Brocade Bonus Time

6:00 PM -- We dont know if Brocade Communications Systems Inc. (Nasdaq: BRCD)execs are losing sleep over the switch maker’s accounting problems, but it appears they won’t lose any money.

CEO Mike Klayko and three other Brocade honchos could receive fat bonuses after the company finally files its late earnings report. Brocade said in a Securities and Exchange Commission (SEC) filing that it will give Klayko stock worth $780,000 after the company becomes current with its earnings reports. That’s 150 percent of his annual base salary. Product development VP Don Jaworski ($562,000), sales VP Ian Whiting ($540,000), and CFO Tony Canova ($525,000) will also receive stock when the reports are filed. The shares vest two years after they are issued if the executives remain with Brocade.

That’s not all. The executives could also receive cash bonus premiums for the full amount of their target bonuses for 2006 and 50 percent of their 2007 target bonuses if the company meets revenue and other financial goals for those years.

That’s not a bad payout considering the Department of Justice is investigating Brocade for the way it accounted for stock options from 2001 to 2004, Nasdaq might delist it for blowing earning report filing deadlines, and it had disappointing sales the past two quarters. (See Brocade Notified by Nasdaq , SEC Gets Formal With Brocade, and Brocade Bloodied Again.) There’s also talk that Brocade is considering going private, which would cancel the stock bonuses but not the cash payouts. (See Is Brocade Going Private?.)

— Dave Raffo, Senior Editor, Byte and Switch