TripAdvisor 2012 Annual Report Download - page 39

Furthermore, we are also accumulating a greater portion of our cash flows in foreign jurisdictions than
previously and the repatriation of such funds for use in the United States, including for corporate purposes such as
acquisitions, stock repurchases, dividends or debt refinancings, may result in additional U.S. income tax expense.
We are currently relying on the “controlled company” exemption under NASDAQ Stock Market Listing
Rules, pursuant to which “controlled companies” are exempt from certain corporate governance requirements
otherwise applicable under NASDAQ listing rules.
The NASDAQ Stock Market Listing Rules exempt “controlled companies,” or companies of which more
than 50% of the voting power is held by an individual, a group or another company, from certain corporate
governance requirements, including those requirements that:
• A majority of the Board of Directors consist of independent directors;
• Compensation of officers be determined or recommended to the Board of Directors by a majority of its
independent directors or by a compensation committee comprised solely of independent directors; and
• Director nominees be selected or recommended to the Board of Directors by a majority of its
independent directors or by a nominating committee that is composed entirely of independent directors.
We currently rely on the controlled company exemption from the above requirements. Accordingly, our
stockholders will not be afforded the same protections generally as stockholders of other NASDAQ-listed
companies with respect to corporate governance for so long as we rely on these exemptions from the corporate
governance requirements.
If we are unable to successfully maintain effective internal control over financial reporting, investors may lose
confidence in our reported financial information and our stock price and business may be adversely impacted.
As a public company, we are required to maintain internal control over financial reporting and our
management is required to evaluate the effectiveness of our internal control over financial reporting as of the end
of each fiscal year. Additionally, we are required to disclose in our Annual Reports on Form 10-K our
management’s assessment of the effectiveness of our internal control over financial reporting and a registered
public accounting firm’s attestation report on this assessment. If we are not successful in maintaining effective
internal control over financial reporting, there could be inaccuracies or omissions in the consolidated financial
information we are required to file with the SEC. Additionally, even if there are no inaccuracies or omissions, we
could be required to publicly disclose the conclusion of our management that our internal control over financial
reporting or disclosure controls and procedures are not effective. These events could cause investors to lose
confidence in our reported financial information, adversely impact our stock price, result in increased costs to
remediate any deficiencies, attract regulatory scrutiny or lawsuits that could be costly to resolve and distract
management’s attention, limit our ability to access the capital markets or cause our stock to be delisted from The
NASDAQ Global Select Market or any other securities exchange on which we are then listed.
We will incur significant increased costs as a result of operating as a public company, and our management
will be required to devote substantial time to new compliance initiatives.
Until recently, we have never operated as a stand-alone public company. As a public company, we incur
significant legal, accounting and other expenses and are subject to rules and regulations that regulate corporate
governance practices of public companies, including the Securities Exchange Act of 1934, as amended, the
Sarbanes-Oxley Act of 2002, as amended, and rules promulgated by NASDAQ. We expect that compliance with
these public company requirements will make some activities more time consuming and may result in a diversion
of management’s time and attention from revenue—generating activities. For example, in 2012 we created new
board committees, adopted new internal controls and disclosure controls and procedures, and devoted and will
continue to devote significant management resources to our SEC reporting requirements.
29