## Facts

- Citrix Systems, Inc. stockholders approved a 2005 equity incentive plan authorizing equity awards to directors, officers, employees, consultants, and advisors.
- The plan imposed a single per-person annual cap of one million shares/RSUs, with no director-specific limits or formulas; at the time of suit, one million RSUs were valued at over $55 million.
- From 2011–2013, a board compensation committee composed solely of non-employee directors awarded RSUs to all non-employee directors, including themselves.
- Non-employee directors received total annual compensation (cash plus equity) generally in the $300,000–$400,000 range.
- A stockholder filed a derivative action alleging the non-employee directors’ compensation was excessive compared to peer companies.
- The complaint did not allege that the stockholder vote approving the plan was uninformed or that the RSU awards violated the plan’s express terms.

## Issues

1. Whether pre-suit demand on the board was excused as futile under Delaware law for claims challenging director self-compensation.
2. Whether stockholder approval of a broadly worded equity plan ratified later director self-awards such that review is limited to waste, or whether entire fairness applies.
3. Whether the complaint stated claims for breach of fiduciary duty, waste, and unjust enrichment regarding the non-employee directors’ compensation.

## Decision

- Demand was excused under the Rales framework because a majority of the directors received the challenged compensation and thus faced a disabling interest in evaluating a demand.
- Stockholder approval of the omnibus plan did not constitute ratification of the specific director compensation decisions because the plan lacked meaningful director-specific limits or amounts.
- Entire fairness governed the fiduciary-duty challenge to the directors’ self-compensation.
- The court denied dismissal of the breach of fiduciary duty (loyalty) and unjust enrichment claims as reasonably conceivable under entire fairness.
- The court dismissed the corporate waste claim for failure to meet Delaware’s stringent waste pleading standard.

## Legal Principles

- Demand is excused where the complaint creates reasonable doubt that a majority of the board can exercise independent and disinterested business judgment in responding to a demand; claims challenging directors’ own compensation commonly implicate director self-interest.
- Director self-compensation is a conflicted transaction and ordinarily requires an affirmative showing of fairness to the corporation.
- Stockholder approval of a compensation plan does not, by itself, ratify subsequent director self-awarded compensation; ratification sufficient to constrain judicial review requires stockholder approval of the specific director compensation at issue or meaningful director-specific ceilings or formulas.
- When ratification is absent, the proper standard of review for director self-compensation is entire fairness (fair dealing and fair price).
- Corporate waste requires allegations that the transaction is so one-sided that no person of ordinary, sound business judgment could view the corporation as receiving adequate value; comparatively high compensation alone may be insufficient to plead waste.

## Conclusion

The court held that a derivative challenge to non-employee director RSU awards could proceed without demand and would be reviewed for entire fairness because the stockholder-approved plan lacked director-specific limits capable of ratifying the directors’ self-determined compensation, while the complaint failed to state a separate claim for corporate waste.


Calma v. Templeton, 114 A.3d 563 (Del. Ch. 2015)