VMware 2011 Annual Report Download - page 33

Table of Contents
We may not be able to resolve any potential conflicts, and even if we do, the resolution may be less favorable than if we were dealing with
an unaffiliated party.
The agreements we enter into with EMC may be amended upon agreement between the parties. While we are controlled by EMC, we may
not have the leverage to negotiate amendments to these agreements if required on terms as favorable to us as those we would negotiate with an
unaffiliated third party.
Some of our directors own EMC common stock, restricted shares of EMC common stock or equity awards to acquire EMC common stock
and hold management positions with EMC, which could cause conflicts of interests that result in our not acting on opportunities we
otherwise may have.
Some of our directors own EMC common stock or equity awards to purchase EMC common stock. In addition, some of our directors are
executive officers or directors of EMC, and EMC, as the sole holder of our Class B common stock, is entitled to elect 7 of our 8 directors.
Ownership of EMC common stock, restricted shares of EMC common stock and equity awards to purchase EMC common stock by our directors
and the presence of executive officers or directors of EMC on our board of directors could create, or appear to create, conflicts of interest with
respect to matters involving both us and EMC that could have different implications for EMC than they do for us. Provisions of our certificate of
incorporation and the master transaction agreement between EMC and us address corporate opportunities that are presented to our directors or
officers that are also directors or officers of EMC. There can be no assurance that the provisions in our certificate of incorporation or the master
transaction agreement will adequately address potential conflicts of interest or that potential conflicts of interest will be resolved in our favor or
that we will be able to take advantage of corporate opportunities presented to individuals who are officers or directors of both us and EMC. As a
result, we may be precluded from pursuing certain growth initiatives.
EMC's ability to control our board of directors may make it difficult for us to recruit independent directors.
So long as EMC beneficially owns shares of our common stock representing at least a majority of the votes entitled to be cast by the holders
of outstanding voting stock, EMC can effectively control and direct our board of directors. Further, the interests of EMC and our other
stockholders may diverge. Under these circumstances, persons who might otherwise accept our invitation to join our board of directors may
decline.
We are a “controlled company” within the meaning of the New York Stock Exchange rules and, as a result, are relying on exemptions from
certain corporate governance requirements that provide protection to stockholders of companies that are not “controlled companies.”
EMC owns more than 50% of the total voting power of our common shares and, as a result, we are a “controlled company” under the New
York Stock Exchange corporate governance standards. As a controlled company, we are exempt under the New York Stock Exchange standards
from the obligation to comply with certain New York Stock Exchange corporate governance requirements, including the requirements:
While we have voluntarily caused our Compensation and Corporate Governance Committee to currently be composed entirely of
independent directors in compliance with the requirements of the New York Stock Exchange, we are not required to maintain the independent
composition of the committee. As a result of our use of the “controlled company” exemptions, holders of our Class A common stock will not
have the same protection afforded to stockholders of companies that are subject to all of the New York Stock Exchange corporate governance
requirements.
Our historical financial information as a business segment of EMC may not be representative of our results as an independent public
company.
The historical financial information covering the periods prior to our IPO in August 2007 included in our Annual Report on Form 10-K for
the fiscal year ended December 31, 2011 does not necessarily reflect what our financial position, results of operations or cash flows would have
been had we been an independent entity during those historical periods. The historical costs and expenses reflected in our consolidated financial
statements prior to 2008 include an allocation for certain corporate
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product or technology development or marketing activities or customer agreements which may require the consent of EMC.
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that a majority of our board of directors consists of independent directors;
• that we have a corporate governance and nominating committee that is composed entirely of independent directors with a written charter
addressing the committee's purpose and responsibilities;
• that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the
committee's purpose and responsibilities; and
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for an annual performance evaluation of the nominating and governance committee and compensation committee.