After being one of the first targets of an emerging executive compensation litigation strategy, Citrix announced the Delaware Chancery Court has approved the settlement of a notable shareholder derivative action in the case of Calma v. Templeton, which alleged the company improperly awarded excessive compensation to non-employee directors. In 2015, executive compensation litigation expanded into director pay with a specific focus on non-employee director compensation. The plaintiff in the Citrix suit (as well as those in other, similar suits) argued that the lack of a reasonable, shareholder-approved limit on the amount of stock compensation a non-employee director could receive under the company's stock plan renders it impossible for the compensation decision to be made independently. The plaintiff argued that without the ability to make an independent assessment, the Board's decision is not entitled to business judgment protections. Unlike say on pay suits, which burst onto the scene with significant fanfare after the introduction of mandatory say on pay and were dismissed just as quickly, these suits have gained traction with companies such as Facebook already having agreed to similar governance changes in a recent settlement. As for Citrix, as part of the settlement, the company agreed to implement several governance reforms, including:
- Implementing a retroactive limit on the amount of equity awards non-employee directors can earn with a ceiling of $795,000 per director;
- Agreeing to put the retroactive amendments to the 2014 and 2015 bonus plans to a shareholder vote at the 2017 annual meeting;
- Buttressing the company's proxy statement disclosures to address how the company approaches non-employee director compensation, including the role of the consultant and the specific awards made to each non-employee director during the year.
- Amending the compensation committee charter to provide for additional responsibilities, including an annual review of all compensation provided to non-employee directors and the use of an independent compensation consultant to assist in the process.