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Director Compensation Subject to Entire Fairness Standard

By David Joffe and Marc Bussone

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.

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