 2018-2020 Relative TSR (absolute percentage point difference) | Target MSUs Earned (%) | |
(50)%
|
0%
| |
(40)%
|
20%
| |
(30)%
|
40%
| |
(20)%
|
60%
| |
(10)%
|
80%
| |
Equal
|
100%
| |
10%
|
120%
| |
20%
|
140%
| |
30%
|
160%
| |
40%
|
180%
| |
³50%
|
200%
| |
The percentage of target MSUs earned is interpolated on a straight-line basis for results falling between the designated levels set forth above. Based on the above table, the maximum amount of MSUs that can be earned is 200% of the target number of shares capableunderlying the MSU award. However, if Ciena’s TSR during the Measurement Period is negative (as a result of beinga decline in our stock price during such period), then the maximum number of shares than can be earned wasis 100% of the target number of shares underlying the MSU award. To the extent earned, the MSUs will vest in full in December 2020 following the end of the Measurement Period, subject to a minimum performance threshold of 90% of target, which would result in 60% of the shares underlying thatindividual executive’s continued service with Ciena through the vesting date. Any portion of the award beingMSUs not earned and a maximum performance cap of 110% of target, which would result in 150%at the end of the shares underlying that portionMeasurement Period will be forfeited.
2019 Proxy Statement 51
The following table sets forth information regardingnon-equity incentive awards and equity awards granted to each of the award being earned. With respect to the PSUs allocated to the adjusted gross margin target, the number of shares capable of being earned was subject to a minimum performance threshold of 40% adjusted gross margin, which would result in 37.5% of the shares underlying that portion of the award being earned, and a maximum performance cap of 44.5% adjusted gross margin, which would result in 200% of the shares underlying that portion of the award being earned. Any shares earnedNEOs during the fiscal 2015 performance period were subject to further vesting requirements, with the shares to be delivered upon vesting in equal installments in December 2015, 2016 and 2017, subject to the NEO’s continued service with Ciena.2018. For information regarding the performance criteria with respectapplicable to PSUs and MSUs granted in fiscal 2015, see “Compensation Discussion and Analysis” above.
| Grants of Plan-Based Awards | |||||||||||||||||||||||||||||||
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1) | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Stock Units | Full Grant Date Fair Value (2) | ||||||||||||||||||||||||||||
| Threshold | Target | Maximum | Threshold | Target | Maximum | ||||||||||||||||||||||||||
| Name | Type of Award | Grant Date | ($) | ($) | ($) | (#) | (#) | (#) | (#) | ($) | |||||||||||||||||||||
| Gary B. Smith | PSU | 12/17/2014 | 35,547 | 179,530 | 329,439 | $ | 3,337,463 | ||||||||||||||||||||||||
| RSU | 12/17/2014 | 119,690 | $ | 2,225,037 | |||||||||||||||||||||||||||
| Incentive Cash | 12/17/2014 | $ | 250,000 | $ | 1,000,000 | $ | 1,750,000 | ||||||||||||||||||||||||
| James E. Moylan, Jr. | PSU | 12/17/2014 | 8,294 | 41,890 | 76,868 | $ | 778,735 | ||||||||||||||||||||||||
| RSU | 12/17/2014 | 41,890 | $ | 778,735 | |||||||||||||||||||||||||||
| Incentive Cash | 12/17/2014 | $ | 95,625 | $ | 382,500 | $ | 669,375 | ||||||||||||||||||||||||
| François Locoh-Donou | PSU | 12/17/2014 | 8,294 | 41,890 | 76,868 | $ | 778,735 | ||||||||||||||||||||||||
| RSU | 12/17/2014 | 41,890 | $ | 778,735 | |||||||||||||||||||||||||||
| Incentive Cash | 12/17/2014 | $ | 89,250 | $ | 357,000 | $ | 624,750 | ||||||||||||||||||||||||
| Philippe Morin | PSU | 12/17/2014 | 8,294 | 41,890 | 76,868 | $ | 778,735 | ||||||||||||||||||||||||
| RSU | 12/17/2014 | 41,890 | $ | 778,735 | |||||||||||||||||||||||||||
| Incentive Cash | 12/17/2014 | $ | 85,627 | $ | 342,508 | $ | 599,388 | ||||||||||||||||||||||||
| David M. Rothenstein | PSU | 12/17/2014 | 5,332 | 26,930 | 49,417 | $ | 500,629 | ||||||||||||||||||||||||
| PSU | 12/17/2014 | — | 17,950 | — | $ | 333,691 | |||||||||||||||||||||||||
| RSU | 12/17/2014 | 26,930 | $ | 500,629 | |||||||||||||||||||||||||||
| Incentive Cash | 12/17/2014 | $ | 70,000 | $ | 280,000 | $ | 490,000 | ||||||||||||||||||||||||
Grants of Plan-Based Awards
Estimated Possible Payouts Under |
Estimated Future Payouts Under | All Other Stock Awards: Number of Shares of Stock or Stock Units (#) | Full Grant Date Fair Value (2) ($) | |||||||||||||||||||||||||||||||||
| Name | Type of Award | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||||
Gary B. Smith
|
PSU
|
12/12/2017
|
|
13,989
|
|
|
111,908
|
|
|
223,816
|
|
$
|
2,414,975
|
| ||||||||||||||||||||||
RSU
|
12/12/2017
|
|
124,342
|
|
$
|
2,683,300
|
| |||||||||||||||||||||||||||||
MSU
|
12/12/2017
|
|
14,921
|
|
|
74,605
|
|
|
149,210
|
| $ | 1,699,502 | ||||||||||||||||||||||||
Incentive Cash
|
12/12/2017
|
$
|
630,000
|
|
$
|
1,125,000
|
|
$
|
2,160,000
|
| ||||||||||||||||||||||||||
James E. Moylan, Jr.
|
PSU
|
12/12/2017
|
|
2,690
|
|
|
21,521
|
|
|
43,042
|
|
$
|
464,423
|
| ||||||||||||||||||||||
RSU
|
12/12/2017
|
|
35,868
|
|
$
|
774,031
|
| |||||||||||||||||||||||||||||
MSU
|
12/12/2017
|
|
2,869
|
|
|
14,347
|
|
|
28,694
|
|
$
|
326,825
|
| |||||||||||||||||||||||
Incentive Cash
|
12/12/2017
|
$
|
249,900
|
|
$
|
446,250
|
|
$
|
856,800
|
| ||||||||||||||||||||||||||
Rick L. Hamilton
|
PSU
|
12/12/2017
|
|
2,152
|
|
|
17,217
|
|
|
34,434
|
|
$
|
371,543
|
| ||||||||||||||||||||||
RSU
|
12/12/2017
|
|
28,695
|
|
$
|
619,238
|
| |||||||||||||||||||||||||||||
MSU
|
12/12/2017
|
|
2,296
|
|
|
11,478
|
|
|
22,956
|
|
$
|
261,469
|
| |||||||||||||||||||||||
Incentive Cash
|
12/12/2017
|
$
|
184,800
|
|
$
|
330,000
|
|
$
|
633,600
|
| ||||||||||||||||||||||||||
Scott A. McFeely
|
PSU
|
12/12/2017
|
|
2,152
|
|
|
17,217
|
|
|
34,434
|
|
$
|
371,543
|
| ||||||||||||||||||||||
RSU
|
12/12/2017
|
|
28,695
|
|
$
|
619,238
|
| |||||||||||||||||||||||||||||
MSU
|
12/12/2017
|
|
2,296
|
|
|
11,478
|
|
|
22,956
|
| �� |
$
|
261,469
|
| ||||||||||||||||||||||
Incentive Cash
|
12/12/2017
|
$
|
184,800
|
|
$
|
330,000
|
|
$
|
633,600
|
| ||||||||||||||||||||||||||
David M. Rothenstein
|
PSU
|
12/12/2017
|
|
2,152
|
|
|
17,217
|
|
|
34,434
|
|
$
|
371,543
|
| ||||||||||||||||||||||
RSU
|
12/12/2017
|
|
28,695
|
|
$
|
619,238
|
| |||||||||||||||||||||||||||||
MSU
|
12/12/2017
|
|
2,296
|
|
|
11,478
|
|
|
22,956
|
|
$
|
261,469
|
| |||||||||||||||||||||||
Incentive Cash
|
12/12/2017
|
$
|
189,000
|
|
$
|
337,500
|
|
$
|
648,000
|
| ||||||||||||||||||||||||||
| (1) | Estimated possible payouts undernon-equity incentive plan awards reflect the |
| (2) | Grant Date Fair Value reported in the table above, computed in accordance with FASB ASC Topic 718, will likely vary from the amount actually realized by any NEO based on a number of factors, including the number of shares that are earned and ultimately vest, the timing of vesting, the timing of any sale of shares, and the market price of |
52 2019 Proxy Statement
The following table sets forth, on anaward-by-award basis, information related toOutstanding Equity Awards at FiscalYear-End unexercised options and unvested stock awards held by each Named Executive Officer as of the end of fiscal 2015.2018. The vesting conditions for each award, including the identification of those awards that are subject to performance-based vesting conditions, are set forth in the footnotes below the table. The market value of equity awards that have not vested is calculated by multiplying the number of shares by $24.14,$32.02, the closing market price per share of our common stock on The New York Stock Exchange on the last trading day of fiscal 2015. Each of the stock options in the table below has a ten-year term from the grant date and an exercise price equal to the closing price on the grant date.Outstanding Equity Awards at Fiscal Year-End Option Awards Stock Awards Number ofSecuritiesUnderlyingUnexercisedOptions(#) Number ofSecuritiesUnderlyingUnexercisedOptions(#) OptionExercisePrice Number ofShares orUnits ofStock ThatHave NotVested MarketValue ofShares orUnits ofStockThatHave NotVested Equity Incentive Plan Awards; Number of Unearned Shares, Units or Other Rights That Have Not Vested Equity Incentive Plan Awards; Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested Number of Unearned Shares, Units or Other Rights That Have Not Vested Name Grant Date Exercisable Unexercisable ($) Option Expiration Date (#) ($) (#) ($) Gary B. Smith 12/18/2007 69,000 — $ 35.21 12/18/2017 12/18/2006 75,000 — $ 27.88 12/18/2016 11/2/2005 4,537 — $ 16.52 11/2/2015 12/17/2014 316,401 (1) $ 7,637,920 12/17/2014 97,250 (2) $ 2,347,615 12/17/2013 84,484 (3) $ 2,039,444 12/17/2013 50,635 (4) $ 1,222,329 12/18/2012 49,900 (5) $ 1,204,586 12/18/2012 37,425 (6) $ 903,440 12/15/2011 5,980 (7) $ 144,357 James E. Moylan, Jr. 12/18/2007 35,000 — $ 35.21 12/18/2017 12/17/2014 73,824 (1) $ 1,782,111 572018.Outstanding Equity Awards at Fiscal Year-End Option Awards Stock Awards Number ofSecuritiesUnderlyingUnexercisedOptions(#) Number ofSecuritiesUnderlyingUnexercisedOptions(#) OptionExercisePrice Number ofShares orUnits ofStock ThatHave NotVested MarketValue ofShares orUnits ofStockThatHave NotVested Equity Incentive Plan Awards; Number of Unearned Shares, Units or Other Rights That Have Not Vested Equity Incentive Plan Awards; Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested Number of Unearned Shares, Units or Other Rights That Have Not Vested Name Grant Date Exercisable Unexercisable ($) Option Expiration Date (#) ($) (#) ($) 12/17/2014 34,036 (2) $ 821,629 12/17/2013 17,603 (3) $ 424,936 12/17/2013 15,824 (4) $ 381,991 12/18/2012 20,793 (5) $ 501,943 12/18/2012 15,594 (6) $ 376,439 12/15/2011 2,620 (7) $ 63,247 François Locoh-Donou 12/18/2006 20,000 — $ 27.88 12/18/2016 12/17/2014 73,824 (1) $ 1,782,111 12/17/2014 34,036 (2) $ 821,629 12/17/2013 17,603 (3) $ 424,936 12/17/2013 15,824 (4) $ 381,991 12/18/2012 17,330 (5) $ 418,346 12/18/2012 12,997 (6) $ 313,748 12/15/2011 2,355 (7) $ 56,850 8/1/2011 9,955 (8) $ 240,314 8/1/2011 9,955 (9) $ 240,314 Philippe Morin (10) 12/17/2014 41,890 $ 1,011,225 12/17/2014 34,036 $ 821,629 12/17/2013 17,603 $ 424,936 12/17/2013 15,824 $ 381,991 12/18/2012 17,330 $ 418,346 12/18/2012 12,997 $ 313,748 12/15/2011 2,355 $ 56,850 8/1/2011 9,955 $ 240,314 8/1/2011 9,955 $ 240,314 David M. Rothenstein 12/17/2014 47,457 (1) $ 1,145,612 12/17/2014 5,983 (1) $ 144,430 11,967 (1) $ 288,883 12/17/2014 21,881 (2) $ 528,207 12/17/2013 11,265 (3) $ 271,937 12/17/2013 10,125 (4) $ 244,418 12/18/2012 15,250 (5) $ 368,135 12/18/2012 11,437 (6) $ 276,089 12/18/2012 3,119 (6) $ 75,293 12/15/2011 2,090 (7) $ 50,453
Outstanding Equity Awards at FiscalYear-End
Stock Awards | ||||||||
| Name | Grant Date | Number of Shares or Units Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | |||||
Gary B. Smith | 12/12/2017 | 132,611 (1) | $ 4,246,204 | |||||
12/12/2017 | 101,029 (2) | $ 3,234,949 | ||||||
12/12/2017 | 74,605 (3) | $ 2,388,852 | ||||||
12/14/2016 | 84,984 (4) | $ 2,721,188 | ||||||
12/14/2016 | 53,112 (5) | $ 1,700,646 | ||||||
12/15/2015 | 48,984 (6) | $ 1,568,468 | ||||||
12/15/2015 | 27,435 (7) | $ 878,469 | ||||||
12/17/2014 | 7,490 (8) | $ 239,830 | ||||||
James E. Moylan, Jr. | 12/12/2017 | 25,501 (1) | $ 816,542 | |||||
12/12/2017 | 29,143 (2) | $ 933,159 | ||||||
12/12/2017 | 14,347 (3) | $ 459,391 | ||||||
12/14/2016 | 18,886 (4) | $ 604,730 | ||||||
12/14/2016 | 17,708 (5) | $ 567,010 | ||||||
12/15/2015 | 10,887 (6) | $ 348,602 | ||||||
12/15/2015 | 9,148 (7) | $ 292,919 | ||||||
12/17/2014 | 2,620 (8) | $ 83,892 | ||||||
Rick L. Hamilton | 12/12/2017 | 20,401 (1) | $ 653,240 | |||||
12/12/2017 | 23,316 (2) | $ 746,578 | ||||||
12/12/2017 | 11,478 (3) | $ 367,526 | ||||||
12/14/2016 | 7,422 (4) | $ 237,652 | ||||||
12/14/2016 | 6,959 (5) | $ 222,827 | ||||||
11/07/2016 | 13,876 (9) | $ 444,310 | ||||||
Scott A McFeely | 12/12/2017 | 20,401 (1) | $ 653,240 | |||||
12/12/2017 | 23,316 (2) | $ 746,578 | ||||||
12/12/2017 | 11,478 (3) | $ 367,526 | ||||||
12/14/2016 | 6,474 (4) | $ 207,297 | ||||||
12/14/2016 | 6,071 (5) | $ 194,393 | ||||||
12/15/2015 | 3,264 (6) | $ 104,513 | ||||||
12/15/2015 | 2,743 (7) | $ 87,831 | ||||||
11/04/2015 | 3,274 (10) | $ 104,833 | ||||||
12/17/2014 | 905 (8) | $ 28,978 | ||||||
David M. Rothenstein | 12/12/2017 | 20,401 (1) | $ 653,240 | |||||
12/12/2017 | 23,316 (2) | $ 746,578 | ||||||
12/12/2017 | 11,478 (3) | $ 367,526 | ||||||
12/14/2016 | 13,486 (4) | $ 431,822 | ||||||
12/14/2016 | 12,645 (5) | $ 404,893 | ||||||
12/15/2015 | 7,778 (6) | $ 249,052 | ||||||
12/15/2015 | 6,535 (7) | $ 209,251 | ||||||
12/17/2014 | 1,685 (8) | $ 53,954 | ||||||
2019 Proxy Statement 53
| (1) | PSU awards granted on December |
| (2) | Remaining unvested RSUs granted on December |
| (3) | MSU awards granted on December 12, 2017 are subject to achievement of the goals described above in in “Grants of Plan-Based Awards” and “Compensation Discussion and Analysis” above. |
| (4) | Remaining amounts earned with respect to PSUs granted on December |
| (5) | |
Remaining unvested RSUs granted on December |
| (6) | |
Remaining amounts earned with respect to PSUs granted on December |
| (7) | |
Remaining unvested RSUs granted on December |
| (8) | Remaining unvested RSUs granted on December 17, 2014 vested on December 20, 2018. |
| (9) | Remaining unvested RSUs granted on November 7, 2016 shall vest as toone-sixteenth of the grant amount on March 20, June 20, September 20 and December 20 of each year through December 20, |
| (10) | |
Remaining unvested RSUs granted on |
The following table sets forth on an aggregated basis, as to each NEO, information related to stock Stock Vested Number of Shares Acquired on Vesting (#) Value Realized on Vesting ($) Gary B. Smith 301,365 $ 6,948,526 James E. Moylan, Jr. 72,363 $ 1,668,803 Rick L. Hamilton 22,973 $ 569,086 Scott A. McFeely 24,252 $ 608,202 David M. Rothenstein 60,413 $ 1,409,016 54 Option Exercises and Stock Vestedoptions exercised and stock awards that vested during fiscal 2015.2018. The value realized upon vesting of stock awards is apre-tax amount determined by multiplying the aggregate number of shares of stock vested for each NEO during fiscal 20152018 by the closing market price per share on the corresponding vesting date for that award. Information as to value realized does not take into account reductions related to withholding and othertax-related items, brokerage commissions or fees, or forfeiture or other disposition of shares to cover these amounts. Stock Awards Name 2019 Proxy Statement
Option Exercises and Stock Vested | ||||||||||||||
| Option Awards | Stock Awards | |||||||||||||
Number of Shares Acquired on Exercise | Value Realized on Exercise | Number of Shares Acquired on Vesting | Value Realized on Vesting | |||||||||||
| Name | (#) | ($) | (#) | ($) | ||||||||||
| Gary B. Smith | 52,500 | $ | 368,890 | 198,845 | $ | 4,124,270 | ||||||||
| James E. Moylan, Jr. | — | $ | — | 70,572 | $ | 1,470,757 | ||||||||
| François Locoh-Donou | 1,785 | $ | 2,802 | 81,607 | $ | 1,676,326 | ||||||||
| Philippe Morin | — | $ | — | 82,802 | $ | 1,699,461 | ||||||||
| David M. Rothenstein | 3,571 | $ | 35,888 | 52,807 | $ | 1,103,069 | ||||||||
The following table shows the executive contributions, earnings and account balances for fiscal 2018 for each NEO participating in the Ciena Corporation Deferred Compensation Plan. This plan allows a select group of senior management employees in the United States (including our NEOs) to defer up to 75% of annual base salary and up to 100% of other compensation, including cash incentive bonuses, commissions and RSU awards. The plan does not provide for any matching or discretionary contributions to participants except for restorative matching payments of foregone matching contributions that a participant would have received under the terms of our 401(k) Plan but for the participant’s deferrals into the plan. Nonqualified Deferred Compensation Executive Contributions in Fiscal 2018 ($) Registrant Contributions in Fiscal 2018 ($) Aggregate Earnings in Fiscal 2018 ($) Aggregate Withdrawals/ Distributions ($) Aggregate Balance at October 31, 2018 ($) Gary B. Smith — — — — — James E. Moylan, Jr. $ 787,260 — $ 28,123 — $ 1,042,253 Rick L. Hamilton — — — — — Scott A. McFeely — — — — — David M. Rothenstein $ 168,750 — $ (8,717) — $ 160,033 Overview This section describes and quantifies the estimated compensation payments and benefits that would be paid to our NEOs in each of the following situations:Nonqualified Deferred Compensation Name
upon death or disability;
upon an involuntary separation of service for other than cause;
upon a change in control inof Ciena; and
upon a termination of employment following a change in control of Ciena.
We do not maintain employment agreements with our executive officers, including the NEOs. The information below describes those instances in which our NEOs would be entitled to payments following a termination of employment and/or upon a change in control of Ciena. Our NEOs are “at will” employees and, except as otherwise described below, they are only entitled to payment of accrued salary and vacation time, on the same terms as provided to our other employees, upon any resignation, retirement or termination of employment, with or without cause. Except as otherwise noted below, the calculations below do not include any estimated payments for those benefits that we generally make available on the same terms to our full-time,non-executive employees.
The estimated payments below are calculated based on compensation arrangements in effect as of the last day of our fiscal 20152018 and assume that the triggering event occurred on such date. The estimated payment amounts are based on a Ciena common stock price of $24.14,$32.02, which was the closing market price per share of our common stock on The New York Stock Exchange on the last trading day of our fiscal 2015.2018. Our estimates of potential payments are further based on the additional assumptions specifically set forth in the tables below. Although these calculations are intended to provide reasonable estimates of potential compensation benefits payable, the estimated payment amounts may differ from the actual amount that any individual would receive upon termination or the costs to Ciena associated with continuing certain benefits following termination of employment. As indicated above, Mr. Morin resigned as an officer and employee of Ciena effective as of November 1, 2015, the beginning of our fiscal 2016. In connection with his resignation, he was not eligible for any severance payment or acceleration of equity awards. Accordingly, illustrative information with respect to any severance payments payable upon the triggering events described below has not been provided for Mr. Morin.
Payments Upon Death or Disability
Stock awards including RSUs and PSUs granted under our 2017 Plan and our 2008 Plan provide for the acceleration of vesting of any awards that would otherwise vest in the 12 months following a termination of service resulting from the holder’s death or disability. Acceleration of vesting upon death or disability applies to all awards granted under these plans, including awards to both executive andnon-executive employees, as well as awards to our
2019 Proxy Statement 55
NEOs. Under these plans,In the case of RSUs, acceleration of vesting applies to such number of shares that would otherwise vest in the 12 months following a termination of service resulting from the holder’s death or disability. In the case of PSUs and MSUs, acceleration of vesting applies to such number of shares that have been earned, but not yet vested, under the award. In the case of PSUs or MSUs not yet earned or unearned, such awards are considered to have been forfeited and are not subject to any acceleration of vesting upon death or disability under the award agreement.
For purposes of the foregoing, a disability is defined as inability to perform each of the essential duties of the applicable person’s position by reason of a medically determinable
Acceleration of the triggering event are consideredVesting of Stock Awards Upon Termination Due to have been earned at target attainment.
Acceleration of Vesting of Stock Awards Upon Termination Due to Death or Disability | ||||
| Value Realized Upon Acceleration | ||||
| Name | ($) | |||
| Gary B. Smith | $ | 5,801,562 | ||
| James E. Moylan, Jr. | $ | 1,838,407 | ||
| François Locoh-Donou | $ | 2,118,830 | ||
| David M. Rothenstein | $ | 1,467,936 | ||
| Name | Value Realized Upon Acceleration ($) | |||||||||
Gary B. Smith | $ 5,459,954 | |||||||||
James E. Moylan, Jr. | $ 1,472,136 | |||||||||
Rick L. Hamilton | $ 645,011 | |||||||||
Scott A. McFeely | $ 717,232 | |||||||||
David M. Rothenstein | $ 1,070,148 | |||||||||
Payments Upon Involuntary Separation of Service for Other than Cause
Ciena’s U.S. Executive Severance Benefit Plan (“Severance Plan”) provides certain U.S.-based employees of Ciena Corporation and its affiliates, including our executive officers andnon-executive employees of the rank of vice president or above, with certain severance benefits in the event of an involuntary separation of service by Ciena without “cause” (as such term is defined in the plan and described below). Under the Severance Plan, benefits payable to participants upon an involuntary separation of service without cause consist of the following:
| • | Cash Severance Payment.Our CEO will be entitled to severance equal to two times his annual base salary and annual target incentive bonus, while our other executive officers will be entitled to severance equal to their annual base salary and annual target incentive bonus or commission.Non-executives entitled to severance may receive four weeks of base salary for each year of service, with a minimum of 26 weeks and a maximum of 52 weeks. The base salary and, where applicable, bonus payments above would be determined based on the salary rate and incentive compensation program in effect immediately prior to the date of termination. Bonus amounts are to be paid at the “target” level. |
| • | Benefits Continuation.For a period of 18 months in the case of our CEO, 12 months for our Senior Vice Presidents, and the severance period calculated above fornon-executive participants, the participant and his or her family will be eligible to continue to participate in our group medical, dental and vision plans. If we cannot continue benefits coverage, we will provide equivalent coverage for the applicable coverage period at our expense. |
| • | Outplacement Assistance. For a period of 12 months in the case of our CEO and other executive officers, and six months for all other participants, Ciena will provide executive outplacement assistance, at its expense, through its then-current agency. |
As a condition of receiving benefits under the Severance Plan, each participant agrees to deliver a release of claims, comply with certainnon-competition andnon-solicitation obligations for a 12 month period, and comply with certain continuing obligations with respect to Ciena’s confidential and proprietary information and inventions. Failure to comply with these and other conditions set forth in the Severance Plan requires the repayment of severance benefits in full. In addition, severance payments are subject to recoupment in accordance with applicable law and any future “clawback” policy adopted by Ciena. Should any payment of severance benefits be subject to excise tax imposed under federal law, or any related interest or penalties, severance benefits shall be either (a) paid in full by us, or (b) paid in a lesser amount such that no portion of the payments would be subject to the excise tax, whichever results in receipt by the executive of a greater amount. This “best choice” mechanism above does not require Ciena to pay any excise taxes or to make anygross-up payments related to excise taxes resulting from any payment of severance benefits.
56 2019 Proxy Statement
Under the Severance Plan, a “separation of service” includes a termination of employment by the participant where Ciena and the participant anticipate that the participant will perform no further services for Ciena, or where the level of services to be performed will permanently decrease to no more than 20% of the average level of services performed over the immediately preceding36-month period. In addition, under the Severance Plan, “cause” means the occurrence of any one or more of the following:
the participant’s willful and continued failure substantially to perform his or her duties (other than as a result of disability), provided that in the case of executive officers,the CEO or a senior vice president of Ciena, such failure shall be determined by the BoardGovernance and Nominations Committee following written notice to the participant and an opportunity to be heard;
any willful act or omission by the participant in connection with his or her responsibilities as an employee constituting dishonesty, fraud or other malfeasance, immoral conduct or gross misconduct;
any willful material violation by the participant of Ciena’s Code of Business Conduct and Ethics or a Proprietary Information, Inventions andNon-Solicitation Agreement entered into by Ciena and the participant; or
the participant’s conviction of, or plea of nolo contendere to, a felony or a crime of moral turpitude under the laws of the United States or any state thereof or any other jurisdiction in which Ciena conducts business.
For purposes of the definition of “cause,” no act or failure to act by the participant shall be deemed “willful” unless effected by the participant not in good faith and without a reasonable belief that such act or failure to act was in, or not opposed to, Ciena’s best interests. The Severance Plan provides that the applicable benefits to which a participant is entitled under the Severance Plan will be reduced by amounts paid under other Ciena severance plans, policies, programs or practice.
For each NEO, the amount in the table below reflects the value of the payments assuming an involuntary separation of service for other than cause effective as of the last day of our fiscal 2015.
Payments Upon Involuntary Separation of Service for Other than Cause | ||||||||||||
| Name | Salary and Bonus Payment ($) | Continuation of Benefits Coverage and Outplacement ($) | Total ($) | |||||||||
| Gary B. Smith | $ | 3,600,000 | $ | 22,758 | $ | 3,622,758 | ||||||
| James E. Moylan, Jr. | $ | 832,500 | $ | 19,250 | $ | 851,750 | ||||||
| François Locoh-Donou | $ | 777,000 | $ | 24,361 | $ | 801,361 | ||||||
| David M. Rothenstein | $ | 680,000 | $ | 23,580 | $ | 703,580 | ||||||
Payments Upon Involuntary Separation of Service for Other than Cause
| Name | Salary and Bonus Payment ($) | Continuation of Benefits Coverage and Outplacement ($) | Total ($) | |||||||||
Gary B. Smith |
| $ 4,050,000 |
|
| $ 37,901 |
|
| $ 4,087,901 |
| |||
James E. Moylan, Jr. |
| $ 971,250 |
|
| $ 18,128 |
|
| $ 989,378 |
| |||
Rick L. Hamilton |
| $ 770,000 |
|
| $ 24,553 |
|
| $ 794,553 |
| |||
Scott A. McFeely |
| $ 770,000 |
|
| $ 18,631 |
|
| $ 788,631 |
| |||
David M. Rothenstein |
| $ 787,500 |
|
| $ 24,553 |
|
| $ 812,053 |
| |||
Payments Upon Change in Control
Each of our executive officers, including the NEOs, is party to an amended and restateda change in control severance agreement with Ciena. Theagreement. Our change in control severance agreements are currently effectivecontinue in effect through November 30, 2016, unless2019 (provided that in the event that Ciena is in active negotiations regarding or has entered into a definitive agreement with respect to a change in control transaction, or has effected such a transaction, the term is subject to an automatic extension until the earlier terminated.of negotiations or the agreement being terminated or 12 months following the effective date of the transaction). As described in “Payments Upon Termination of Employment Following Change in Control” below, the amended and restated change in control severance agreements provide our executive officers with certain severance benefits in the event that such officer’s employment is terminated by us or any successor entity without “cause,” or by the officer for “good reason,” within 90 days prior to or one year (or in the case of our CEO, 18 months) following a “change in control,” as such terms are defined in the agreements. In addition, the agreements provide that upon a “change in control,” any performance-based equity awards, to the extent unvested, will be converted into awards with time-based vesting conditions. Conversion of performance-based stock awards upon a change in control does not require termination of employment. For these converted awards, the unvested portion will be deemed to have commenced time-based vesting on the grant date, withone-sixteenth of the grant amount vesting every three months thereafter. Because conversion of the awards will cause certain unvested stock awards to vest upon a change in control, we have included in the table below calculations with respect to the corresponding value of the vesting of such affected performance-based awards. For purposes of these calculations, we have used the actual share amount earned, in the case of PSU or MSU awards that have been earned, or, alternatively, the “target” number of shares for such PSU or MSU, in the case of awards that have a current performance period or otherwise remain to be earned, as applicable.
2019 Proxy Statement 57
The following table shows the estimated value of the conversion of performance-based equity awards, and the resulting acceleration of vesting of these awards, for each NEO assuming that there was a change in control of Ciena on the last day of our fiscal 20152018 and that the acquiror assumed or provided substitute awards for our outstanding equity awards (see also the “Acceleration of Vesting of Equity Awards Resulting from Change in Control Where Equity Awards are not Assumed or Replaced by Acquiror” table below). The value of stock awards is determined based on the number of shares subject to acceleration of vesting, multiplied by $24.14$32.02 per share, the closing market price per share of ourCiena common stock on The New York Stock Exchange on the last trading day of our fiscal 2015.
Acceleration of Vesting of Equity Awards Upon Change in Control | ||||||||
Conversion of Performance-Based Stock Awards Upon Change in Control | ||||||||
Shares Subject to Conversion | Shares Subject to Accelerated Vesting Upon Conversion | Value Realized Upon Acceleration | ||||||
| Name | (#) | (#) | ($) | |||||
| Gary B. Smith | 313,918 | 104,932 | $ | 2,533,059 | ||||
| James E. Moylan, Jr. | 80,287 | 29,850 | $ | 720,579 | ||||
| François Locoh-Donou | 86,779 | 37,425 | $ | 903,440 | ||||
| David M. Rothenstein | 71,395 | 23,827 | $ | 575,184 | ||||
Acceleration of Vesting of Equity Awards Upon Change in Control
Conversion of Performance-Based Stock Awards Upon Change in Control
| ||||||||
| Name | Shares Subject to Conversion (#) | Shares Subject to Accelerated Vesting Upon Conversion (#) | Value Realized Upon Acceleration ($) | |||||
Gary B. Smith | 320,481 |
| 91,841 |
| $ 2,940,749 | |||
James E. Moylan, Jr. | 65,641 |
| 19,783 |
| $ 633,452 | |||
Rick L. Hamilton | 36,117 |
| 6,475 |
| $ 207,330 | |||
Scott A. McFeely | 37,433 |
| 8,304 |
| $ 265,894 | |||
David M. Rothenstein | 49,959 |
| 14,475 |
| $ 463,490 | |||
Payments Upon Change in Control Where Equity Awards Are Not Assumed or Substituted
Upon a change in control where the acquiror does not assume Ciena’s outstanding unvested awards or replace such awards with substitute awards, our current and legacy equity compensation plans provide for acceleration of vesting or defer the determination regarding acceleration of vesting to the discretion of our Compensation Committee. This mechanism, which is typical in equity plans, is intended to protect the interests of both executive andnon-executive employees. Moreover, we consider the likelihood of such treatment of equity awards by an acquiror in a change in control transaction to be remote. In the table below, however, for illustrative purposes, we have calculated the estimated payments assuming the full acceleration of outstanding awards upon a change in control where the acquiror neither assumes outstanding awards nor provides substitute awards.
For purposes of the calculations in the table below, stock awards subject to accelerated vesting have been valued at $24.14$32.02 per share, the closing market price per share of our common stock on The New York Stock Exchange on the last trading day of our fiscal 2015.2018. Calculations in the table below with respect to PSUs and MSUs that have not yet been earned reflect estimated values based upon the “target” level of achievement during the relevant performance period. All stock options held
Acceleration of Vesting of Equity Awards Upon Change in Control
Where Equity Awards are not Assumed or Replaced by the NEOs as of the last trading day of our fiscal 2015 were fully vested, and therefore no additional compensation would be earned in connection with any acceleration of vesting.Acquiror
| Name | Value Realized Upon Stock Award Acceleration ($) | |||||
Gary B. Smith | $ 16,315,695 | |||||
James E. Moylan, Jr. | $ 3,978,805 | |||||
Rick L. Hamilton | $ 2,570,181 | |||||
Scott A. McFeely | $ 2,393,239 | |||||
David M. Rothenstein | $ 3,014,363 | |||||
58 2019 Proxy Statement
Acceleration of Vesting of Equity Awards Upon Change in Control Where Equity Awards are not Assumed or Replaced by Acquiror | ||||
Value Realized Upon Stock Award Acceleration | ||||
| Name | ($) | |||
| Gary B. Smith | $ | 12,195,625 | ||
| James E. Moylan, Jr. | $ | 3,581,410 | ||
| François Locoh-Donou | $ | 3,909,352 | ||
| David M. Rothenstein | $ | 2,897,935 | ||
Payments Upon Termination of Employment Following Change in Control
Under the amended and restated change in control severance agreements, our executive officers, including the NEOs, are entitled to certain severance benefits in the event that the officer’s employment is terminated by us or any successor entity without “cause,” or, by the officer for “good reason,” within a90-day period prior to, or a12-month period (or in the case of our CEO, eighteen months) following, the effective date of a “change in control” of Ciena. We refer to this double trigger event, which requires both a change in control of Ciena and a subsequent termination of the executive’s employment, as a “covered termination.” Our change in control severance agreements continue in effect through November 30, 2016 (provided that the term is subject to an automatic extension of up to 12 months in the event that Ciena is in active negotiations regarding, or has entered into, a definitive
Payment of any severance benefits pursuant to the change in control severance agreements (to the extent permissible under applicable law) is conditioned upon the officer agreeing to be bound by provisions restricting his or her ability to compete with us, and to solicit our employees or business, for one year after termination (or 18 months for our CEO), as well as the officer’s delivery to us of a general release and waiver of claims. In the event of a breach of these provisions, the officer must reimburse all severance benefits paid. The severance benefits described below are to be paid by us or our successor upon a covered termination.
| • | Salary and Bonus Payment.Upon a covered termination, our CEO would be entitled to receive a lump sum payment equal to 2.5 times his annual base salary and annual target incentive bonus. Each other NEO would be entitled to receive a lump sum payment equal to 1.5 times his or her annual base salary and annual target incentive bonus, respectively. The base salary and bonus payments in both instances above would be determined based on the salary rate and incentive compensation program in effect immediately prior to either the date of termination or the effective date of the change in control, whichever is higher. Bonus amounts are to be paid at the “target” level. |
| • | Continuation of Benefits.Upon a covered termination, each NEO and his or her family would be eligible to continue to participate in our group medical, dental and vision plans until the earlier of the 18 months from the covered termination or the date of such officer’s commencement of alternate employment. If we cannot continue benefits coverage, we are obligated to pay for or provide equivalent coverage at our expense. The agreements continue to require Ciena to maintain director and officer insurance coverage for the NEOs as well as any indemnification agreement we have entered into with them. |
| • | Acceleration of Vesting of Equity Awards.Upon a covered termination, all unvested options and stock awards (including RSUs and PSUs, as applicable) held by each NEO would immediately vest and become exercisable. |
| • | Reduction of Benefits if Risk of Excise Tax Applicability.Should any payment of severance benefits to our NEOs pursuant to the change in control severance agreements be subject to excise tax imposed under federal law, or any related interest or penalties, the change in control severance agreements provide that the payments would be either (a) paid in full by us, or (b) paid in a lesser amount such that no portion of the payments would be subject to the excise tax, whichever results in receipt of a greater amount by the NEO. This “best choice” mechanism above does not require Ciena to pay any excise taxes, or to make anygross-up payments related to excise taxes, resulting from any payment of severance benefits. Under the change in control severance agreements, responsibility for any excise taxes remains with the employee. |
See “Applicable Definitions” below to better understand the meaning of the terms “change in control,” “cause” and “good reason” under our change in control severance agreements.
The following table shows the estimated value of the aggregate payments that would be paid to each NEO pursuant to the change in control severance agreements upon a covered termination. Accordingly, the total amount below also includes the value realized upon a change in control and reported in the table above in “Payments Upon Change in Control.”
Potential Payments Upon “Covered Termination” | ||||||||||||||||
Salary and Bonus Payment | Continuation of Benefits Coverage | Value Realized Upon Equity Acceleration | Total | |||||||||||||
| Name | ($)(1) | ($)(2) | ($)(3) | ($) | ||||||||||||
| Gary B. Smith | $ | 4,500,000 | $ | 14,683 | $ | 12,195,625 | $ | 16,710,308 | ||||||||
| James E. Moylan, Jr. | $ | 1,248,750 | $ | 11,175 | $ | 3,581,410 | $ | 4,841,335 | ||||||||
| François Locoh-Donou | $ | 1,165,500 | $ | 16,286 | $ | 3,909,352 | $ | 5,091,138 | ||||||||
| David M. Rothenstein | $ | 1,020,000 | $ | 15,505 | $ | 2,897,935 | $ | 3,933,440 | ||||||||
Potential Payments Upon “Covered Termination”
| Name | Salary and Bonus Payment ($)(1) | Continuation of Benefits Coverage ($)(2) | Value Realized Upon Equity Acceleration ($)(3) | Total ($) | |||||||||||||||||||||
Gary B. Smith |
| $ 5,062,500 | $ 37,901 | $ 16,315,695 |
| $ 21,416,096 |
|
| |||||||||||||||||
James E. Moylan, Jr. |
| $ 1,456,875 | $ 24,342 | $ 3,978,805 |
| $ 5,460,022 | |||||||||||||||||||
Rick L. Hamilton |
| $ 1,155,000 | $ 33,980 | $ 2,570,181 |
| $ 3,759,161 | |||||||||||||||||||
Scott A. McFeely |
| $ 1,155,000 | $ 25,096 | $ 2,393,239 |
| $ 3,573,335 | |||||||||||||||||||
David M. Rothenstein |
| $ 1,181,250 | $ 33,980 | $ 3,014,363 |
| $ 4,229,593 | |||||||||||||||||||
| (1) | Reflectspre-tax severance payments to each NEO based upon: (a) annual salary in effect as of the end of fiscal |
2019 Proxy Statement 59
| (2) | Includes aggregate incremental costs for continuation of medical and dental benefits as used for financial statement reporting purposes, assuming we are able to continue such existing coverage and continuation costs are commensurate with costs incurred for such coverage during fiscal |
| (3) | Reflects the conversion of performance-based and market stock unit awards upon change in control and value associated with the resulting acceleration of vesting as described in “Payments Upon Change in Control” above, together with the acceleration of stock awards |
Applicable Definitions.
For purposes of determining whether a change in control or covered termination has occurred under the change in control severance agreements, the following terms generally have the following meanings:“
Cause” means:the officer’s willful and continued failure substantially to perform the duties of his position, as determined by the Board of Directors following written notice to the officer;
any willful act or omission constituting dishonesty, fraud or other malfeasance;
any willful act or omission constituting immoral conduct or gross misconduct;
any willful material violation of our Code of Business Conduct and Ethics or Proprietary Information, Inventions andNon-Solicitation Agreement; or
the officer’s conviction of, or plea of nolo contendere to, a felony or crime of moral turpitude under federal or state law or the laws of any other jurisdiction in which Ciena conducts business.
“
Good reason” means:removal from, or failure to be reappointed or reelected to, the officer’s principal position held immediately prior to the change in control;
material diminution in the officer’s position, duties or responsibilities, or the assignment of duties that are inconsistent, in any material respect, with those held immediately prior to the change in control;
material reduction in base salary, incentive compensation opportunity or participation in other long-term incentive or benefit plans as in effect immediately before the change in control;
relocation of principal workplace, without the officer’s consent, by more than 50 miles; or
the failure to obtain the assumption of the change in control severance agreement by any successor company;
provided, in each case, that (a) the officer notifies Ciena of the foregoing conditions within 90 days of the initial existence of the condition, (b) Ciena has been given at least 30 days following notice to cure such condition, and (c) the officer actually terminates employment within one year following the initial existence of the condition.
“
Change in control” means:the direct or indirect sale or exchange by our stockholders of all or substantially all of our outstanding stock, or a merger or consolidation, transaction, in each case, where the stockholders before such transaction do not retain at least a majority voting interest in the acquiring corporation after such transaction;
the sale, exchange or transfer of all or substantially all of our assets;
a change in the composition of the Board within atwo-year period, as a result of which less than a majority of the directors are incumbent directors (as defined in the agreement);
our liquidation or dissolution; or
any other event determined to be a change in control by our Board of Directors.
In each case, the determination of whether a “change in control” has occurred shall be made without regard to whether such events were hostile or against the position of the Board or were approved or concurred with by the Board.
60 2019 Proxy Statement
Overview
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of RegulationS-K, we are providing the following information about the relationship of the annual total compensation of our median employee and the annual total compensation of our CEO.
CEO Pay Ratio | ||||
CEO Annual Total Compensation* | $ 9,129,584 | |||
Median Employee Annual Total Compensation | $ 102,540 | |||
CEO to Median Employee Pay Ratio | 89:1 | |||
* Represents amount of total compensation from Summary Compensation Table
Methodology
Our CEO pay ratio is an estimate calculated in a manner consistent with SEC rules and based upon our reasonable judgment and assumptions. Our methodology and process is explained below:
| ❖ | Determination of Employee Population.We began with the total population of all global employees of Ciena as of September 1, 2018, including full-time and part-time employees, interns and temporary workers on our payroll, and our Executive Chairman, but excluding our CEO. |
| ❖ | Identification of Median Employee.We selected the aggregate of (a) annualized base salary as of September 1, 2018, (b) the target cash incentive compensation for employees eligible under our Cash Incentive Bonus Plan or Sales Incentive Compensation Plan, as applicable, and (c) the target delivered value for equity awards granted to employees as part of our annual equity grants in December 2017, as the consistently applied compensation measure to identify our median employee. We estimated total compensation using a method similar to the Summary Compensation Table rules, applying an exchange rate as of September 1, 2018 to convert international currencies into U.S. dollars, and then identified the median employee. We did not make any cost of living adjustments or full time equivalent adjustments.Using this methodology, we determined that the median employee was a full-time employee located in Canada. |
| ❖ | Calculation of CEO Pay Ratio.We calculated our median employee’s annual total compensation for 2018 according to the SEC’s instructions for preparing the Summary Compensation Table. We applied an exchange rate of 1 CAD to 0.761412 USD as of October 31, 2018, to convert international currencies into U.S. dollars. We then calculated our CEO’s annual total compensation using the same approach to determine the pay ratio shown above. |
The disclosure presented above is a reasonable estimate. Because the SEC rules for identifying the median employee and calculating the pay ratio allow companies to use different methodologies, exemptions, estimates and assumptions, this disclosure may not be comparable to the pay ratio reported by other companies.
2019 Proxy Statement 61
Annual Advisory“Say-on-Pay” Vote to Approve Our Named Executive Officer Compensation
We are required by Section 14A of the Exchange Act to conduct anon-binding advisory vote of our stockholders to approve the compensation paid to our NEOs as disclosed in this proxy statement. We encourage stockholders to read the “Compensation Discussion and Analysis” and “Executive Compensation Tables” in this proxy statement for a more detailed discussion of our compensation programs and policies, the compensation governance measures undertaken and implemented by our Board of Directors, and the compensation awarded to our NEOs during fiscal 2015.
We actively review and assess our executive compensation program in light of the dynamic industry in which we operate, the evolving marketplace in which we compete for executive talent, and changes in compensation governance best practices. We are focused on compensating our executive officers fairly and in a manner that promotes our compensation philosophy. Specifically, our executive compensation program is based on the following objectives:
COMPENSATION OBJECTIVES |
❖ Attract and retain talented executives by offering competitive compensation packages ❖ Motivate executives to achieve strategic and tactical corporate objectives, including the profitable growth of Ciena’s business ❖ Align executive compensation with stockholder interests ❖ Reward executives for individual, functional and corporate performance ❖ Promote apay-for-performance culture |
Our Board of Ciena’s business;
With respect to our fiscal 2015 performance,corporate governance, we had a record year of business and strong financial performance. Specifically, stockholders should consider a number ofhave deliberately structured our important achievements during this past year, including:
With respect to our fiscal 2018 performance, as a result of successful execution against our long-term strategy, we had a very strong year of business and financial results. Fiscal 2018 performance and business highlights are described more fully in our Proxy Statement Summary above.
The Board recommends that stockholders vote in favor of the following resolution:
“RESOLVED, that the stockholders approve, on an advisory basis, the compensation of Ciena’s Named Executive Officers, as disclosed in Ciena’s proxy statement for its 2019 Annual Meeting of Stockholders pursuant to the rules of the Securities and Exchange Commission (including in the Compensation Discussion and Analysis, the compensation tables and related footnotes and narrative disclosures under the heading “Executive Compensation Tables”).” |
Although this vote is advisory and is not binding on the Compensation Committee or the Board, the Compensation Committee ofand the Board valuesvalue the input and views of our stockholders. The Board and the Compensation Committee will review the results of the vote and take them into consideration when considering future executive compensation policies and decisions.
Proposal No. 43 — Recommendation of the Board of Directors
The Board of Directors recommends that you vote “FOR” the advisory approval of our named executive officer compensation |
62 2019 Proxy Statement
Ciena did not engage in any related person transactions during fiscal For purposes of the policy, a related person is one of the following:POLICY FOR RELATED PERSON TRANSACTIONS2015 under2018 within the meaning of applicable SEC rules. The Board of Directors has adopted a written Policy for Related Person Transactions. The purpose of the policy is to describe the procedures used to identify, review, approve and disclose, if necessary, any related person transaction or series of transactions in which: (i) Ciena was, is or will be a participant; (ii) the amount involved exceeds $120,000; and (iii) a related person had, has or will have a direct or indirect material interest.
any Ciena director, nominee for director or executive officer (as such terms are used in Section 16 of the Exchange Act and the regulations promulgated thereunder);
any immediate family member of a Ciena director, nominee for director or executive officer;
any person (including any “group” as such term is used in Section 13(d) of the Exchange Act) who is known to Ciena as a beneficial owner of more than 5% of its voting common stock (a “significant stockholder”); or
any immediate family member of a significant stockholder.
Under the policy, all related person transactions above a certain de minimis threshold are required to be approved or ratified by the Audit Committee, or another committee consisting solely of independent directors. As a general rule, any director who has a direct or indirect material interest in the related person transaction should not participate in the consideration of whether to approve or ratify the transaction. Prior to entering into a related person transaction, the material facts regarding the transaction, including the interest of the related person, must be presented to the Audit Committee for review. The Committee will consider whether the related person transaction is advisable and whether to approve, ratify or reject the transaction or refer it to the full Board of Directors, in its discretion. If the Committee approves a related person transaction, it will report the action to the full Board of Directors, and Ciena will disclose the terms of related person transactions in its filings with the SEC to the extent required.
The following table provides information as of the end of fiscal 67EQUITY COMPENSATION PLAN INFORMATION2015,2018 with respect to the shares of Ciena common stock that may be issued under Ciena’s existing equity compensation plans. In accordance with SEC rules, the tabular disclosure in column (A) does not reflect the approximately 4.94.4 million shares underlying stock unit awards issued and outstanding at the end of fiscal 2015.2018. Number of securities tobe issued upon exerciseof outstanding options, warrants and rights Weighted average exerciseprice of outstanding options, warrants and rights Number of securities remainingavailable for future issuance underequity compensation plans (excluding securities reflected in Column (A) Plan category (A) (B) (C) Equity compensation plans approved by stockholders (1) 2,205,185 $ 24.74 12,677,660 (2) Equity compensation plans not approved by stockholders (3) 87,755 $ 17.20 Total 2,292,940 $ 24.45
Plan category
| Number of securities to be issued upon exercise of outstanding options, warrants and rights (A)
| Weighted average exercise price of outstanding options, warrants and rights (B)
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in Column (A) (C)
|
| |||||||||||||
Equity compensation plans approved by stockholders (1)
|
|
275,834
|
|
$
|
33.52
|
|
|
12,134,290
|
(2)
| ||||||||
Equity compensation plans not approved by stockholders
|
|
—
|
|
|
—
|
| |||||||||||
Total
|
|
275,834
|
|
$
|
33.52
|
| |||||||||||
| (1) | Consists of awards outstanding under the following equity compensation plans: |
the 2008 Plan;
the Cyan, Inc. 2006 Stock Plan and Cyan, Inc. 2013 Equity Incentive Plan, each assumed by Ciena in connection with an acquisition transaction.
| (2) | As of October 31, |
2019 Proxy Statement 63
Pursuant toRule 14a-8 under the Exchange Act, some proposals by stockholders may be eligible for inclusion in our proxy statement for the Under our proxy access bylaw, if a stockholder (or a group of up to 20 stockholders) who has owned at least 3% of our shares for at least three years and has complied with the other requirements set forth in our bylaws wants us to include director nominees (up to the greater of two nominees or 20% of the Board) in our proxy statement for the 2020 Annual Meeting, the nominations must be received in a timely manner, between 120 and 150 days prior to the anniversary of the date our proxy statement was first sent to stockholders in connection with our last annual meeting, which would be no earlier than September 15, 2019 and no later than October 15, 2019. For more information on this proxy access right, please see “Principles of Corporate Governance, Bylaws and Other Governance Documents – Proxy Access” above. We strongly encourage any stockholder interested in submitting a proposal or nomination to contact our Corporate Secretary in advance of this deadline to discuss the proposal, and stockholders may want to consult knowledgeable counsel with regard to the detailed requirements of applicable securities laws. If you wish to present a proposal or nomination before our To submit a proposal or nomination, stockholders should provide written notice to Ciena Corporation, 7035 Ridge Road, Hanover, Maryland 21076, Attention: Corporate Secretary. Stockholders should note that our bylaws clarify the applicability of Ciena’s advance notice provision to all stockholder proposals, whether or not submitted for inclusion in Ciena’s proxy statement. Specifically, Article I, Section 4(A)(3)(c) of the bylaws, governing stockholder submission of a proposal or nomination of a person for election as a director, requires a stockholder to include the following information in the notice provided to Ciena:STOCKHOLDER PROPOSALS FOR 20172020 ANNUAL MEETING20172019 Annual Meeting. Stockholder proposals submitted must include proof of ownership of Ciena common stock in accordance withRule 14a-8(b)(2). These submissions must comply with the rules of the SEC for inclusion in our proxy statement and must be received no later than October 13, 2016.15, 2019. Submitting a stockholder proposal does not guarantee that we will include it in our proxy statement.20172020 Annual Meeting, but you do not intend to have your proposal included in our proxy statement, your proposal must be delivered no earlier than November 24, 201629, 2019 and no later than December 24, 2016.29, 2019. If the date of our 20172020 Annual Meeting of stockholdersStockholders is more than 30 calendar days before or more than 70 calendar days after the anniversary date of the 20162019 Annual Meeting, your submission must be delivered not earlier than68120 days prior to our 20172020 Annual Meeting and not later than the later of the 90th day prior to such Annual Meeting or the 10th day following the public announcement of the date of such meeting.
the name and address of such stockholder as it appears on Ciena’s books, and any beneficial owner;
the class and number of shares that are owned beneficially and of record by the stockholder and any beneficial owner;
a representation that the stockholder is entitled to vote at the meeting and intends to attend the meeting to present the proposal or director nomination;
a representation as to whether the stockholder intends to conduct a proxy solicitation;
a description of any agreement, arrangement or understanding between or among the stockholder, any beneficial owner, any of their affiliates or other persons acting in concert with them, and any nominee or the nominee’s affiliates, with respect to the nomination or proposal; and
a description of any agreement, arrangement or understanding, including any derivative or short positions, profit interests, options, warrants, stock appreciation or similar rights, hedging transactions, and borrowed or loaned shares, entered into as of the notice date by, or on behalf of, the stockholder and any beneficial owner, the effect or intent of which is to mitigate loss, manage risk, benefit from share price changes, or increase or decrease voting power of the stock held by such person.
Additional information is required to be included in the notice provided to Ciena for stockholder proposals made in accordance with our proxy access bylaw provision, including, among other things:
statements certifying and materials evidencing continuous ownership of stock for at least three years;
written consent of the stockholder’s nominees;
certain representations and undertakings with respect to ownership of stock, nominations, and accuracy of information provided; and
an undertaking to comply with applicable law and assume liability stemming from any violations arising from information provided by the stockholder.
64 2019 Proxy Statement
The description above is intended as a summary and is qualified in its entirety by reference to the relevant bylaw provisions regarding the requirements for making stockholder proposals and nominating director candidates. The bylaws are available on the “Corporate Governance” page of the “Investors” section of our website atwww.ciena.com.
www.ciena.com.
Section 16 of the Exchange Act requires Ciena’s directors and officers, and persons who own more than 10% of Ciena’s common stock, to file initial reports of ownership and reports of changes in ownership with the SEC and theThe New York Stock Exchange. Such persons are required by SEC regulations to furnish Ciena with copies of all Section 16(a) forms that they file.
Based solely on Ciena’s review of the copies of such forms furnished to Ciena and written representations from our executive officers and directors, we believe that excluding (i) one late form 4 filing by Mr. Alexander in February 2015 regarding one transaction, and (ii) one late Form 4 filing by Ms. Fitt in April 2015 regarding one transaction, all Section 16(a) filing requirements of our directors and executive officers were met during fiscal 2015,2018, including requirements with respect to when such filings are required to be made.made, except for a Form 4 for James Frodsham with respect to a sale of Ciena’s common stock on February 12, 2018, which was filed with the SEC on February 15, 2018.
2019 Proxy Statement 65
Our Board of Directors has made these proxy materials available to you via the Internet or, upon your request, has delivered printed versions of these materials to you by mail. We are furnishing this proxy statement in connection with the solicitation by our Board of Directors of proxies to be voted at our 2019 Annual Meeting. The Annual Meeting will be held on March 28, 2019 at 3:00 p.m. Eastern Time, or at any adjournment thereof. As described below, this year’s Annual Meeting will be a completely virtual meeting of stockholders to be held over the Internet.
Internet Availability of Proxy Materials
We are making this proxy statement and our Annual Report to Stockholders, including our Annual Report on Form10-K for the fiscal year ended October 31, 2018, available to our stockholders on the Internet. On February 12, 2019, we mailed our stockholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access our proxy materials, including this proxy statement and our Annual Report to Stockholders for fiscal 2018. The Notice of Internet Availability of Proxy Materials also provides instructions on how to vote over the Internet, by mail or by telephone. If you received a Notice of Internet Availability of Proxy Materials by mail, you will not receive a printed copy of the proxy materials in the mail unless you specifically request these materials. Other stockholders, in accordance with their prior requests, have receivede-mail notification of how to access our proxy materials and vote over the Internet, or have been mailed paper copies of our proxy materials and a proxy card or a vote instruction form from their bank or broker.
Internet distribution of proxy materials is designed to expedite receipt by stockholders, lower the cost of our Annual Meeting, and reduce the environmental impact of our Annual Meeting. However, if you received a Notice of Internet Availability of Proxy Materials by mail and would like to receive a printed copy of our proxy materials, please follow the instructions for requesting such materials contained on the Notice of Internet Availability of Proxy Materials. If you have previously elected to receive our proxy materials electronically, you will continue to receive these materials viae-mail unless you elect otherwise.
Attending the Annual Meeting
Ciena will be hosting this year’s Annual Meeting live over the Internet atwww.virtualshareholdermeeting.com/ciena2019.The Annual Meeting will be a completely virtual meeting to be held over the Internet. A summary of the information you need to attend the Annual Meeting online is provided below:
| • | All stockholders can attend the Annual Meeting over the Internet atwww.virtualshareholdermeeting.com/ciena2019; |
Only stockholders as of the record date may vote or submit questions while attending the Annual Meeting (by using the16-digit control number provided in your Notice of Internet Availability of Proxy Materials, your proxy card, or the voting instructions that accompanied your proxy materials);
| • | Instructions on how to attend the Annual Meeting are posted atwww.virtualshareholdermeeting.com/ciena2019; |
Stockholders with questions regarding how to attend and participate in the Annual Meeting may call1-855-449-0991 on the meeting date; and
A replay of the Annual Meeting will be available online for approximately 12 months following the meeting date.
66 2019 Proxy Statement
Who may vote at the Annual Meeting?
The Board of Directors has set February 1, 2019 as the record date for the Annual Meeting. If you were the owner of Ciena common stock at the close of business on February 1, 2019, you may vote at the Annual Meeting. You are entitled to one vote for each share of common stock you held on the record date.
A list of stockholders of record entitled to vote at the Annual Meeting will be open to examination by any stockholder, for any purpose germane to the Annual Meeting, during normal business hours for a period of ten days before the Annual Meeting at our corporate offices at 7035 Ridge Road, Hanover, Maryland 21076, and online during the Annual Meeting accessible atwww.virtualshareholdermeeting.com/ciena2019.
How many shares must be present to hold the Annual Meeting?
A majority of our shares of common stock outstanding as of the record date must be present at the Annual Meeting in order to hold the meeting and conduct business. This is called a “quorum.” On the record date, there were 156,336,210 shares
of Ciena common stock outstanding. Your shares will be counted as present at the Annual Meeting if you either attend our online Annual Meeting or properly submit your proxy prior to the Annual Meeting.
Why was I mailed a notice regarding the Internet availability of proxy materials instead of a full set of printed proxy materials?
Pursuant to the “notice and access” rules adopted by the SEC, we have elected to provide stockholders access to our proxy materials over the Internet. Accordingly, we sent a Notice of Internet Availability of Proxy Materials (“Notice”) to all of our stockholders as of the record date. The Notice includes instructions on how to access our proxy materials over the Internet and how to request a printed copy of these materials. In addition, by following the instructions in the Notice, stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis.
Choosing to receive your future proxy materials by email will save us the cost of printing and mailing documents to you and will reduce the impact of our annual meetings on the environment. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate it.
What proposals will be voted on at the Annual Meeting and how does the Board of Directors recommend that I vote?
| Proposals | Board Vote | |||||
1. | Elect two Class I Director nominees and one Class II Director nominee | FOR each nominee | ||||
2. | Ratify appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal 2019 | FOR | ||||
3. | Advisory vote on named executive officer compensation(“Say-on-Pay”) | FOR | ||||
How will voting on any business not described in this proxy statement be conducted?
We are not currently aware of any other business to be acted upon at the Annual Meeting. If any other matters are properly submitted for consideration at the Annual Meeting, including any proposal to adjourn the Annual Meeting, the persons named as proxies will vote the shares represented thereby in their discretion. Adjournment of the Annual Meeting may be made for the purpose of, among other things, soliciting
additional proxies. Any adjournment may be made from time to time by approval of the holders of common stock representing a majority of the votes present in person or by proxy at the Annual Meeting, whether or not a quorum exists, without further notice other than by an announcement made at the Annual Meeting.
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How many votes are required to approve each proposal?
In the case of an uncontested election, our bylaws require that each director be elected by the vote of a majority of the votes cast with respect to that director’s election by holders of shares present in person or represented by proxy at the Annual Meeting. For this purpose, a “majority of the votes cast” means that the number of votes cast “FOR” a director’s election exceeds the number of votes cast “AGAINST” that director’s election, with abstentions and brokernon-votes not counted as a vote cast either “FOR” or “AGAINST.” For more information regarding the Board’s required procedures and disclosures associated with this majority vote standard, please see “Majority Vote Standard in Director Elections” in the “Corporate Governance and the Board of Directors” section above. In the
case of a contested election (i.e., an election in which the number of candidates exceeds the number of directors to be elected), directors will be elected by plurality vote. For this election, the election of directors at the Annual Meeting is uncontested, meaning that the nominees will be elected by a majority of the votes cast, as described above.
Approval of proposals 2 and 3 each require the affirmative vote of a majority of the total votes cast by holders of shares present in person or represented by proxy at the Annual Meeting and entitled to vote on these proposals, with abstentions and brokernon-votes not counted as a vote cast either “FOR” or “AGAINST.”
How are votes counted?
With regard to the election of each director nominee in proposal 1 and with regard to proposals 2 and 3, each as set forth in this proxy statement, you may vote “FOR,” “AGAINST” or “ABSTAIN.” If you abstain from voting on these proposals, your shares will be counted as present for purposes of
establishing a quorum at the Annual Meeting. An abstention will not count as a vote “FOR” or “AGAINST” these proposals at the Annual Meeting and will have no effect on the outcome of the election of our directors in an uncontested election, or on the outcome of the vote on the remaining proposals.
What are brokernon-votes and how are they counted at the Annual Meeting?
Brokernon-votes occur when brokers do not receive voting instructions from their customers and do not have discretionary voting authority with respect to a proposal. If you hold shares through a broker, bank or other nominee and you do not give instructions as to how to vote, your broker may have discretionary authority to vote your shares on certain routine
items but not on other items. Brokernon-votes are counted as present for purposes of determining the presence or absence of a quorum for the transaction of business at the Annual Meeting but will not be counted for purposes of the election of directors and will have no effect on the outcome of the vote on the remaining proposals.
What is the difference between holding shares as a “stockholder of record” and as a beneficial owner of shares held in “street name”?
If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., you are considered the “stockholder of record” with respect to those shares, and the Notice was sent directly to you.
If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name,” and the
Notice or separate voting instructions were forwarded to you by that organization. As a beneficial owner, you have the right to direct that organization on how to vote the shares held in your account. You should follow the instructions in the Notice or voting instructions provided to you by that organization in order to vote your shares or direct the organization on how to vote your shares
Why hold a virtual Annual Meeting over the Internet?
We embrace the latest technologies in our business and believe that holding our Annual Meeting virtually over the Internet provides expanded access, improves communication with stockholders, and yields cost savings for Ciena and our stockholders. We ensure that at our virtual Annual Meeting, all attendees are afforded the same rights and opportunities to participate as they would at anin-person meeting. We began holding our Annual Meeting online in 2013. At that time, we considered a number of factors, including the technologies available to us, the cost of our Annual Meeting, and the historical level of stockholder attendance in person, as compared to the use of other communications such as telephone or Internet. We noted at that time that only a very small number of stockholders, generally less than ten each
year, attended our Annual Meeting in person. When we considered implementing a fully virtual Annual Meeting in 2013, we reached out to a number of our stockholders and received extensive support. We continue to receive positive feedback from our stockholders as we adopt best practices and new technologies for our Annual Meeting, proxy statement and related materials. We evaluate annually the method of holding the Annual Meeting, taking into consideration the above factors as well as business and market conditions and the proposed agenda items. We continue to believe that holding our Annual Meeting virtually over the Internet is the right approach for our company, as it enables more of our global base of stockholders to participate in our Annual Meeting.
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How do I vote my shares without participating in the online Annual Meeting?
Whether you are a “stockholder of record” or hold your shares in “street name,” you may direct your vote without participating in the online Annual Meeting.
If you are a stockholder of record, you may vote by your shares over the Internet or by telephone by following the instructions on the Notice. If you request printed copies of the proxy materials by mail, you may also vote by signing and submitting your proxy card and returning it by mail. You should sign your name exactly as it appears on the proxy card. If you are signing in a representative capacity (for example, as guardian, executor, trustee, custodian, attorney or officer of a corporation), you should indicate your name and title or capacity.
If you are the beneficial owner of shares held in street name, you may be eligible to vote your shares electronically over the Internet or by telephone by following the instructions on the Notice. If you request printed copies of the proxy materials by mail, you may also vote by signing the voter instruction form provided by your bank or broker and returning it by mail. If you provide specific directions on how to vote by mail, telephone or over the Internet, your shares will be voted by your broker or nominee as you have directed.
The persons named as proxies are executive officers of Ciena. All proxies properly submitted in time to be counted at the Annual Meeting will be voted in accordance with the directions contained therein. If you submit your proxy without directing how your shares are to be voted, your shares will be voted by the proxy holders in accordance with the recommendations of the Board of Directors set forth above.
How do I vote my shares during the online Annual Meeting?
Even if you plan to attend and participate in our online Annual Meeting, we encourage you to vote by telephone or over the Internet, or by returning a proxy card following your request of printed materials. This will ensure that your vote will be counted if you are unable to, or later decide not to, participate in the online Annual Meeting. Whether you are a
stockholder of record or hold your shares in “street name,” you may vote online at the Annual Meeting. You will need to enter your16-digit control number (included in your Notice, your proxy card or the voting instructions that accompanied your proxy materials) to vote your shares at the Annual Meeting.
What happens if my shares are held in more than one account?
If your shares are held in more than one account, you will receive a Notice or separate voting instructions for each account. To ensure that all of your shares in each account are
voted, you must vote in accordance with the Notice or separate voting instructions that you receive for each account.
May I revoke my proxy and change my vote after I have voted?
You may revoke your proxy and change your vote at any time before the final vote at the Annual Meeting. You may revoke your proxy over the Internet or by phone by following the instructions included in your proxy materials, or by submitting a written notice of revocation to Ciena Corporation, 7035 Ridge Road, Hanover, Maryland 21076, Attention: Corporate Secretary. You may also revoke a previously submitted proxy by voting again on a later date over the Internet, by telephone
or by signing and returning a new proxy card by mail (only your latest proxy submitted prior to the Annual Meeting will be counted), or by attending and voting at the online Annual Meeting. Your attendance at the Annual Meeting will not automatically revoke your proxy unless you enter your16-digit control number and vote again electronically at the Annual Meeting.
What happens if additional matters are presented at the meeting?
Management knows of no matters to be presented for action at the Annual Meeting other than those mentioned in this proxy statement, and the deadline under our bylaws for stockholder proposals and director nominations has passed. However, if any additional matters properly come before the Annual Meeting, it is intended that the persons named as
proxies will vote on such other matters in accordance with their judgment of the best interests of Ciena. If for any unforeseen reason any of our nominees is not available as a candidate for director, the persons named as proxies will vote for such other candidate or candidates as may be nominated by the Board of Directors.
Will the Annual Meeting be webcast?
Yes. This year’s Annual Meeting will be a completely virtual meeting and will be webcast live atwww.virtualshareholdermeeting.com/ciena2019. All stockholders may attend and listen live to the webcast of the Annual Meeting. Stockholders as of the record date of the Annual Meeting may electronically vote their shares and submit
questions while attending the Annual Meeting over the Internet by using the16-digit control number included in the Notice, proxy card or the voting instructions that accompanied these proxy materials. A replay of the Annual Meeting audio webcast will be available on our website for approximately one year.
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Where can I find the voting results of the Annual Meeting?
The preliminary voting results will be announced at the Annual Meeting. The final voting results will be tallied by the inspector of elections and will be subsequently published by us
by the filing of a current report onForm 8-K with the SEC shortly following our Annual Meeting. This filing will also be available on our website atwww.ciena.com.
Who is soliciting my vote and who will bear the cost of this solicitation?
Our Board of Directors is making this solicitation, and Ciena will bear the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials and soliciting votes. We have engaged Alliance Advisors as our proxy solicitor to help us solicit proxies for a fee of $14,500, plus reasonableout-of-pocket expense. Copies of solicitation materials may be furnished to brokers, custodians, nominees and other
fiduciaries for forwarding to beneficial owners of shares of Ciena common stock, and normal handling charges may be paid for such forwarding service. Officers and other Ciena employees, who will receive no additional compensation for their services, may solicit proxies by mail,e-mail, via the Internet, personal interview or telephone.
A copy of Ciena’s Annual Report to Stockholders for fiscal Ciena filed its Annual Report onForm 10-K for fiscal Stockholders residing in the same household who hold their stock through a bank or broker may receive only one set of proxy materials, including the Notice of Internet Availability of Proxy Materials, in accordance with a notice sent earlier by their bank or broker. This practice of sending only one copy of proxy materials, called “householding,” saves Ciena money in printing and distribution costs and reduces the environmental impact of our Annual Meeting. This practice will continue unless instructions to the contrary are received by your bank or broker from one or more of the stockholders within the household. If you hold your shares in “street name” and reside in a household that received only one copy of the proxy materials, you can request to receive a separate copy in the future by following the instructions sent by your bank or broker. If your household receives multiple copies of the proxy materials, you may request that only a single set of materials be sent by following the instructions sent by your bank or broker.ANNUAL REPORT ON FORM10-K2015,2018, which includes the Annual Report onForm 10-K, has been posted on the Internet along with this proxy statement, each of which is accessible by following the instructions in the Notice.Notice of Internet Availability of Proxy Materials. The Annual Report to Stockholders is not incorporated into this proxy statement and is not considered proxy-soliciting material.20152018 with the SEC on December 21, 2015.2018. Ciena will mail without charge, upon written request, a copy of its Annual Report onForm 10-K for fiscal 2015,2018, excluding exhibits. Please send a written request to Investor Relations, Ciena Corporation, 7035 Ridge Road, Hanover, Maryland, 21076, or access these materials from the “Investors” section of Ciena’s website atwww.ciena.com.69HOUSEHOLDING OF PROXY MATERIALS
If you receive your proxy materials by mail, we encourage you to elect to receive future copies of our proxy materials bye-mail. To enroll in this program, follow the instructions included on your Notice of Internet Availability of Proxy Materials or in the proxy materials provided by your bank or broker. Enrollment in the online program will remain in effect for as long as your brokerage account is active or until enrollment is canceled. Enrolling to receive proxy materials online will save Ciena the cost of printing and mailing documents and will reduce the environmental impact of our Annual Meeting. 70 ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS 2019 Proxy Statement
GAAP Measures at or as of The AMENDMENT NO. 4 TONON-GAAPCIENA CORPORATION 2008 OMNIBUS INCENTIVE PLANTHIS AMENDMENT NO. 4 MEASURES(the “Amendment”) to the Ciena Corporation 2008 Omnibus Incentive Plan (the “Plan”), was adopted by the Board of Directors of Ciena Corporation (the “Company”) on January 28, 2016, and is effectiveMarch __, 2016, the date upon which the Amendment received approval of the stockholders of the Company.Quarter ended October 31, 2018Plan is hereby amended as follows:1.The following paragraph is added to the end of Section 3.3 of the Plan:Any Award granted pursuant to the Plan shall be subject to mandatory repayment by the Grantee to the Company (i) to the extent set forthfollowing table includes certain comparable GAAP measures forNon-GAAP measures included in this Plan or an Award Agreement or (ii) to the extent the Grantee is, or in the future becomes, subject to (A) any Company or Affiliate “clawback” or recoupment policy that is adopted by the Company, including to comply with the requirements of any applicable laws, rules or regulations, or (B) any applicable laws that impose mandatory recoupment, under circumstances set forth in such applicable laws.proxy statement:
| Comparable GAAP Measure | ||
Operating Expense | $ 302.2 million | |
Operating Income | $ 95.9 million | |
Net Income | $ 64.0 million | |
Net Income per diluted common share | $ 0.34 | |
Non-GAAP Measures
This proxy statement includesnon-GAAP measures of one or more of Ciena’s operating expense, operating income, net income, and net income per diluted common share, as well as gross debt to EBITDA. These measures are not intended to be a substitute for financial information presented in accordance with GAAP. In evaluating the operating performance of Ciena’s business, management excludes certain charges and credits that are required by GAAP. These items share one or more of the following characteristics: they are unusual and Ciena does not expect them to recur in the ordinary course of its business; they do not involve the expenditure of cash; they are unrelated to the ongoing operation of the business in the ordinary course; or their magnitude and timing is largely outside of Ciena’s control. Management believes that thenon-GAAP measures herein provide management and investors useful information and meaningful insight into the operating performance of the business. The presentation of thesenon-GAAP financial measures should be considered in addition to Ciena’s GAAP results and these measures are not intended to be a substitute for the financial information prepared and presented in accordance with GAAP. Ciena’snon-GAAP measures and the related adjustments may differ fromnon-GAAP measures used by other companies and should only be used to evaluate Ciena’s results of operations in conjunction with our corresponding GAAP results. A reconciliation ofnon-GAAP measures used in this proxy statement to Ciena’s GAAP results for the relevant period can be found in the Appendix to our investor presentation for the fourth quarter of fiscal 2018 included as an exhibit to our Current Report on Form8-K furnished with the SEC on December 13, 2018.
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CIENA CORPORATION 7035 RIDGE ROAD HANOVER, MD 21076SCAN TO VIEW MATERIALS & VOTEVOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com or scan the QR Barcode aboveUse the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.During The Meeting - Go to www.virtualshareholdermeeting.com/ciena2019You may attend the Meeting on March 28, 2019 at 3:00 p.m. Eastern Time via the Internet and vote during the Meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions.VOTE BY PHONE - 1-800-690-6903Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.VOTE BY MAILMark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:E56001-P15106KEEP THIS PORTION FOR YOUR RECORDSTHIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.DETACH AND RETURN THIS PORTION ONLYCIENA CORPORATIONThe Board of Directors recommends you vote FOR the following proposals:1. Election of two Class I Directors and one Class II Director:Nominees:1a. Lawton W. Fitt1b. Patrick H. Nettles, Ph.D.1c. Joanne B. OlsenFor Against Abstain2. Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending October 31, 2019.3. Advisory vote on our named executive officer compensation, as described in these proxy materials.NOTE: Such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.For Against AbstainPlease sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.Signature [PLEASE SIGN WITHIN BOX] DateSignature (Joint Owners) Date
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report with Form 10-K are available at www.proxyvote.com.CIENA CORPORATION Annual Meeting of Stockholders March 28, 2019 at 3:00 p.m. Eastern TimeThis proxy is solicited by the Board of DirectorsThe undersigned hereby revokes all previous proxies, acknowledges receipt of the Notice of Annual Meeting of Stockholders and the Proxy Statement, and appoints Gary B. Smith, James E. Moylan, Jr. and David M. Rothenstein, or any of them, the proxies of the undersigned, with full power of substitution, to vote all shares of common stock of Ciena Corporation that the undersigned is entitled to vote at the Annual Meeting of Stockholders of Ciena Corporation to be held via live webcast at www.virtualshareholdermeeting.com/ciena2019 on Thursday, March 28, 2019 at 3:00 p.m. Eastern Time, or any adjournment thereof.This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors' recommendations. Continued and to be signed on reverse side
