Citrix 2006 Annual Report Download - page 65

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Citrix Systems, Inc.  Annual Report
• In connection with its investigation, the members
of the Company’s Audit Committee met both
telephonically and in-person numerous times
and the Chairman of the Audit Committee
communicated with the Audit Committee’s counsel
on a frequent basis; and
• Engaging outside consultants to conduct various
analyses of the Company’s option grants.
Historical Stock Option Granting Practices
Prior to January 1, 2006, the Company accounted for its
stock option grants under APB No. 25 and had provided
the required disclosures pursuant to the provisions of
Statement of Financial Accounting Standards, or SFAS,
No. 123, Accounting for Stock-Based Compensation . On
January 1, 2006, the Company adopted SFAS No. 123R,
Share-Based Payment , under the modified prospective
method. For the measurement date revisions the Company
has made, the Company revised its historical pro forma
footnote disclosures in accordance with SFAS No. 123.
Additionally, the Company adjusted its 2006 consolidated
financial statements to reflect the impact of any revised
measurement dates on the compensation cost recognized
in accordance with SFAS No. 123R.
As permitted by the terms of the Company’s various stock
plans (as amended and restated from time to time), the
Compensation Committee of the Company’s Board of
Directors was vested with the authority to administer and
grant stock options under the plans. During the period to
November 2003, all employee stock option grants were
required to be approved by the Compensation Committee.
Until November 2003 and continuing to the present, the
Compensation Committee delegated authority, subject
to specific parameters, to the Company’s Chief Executive
Officer and Chief Financial Officer to grant options to
non-executive employees. Grants to Section 16 Officers,
to employees whose compensation was subject to
Section 162(m) of the Internal Revenue Code of 1986,
as amended, or the IRC, and other grants outside of
the parameters discussed below continued to require
Compensation Committee approval in order to complete
the required granting actions.
In the restatement, for grants requiring Compensation
Committee approval, the Company generally determined
that Compensation Committee approval was likely obtained
at the next in-person meeting after the date of grant. This
conclusion was based on the fact that Compensation
Committee members recall signing consents in person at
board meetings, that members of management recalled
that it was the Company’s objective to present consents
to the Committee at in-person meetings, that the consents
contained in the Company’s records typically contain all
signatures on a single page (consistent with having been
signed in person), and that the available meta-data for
such consents generally indicated that the consent forms
were available for signature at that time. The Company
generally used the in-person board meeting dates when
determining revised measurement dates, because
members of management responsible for approval and
processing of these grants believed or acted as if approval
was an important and required granting action for all
grants that were not subject to the delegation of authority
described below. For example, managers involved in
processing grants: (i) said that they typically refrained from
correcting grants approved by the Committee without
further Committee action; but (ii) believed that alteration
or correction of grant recipient and amount lists prior to
Committee approval was permitted (and performed such
corrections and alterations and did not consider them to
be modifications); and (iii) believed Committee approval
was necessary to grant options. There was some evidence
that signatures were sometimes solicited at such meetings
for consents previously signed and transmitted by fax or
other means but because the Company did not retain
these earlier obtained consents there was little evidence
to indicate for which grants these approvals were obtained
and when they were received. Where meta-data or
other evidence led us to conclude that approval was not
complete at the next in person meeting, the Company
relied on the other evidence to select a later date.
Where meta-data or other evidence led the Company to
conclude that approval was not complete at the next in
person meeting, the Company relied on the other evidence
to select a later date.
From December 1995 through December 2006, the
exercise price for all grants was typically set at the closing
price of the Company’s common stock on the original
intended grant date. During this period, the Company