VMware 2009 Annual Report Download - page 35

Table of Contents
Some of our directors own EMC common stock, restricted shares of EMC common stock and/ or options 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 and/or equity awards to purchase EMC common stock. In addition, some of our directors
are executive officers and/or directors of EMC. 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.
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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
•
for an annual performance evaluation of the nominating and governance committee and compensation committee.