Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

Director Compensation Subject to Entire Fairness Standard

By David Joffe and Marc Bussone
September 02, 2015

In Calma v. Templeton, C.A. No. 9579-CB (Del. Ch. April 30, 2015), the Delaware Court of Chancery denied the motion to dismiss filed by Citrix Systems, Inc. (Citrix) and its directors in a derivative suit brought by shareholders. The suit alleged that Citrix's directors breached their fiduciary duty by paying excessive compensation to the company's non-employee directors from 2011 through 2013 in connection with awards of restricted stock units (RSUs) under the Citrix 2005 Equity Incentive Plan (Plan). In a challenge to the business judgment rule, the plaintiffs were allowed to proceed with their breach of fiduciary duty claim, and the court noted that the awards were subject to review under the “entire fairness” standard.

Background

The Plan permitted grants of equity compensation in the form of RSUs, stock options and other types of equity awards. It was approved by Citrix stockholders in 2005. Employees, directors, officers, consultants and advisers of Citrix were eligible to receive awards. The Plan limited the total number of RSUs that a participant could receive in a calendar year to 1 million, but it did not otherwise limit annual compensation or awards under the Plan. The Plan granted authority to the compensation committee to decide how many RSUs to award to participants, subject only to the 1 million RSU per year per participant limit. It contained no sub-limits by position, such as a limit for non-employee directors or officers. Based on the price of Citrix stock at the time the case was filed, a grant of 1 million RSUs to a single participant would have been worth over $55 million.

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
Major Differences In UK, U.S. Copyright Laws Image

This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.

The Article 8 Opt In Image

The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.

Strategy vs. Tactics: Two Sides of a Difficult Coin Image

With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.

Legal Possession: What Does It Mean? Image

Possession of real property is a matter of physical fact. Having the right or legal entitlement to possession is not "possession," possession is "the fact of having or holding property in one's power." That power means having physical dominion and control over the property.

The Anti-Assignment Override Provisions Image

UCC Sections 9406(d) and 9408(a) are one of the most powerful, yet least understood, sections of the Uniform Commercial Code. On their face, they appear to override anti-assignment provisions in agreements that would limit the grant of a security interest. But do these sections really work?