Settlement of Calma v. Templeton Provides Guidance on Setting Director Pay

In response to recent lawsuits by the plaintiffs’ bar, I have previously posted about why public company employers may wish to consider adding a separate annual limit on non-employee director equity awards. Just last month the Delaware Chancery Court approved a settlement of Calma v. Templeton, a case in which Calma challenged the size of director equity awards granted under Citrix’s shareholder-approved equity compensation plan.  Among other things, the settlement provides what some practitioners believe to be a reasonable framework for structuring director compensation programs on a go-forward basis.  Key provisions of the settlement are as follows:

  • Citrix agreed to amend its equity compensation plan to incorporate a $795,000 cap on the value of equity awards that may be granted to any one non-employee director in any one year. 
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Yet Another Reason to Consider Separate Annual Limits on Director Equity Awards

As reported in a prior blog post, public company employers that are adopting or amending equity-based compensation plans should consider adding a separate annual limit on director equity awards.  In a recent Delaware Chancery Court opinion (Calma v. Templeton), the Chancery Court refused to grant the board of directors of Citrix Systems, Inc. the protection afforded by the business judgment rule when they approved equity awards to themselves under the Company’s 2005 shareholder-approved equity compensation plan. The Chancery Court’s failure to review the director equity awards using the business judgment rule meant that the shareholder derivative action in Calma could proceed to trial under a more plaintiff-friendly “entire fairness” standard of review. Read More ›

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