| Our Leadership Structure Our current leadership structure separates the roles of CEO and Chairman. The CEO is responsible for setting the strategic direction for the Company and the day-to-day leadership and performance of the Company, while the Chairman provides guidance to the CEO, sets the agendaagendas for Board meetings and presides over meetings of the full Board. Our leadership structure also includes a Lead Independent Director role to facilitate effective performance of the Board and its oversight of our business. We believe that having a separate Chairman and Lead Independent Director structure allows the Board to effectively address governance issues by providing another channel for the Board to express its views to management and provide feedback to the CEO on company performance. The leadership structure of the Board has not impacted the Board’s ability to provide effective oversight of risk management. Lead Independent Director Mr. Sagan has been our Lead Independent Director since February 2015. The responsibilities of our Lead Independent Director include: •serving as chair of any Board meeting, or portion of a meeting, at which the Chairman is not present; •serving as a liaison between the independent directors and the Chairman and the CEO; •providing the Chairman and the CEO with input on the preparation of Board meeting agendas, including those portions of Board meetings not attended by the Chairman and Board committee meetings;agendas;
•providing feedback to the Chairman and the CEO in the form of assessments of Board meetings and management presentations at Board meetings; •consulting with the Chairman and the CEO on matters relating to corporate governance and Board performance; •communicating regularly with the CEO regarding information to be provided to the Board so that the Board can perform its duties and as to feedback from the Board for the CEO; •calling special meetings of the full Board, as needed; •being available for communication with major stockholders as appropriate;
•serving as an ex-officio, non-voting member of each Board committee of which the Lead Independent Director is not a member; •supervising the Board’s annual self-evaluations, including providing each Board member with feedback on such Board member’s performance and reporting overall results of the evaluations to the CCGGovernance Committee and, where appropriate, to the Board as a whole; and •performing such other duties as may be requested from time to time by the Board. Oversight of Risk Management The Board’s role in the Company’s risk oversight process includes receiving regular reports from members of senior management on areas of material risk to the Company, including financial, operational, financial,cybersecurity, legal, and regulatory, and strategic, ESG and reputational risks. Our Mergers and Acquisitions Committee (the “M&A Committee”) assesses risks to the Company in connection with proposed acquisitions, divestitures and investments. The M&A Committee reviews management’s assessment of potential risks raised during due diligence and management’s related risk mitigation plans before granting approval to enter into definitive transaction agreements. Our Audit Committee oversees management of financial risk exposures, including the integrity of our accounting and financial reporting processes and controls. As part of this responsibility, the Audit Committee meets periodically with the independent auditor, our internal auditors and our financial and accounting personnel to discuss significant financial risk exposures and the steps management has taken and willplans to take to monitor, control and report any such exposures. Additionally, the Audit Committee reviews significant findings prepared by the independent auditor and our internal auditors, together with management’s related responses. Our Audit Committee also oversees management’s compliance with applicable legal and regulatory requirements and the risks related to potential non-compliance, including those related to cybersecurity matters and concerns, information security and data privacy. The Audit Committee reviews periodic reports from our Chief Ethics and Compliance Officer (“CECO”), our Chief Information Security Officer (“CISOCSO”), our internal auditors and our independent auditor. Finally, theThe Audit Committee has primary oversight responsibility for matters relating to enterprise risk. As such, the charter for our Audit Committee provides for periodic reviews and discussion of our practices and policies with respect to risk assessment and risk management with an enterprise risk management committee comprised of senior members of the Company’s management team.team, including our CFO and the head of our internal audit group. Our Audit Committee also oversees the Company’s compliance with applicable legal and regulatory requirements and risks related to potential non-compliance, including those related to cybersecurity, incident response, information security and data privacy. In addition to reviewing cybersecurity risks during each of its quarterly meetings, the Audit Committee periodically holds special meetings dedicated solely to discussing cybersecurity risks and developments of importance to the Company. The Audit Committee receives regular reports on significant cybersecurity matters from the CSO and other members of senior management. These reports include topics such as, among other things, the status of projects to strengthen the Company’s security systems and improve cyber readiness and resilience, existing and emerging threat landscapes, as well as the results of exercises and response readiness assessments performed by internal stakeholders and outside advisors. The Audit Committee also reviews and oversees implementation of our policies and procedures related to cybersecurity risk assessment and management. In addition, the Company has adopted a cybersecurity reporting policy, which provides for controls and procedures for timely and accurate reporting to the Audit Committee of any significant cybersecurity incidents or significant vulnerabilities that are unresolved within standard procedures. As part of our cybersecurity, privacy and risk management programs, the Company provides broad-based and role-specific information security, data protection and compliance training to employees. Additionally, in an effort to mitigate information security risk, the Company maintains insurance coverage intended to respond to certain network, cyber, and privacy risk events and to defray the costs of data security incidents. Furthermore, the Company has based its security policies in part on the ISO (International Organization for Standardization) Industry Framework and holds numerous security certifications, a number of which require independent third-party validation, at the corporate and individual cloud services levels, further demonstrating the Company's strong commitment to cybersecurity. The enterprise risk management committeeinternal audit group reviews the adequacy and effectiveness of the Company’s risk management and controls framework and processes, provides that risk management activities are integrated, consistent and managed at a level consistent with the risk, makes recommendations for, and tracks and reports on progress of, changes in the risk management framework, and assists the CEOCompany’s executive staff in assuring that significant risks to the Company are identified and risk benefit trade-offs are managed appropriately to protect the Company’s assets and shareholderstockholder value. The CFO serves as the enterprise risk management committee chairman and the members include the CEO and senior leadershead of the Company’s legal,internal audit compliance, information security, product security, human resources, information, customer and products organizations. The enterprise risk management committee meets with and regularly reports to the Audit Committee. Our Governance Committee oversees the management of governance risks associated with director independence, potential director and executive conflicts of interest, the composition and structure of the Board and its committees and
succession planning, and it also monitors the effectiveness of our corporate governance policies. Our Governance Committee also oversees our policies, procedures and risks related to related persons transactions and assesses ESG risks in connection with its oversight of our ESG programs. Our Compensation Committee oversees and reviews thewith management our executive officer and employee compensation plans and programs that could have a material impact on VMware for each of our functional groups with the CCG Committee.groups. Our management review considers whether any of these plans or programs may encourage inappropriate risk-taking or give rise to risks that are reasonably likely to have a material adverse effect on us, and whether it would recommend any changes to the plans or programs. Long-term, equity-based compensation, which we believe discourages excessive short-term risk taking and strongly aligns employee interests with the creation of long-term increased stockholder value, is an important feature in the compensation packages we offer our executive officers and employees. Management also reviews with the CCGCompensation Committee risk-mitigating controls, such as our compensation recovery policy for executive officer bonus and equity compensation, the degree of committee and senior management oversight of each program, and the level and design of internal controls over such programs. Based on these reviews, we have concluded that our compensation plans and programs are not reasonably likely to have a material adverse effect on our Company.
Stockholder Engagement
As VMware navigates a new chapter as a standalone public company, we continue to believe that ongoing stockholder outreach provides our Board and management team with valuable feedback from investors. To that end, since our 2021 Annual Meeting, in addition to responding to stockholder communications that were submitted via the processes outlined in Information about the Annual Meeting—“How do I contact VMware’s Board of Directors?”,we strengthened our stockholder engagement program by proactively reaching out to our ten largest unaffiliated stockholders, who collectively held approximately 38% of our total unaffiliated shares outstanding, as well as the two major proxy advisory firms. VMware’s leadership team engaged in conversations with nine of these investors and both proxy advisory firms. During these engagements, we discussed with stockholders such topics as the following, among others: •The current executive compensation program, including the alignment of rigorous performance hurdles in Mr. Raghuram’s compensation package with significant stockholder value creation, and the rationale behind metrics within our incentive compensation programs; •The Company’s corporate governance structure and practices as a standalone public company, including our transition to a single-class vote structure; •Succession planning and the CEO transition process; •Our approach to developing a comprehensive sustainability strategy, including the results of our materiality assessment, as well as our 2030 Agenda ESG goals that closely align with VMware’s business strategy; •Our efforts to promote diversity, equity and inclusion across the entire workforce, including enhancements to help improve diverse representation beginning with our hiring and onboarding processes, as well as ongoing training to support the career development of our employees. Our Board and management team consider stockholder feedback to be an important component of their decision-making process, and consistent engagement positions VMware to better understand the most important issues at hand for our investors.
BOARD OF DIRECTORS INDEPENDENCE AND COMMITTEES The Board is currently composed of 11 members. Donald Carty, a member of our Board since 2015, is not standing for re-election, and his Board service will end on the date of the Annual Meeting, at which time the Board will be reduced to ten members. The number of directors constituting the Board may be set by resolution of the Board; however, the Board may not consist of less than six directors nor more than twelve directors. The Board is divided into three classes, with each class serving for a staggered three-year term. At each Annual Meeting, a class of directors is elected for a three-year term to succeed the directors of the same class whose terms are then expiring. The following table provides summary information about each of our directors, with the exception of Mr. Carty, who is currently a member of the Audit Committee. ____________________ M Committee Member C Committee Chair
Directors Standing For Election Directors Nicole Anasenes, Marianne Brown and Paul Sagan have each been nominated by the Board for election at the Annual Meeting, and each has agreed to stand for election for an additional three-year term. Information concerning the nominees follows. | | | | | | | | | | Nicole Anasenes
Age: 49 Director since: 2022 Term expires: 2022 Committees: Audit |
Former Public Company Directorships in Past Five Years: ANSYS, Inc. | Background •SVP (2020-present) and CFO (2021-present), ANSYS, Inc., a provider of engineering simulation software and services •CFO and COO, Squarespace, Inc., a provider of online tools for building and managing e-commerce and online presence (2016-2020) |
•CFO, Infor (2013-2015) •Various leadership positions in corporate finance, M&A and market development, IBM (17 years) | Director Qualifications Ms. Anasenes brings to our Board significant business acumen and extensive experience in financial and operational matters, gained from her current and prior leadership positions as CFO and COO of public and private technology companies. In addition, her prior service on another public company board, including as a member of its audit committee, provides her with valuable experience. |
| | | | | | | | | | Marianne Brown
Age: 63 Director since: 2019 Term expires: 2022 Committees: Audit; Compensation |
Other Public Company Directorships: Akamai Technologies, Inc.; Northrop Grumman Corporation; The Charles Schwab Corporation | Background •EVP and Co-COO, Global Financial Solutions (2018-2019) and COO, Institutional and Wholesale Solutions (2015-2018), Fidelity National Information Services, Inc., a financial software, services and global business solutions provider |
•COO, SunGard Financial Systems LLC (2014-2015) •President and CEO, Omgeo (2006-2014) •CEO, Securities Industry Automation Corporation (2005-2006) •Various positions of increasing authority, Automatic Data Processing, Inc. (26 years) | Director Qualifications Ms. Brown brings to our Board executive leadership experience that includes extensive background with companies that provide software, services and global business solutions to large enterprise customers. Her leadership experience in the financial services industry provides valuable insights into the business requirements and expectations that enterprise customers have for complex IT solutions, such as those offered by VMware. Her extensive experience as a COO also provides unique insight into the challenges of developing and implementing business solutions at a global scale. |
| | | | | | | | | | Paul Sagan
Age: 63 Director since: 2014 Term expires: 2022 Committees: Compensation (Chair); Governance |
Other Public Company Directorships: Moderna, Inc.; Catalyst Partners Acquisition Corp.
Former Public Company Directorships in Past Five Years: Akamai Technologies, Inc. | Background •Senior Advisor (2020-present); Executive in Residence (2020-present and 2014-2018); and Managing Director (2018-2020), General Catalyst, a venture capital firm •CEO (2005-2013); President (2011-2012 and 1999-2010); and VP and COO (1998-1999), Akamai Technologies, Inc. |
•Various senior executive positions at media and entertainment companies such as Time Warner Cable, Time Inc. and CBS, Inc. (former) •Member, President Obama’s National Security Telecommunications Advisory Committee (former) •Senior Advisor, World Economic Forum (former) | Director Qualifications As the former President, COO and CEO of a fast-growing, industry-leading S&P 500 company, Mr. Sagan brings to our Board significant experience leading a complex, international technology enterprise, extensive knowledge of internet-based technologies and business acumen. During his career, Mr. Sagan has led visionary technology and media companies and has been senior advisor to the World Economic Forum. In addition, Mr. Sagan’s service on other public company boards enables him to bring valuable experience from those directorships to his service on our Board. |
Directors Not Standing For Election Information concerning our continuing directors is presented below. | | | | | | | | | | Anthony Bates
Age: 55 Director since: 2016 Term expires: 2023 Committees: Compensation; M&A (Chair) |
Other Public Company Directorships: eBay, Inc.
Former Public Company Directorships in Past Five Years: Social Capital Hedosophia Holdings Corp.; GoPro, Inc. | Background •CEO (2019-present) and Chairman (2021-present), Genesys Telecommunications Laboratories, Inc., a customer-experience software platform provider •CEO, Growth Equity (2017-2018), Social Capital, an investment firm •President, GoPro, Inc. (2014-2016) |
•EVP, Business Development and Evangelism (2013-2014) and President, Skype Division (2011-2013), Microsoft Corporation •CEO, Skype Inc. (2010-2011) •Various positions of increasing authority, Cisco Systems, Inc. (1996-2010) | Director Qualifications Mr. Bates has extensive executive leadership experience in the technology industry, including managing worldwide operations, sales, service and support areas. His leadership experience and service on the board of directors of other companies brings to our Board strong leadership expertise and unique industry insight. |
| | | | | | | | | | Michael Brown
Age: 76 Director since: 2007 Term expires: 2024 Committees: Audit; Compensation; Governance |
Other Public Company Directorships: Stifel Financial Corp.
Former Public Company Directorships in Past Five Years: Insperity, Inc. | Background •VP and CFO (1994-1997); VP, Finance (1993-1994); and Treasurer (1990-1993), Microsoft Corporation •Various positions of increasing authority, Deloitte & Touche LLP (1971-1989) |
•Chair, NASDAQ Stock Market Board of Directors (former) •Governor, National Associations of Securities Dealers (former) | Director Qualifications Mr. Brown brings to our Board substantial financial expertise that includes extensive knowledge of the complex financial and operational issues facing large companies and a deep understanding of accounting principles and financial reporting rules and regulations. He acquired this knowledge in the course of serving as the CFO of a global technology company, working with a major international accounting and consulting firm for 18 years and serving as a member of the audit committees of other public company boards. Mr. Brown’s experience at Microsoft and on the boards of other technology companies also provides insight into the information technology industry. His experience as an independent auditor provides our Board and the Audit Committee with significant insight into the preparation of financial statements and knowledge of audit procedures. Through his many senior management positions, including as Chair of the board of the NASDAQ Stock Market and as a governor of the National Associations of Securities Dealers, Mr. Brown has demonstrated his leadership and business acumen. |
| | | | | | | | | | Michael Dell
Age: 57 Director since: 2016 Term expires: 2023 Committees: M&A |
Other Public Company Directorships: Dell Technologies Inc.; SecureWorks Corp. (a majority-owned subsidiary of Dell)
Former Public Company Directorships in Past Five Years: Pivotal Software, Inc. | Background •Chairman, CEO and Founder, Dell Technologies Inc., a technology and services company (2016-present) •Chairman (1984-present) and CEO (1984-2004 and 2007-present), Dell Inc., a wholly owned subsidiary of Dell Technologies Inc. |
•Founder, MSD Capital, L.P., a family investment firm (current) •Co-founder, Michael & Susan Dell Foundation (current) | Director Qualifications As the Chairman, CEO and founder of Dell, Mr. Dell oversees one of the world’s largest technology companies and is recognized as one of the leading innovators and influencers in the business world. Mr. Dell has decades of experience leading a complex, international technology enterprise and possesses extensive knowledge of internet-based technologies and the needs and expectations of enterprise customers. Having successfully led Dell Inc. through many transitions in information technology and enterprise computing, Mr. Dell brings extensive and valuable experience to our Board. |
| | | | | | | | | | Kenneth Denman
Age: 63 Director since: 2021 Term expires: 2024 Committees: Governance; M&A |
Other Public Company Directorships: Costco Wholesale Corp.; Motorola Solutions, Inc.
Former Public Company Directorships in Past Five Years: LendingClub Corporation; Mitek Solutions, Inc.; ShoreTel, Inc. | Background •Venture Partner, Sway Ventures, a venture capital firm (2018-present) •President and CEO, Emotient, Inc. (2012-2016) •CEO, Openwave Systems, Inc. (2008-2011) •CEO, iPass, Inc. (2001-2008) •SVP and COO, MediaOne (1996-1999) |
•Advisory Board member, Visiting Professor and Edward V. Fritzky Endowed Chair, University of Washington Foster School of Business (current) •Executive Board member, University of Washington Foundation (current) •Board of Trustees member, Seattle Children’s Hospital (current) | Director Qualifications Mr. Denman has extensive executive leadership experience in the technology industry, including in the software, services and cybersecurity businesses, managing global businesses and developing markets, together with private equity, investment banking and capital allocation experience. His leadership experience and service on the boards of directors of other public companies brings to our Board strong leadership expertise and unique industry insight.
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| | | | | | | | | | Egon Durban
Age: 48 Director since: 2016 Term expires: 2023 Committees: M&A |
Other Public Company Directorships: Dell Technologies Inc.; Endeavor Group Holdings, Inc.; Motorola Solutions, Inc.; Qualtrics International Inc.; Twitter, Inc.; Unity Software Inc.
Former Public Company Directorships in Past Five Years: Pivotal Software, Inc.; SecureWorks Corp. | Background •Co-Chief Executive Officer (2019-present); and Managing Partner and Managing Director (2013-2019), Silver Lake, a global technology investment firm | Director Qualifications As Co-CEO of one of the leading global technology investment funds, Mr. Durban possesses considerable financial acumen, deep knowledge of global trends in information technology and expertise in conducting complex business transactions. Mr. Durban also brings valuable experience from his service on other public company boards to his service on our Board. |
| | | | | | | | | | Karen Dykstra
Age: 63 Director since: 2016 Term expires: 2024 Committees: Audit (Chair); Governance (Chair) |
Other Public Company Directorships: Gartner, Inc.
Former Public Company Directorships in Past Five Years: Boston Properties, Inc. | Background •CFO and Chief Administrative Officer (2013-2015); EVP and CFO (2012-2013), AOL, Inc. •Partner, Plainfield Asset Management LLC (2007-2010) |
•COO and CFO, Plainfield Direct LLC (2006-2010) •CFO (2003-2006) and various positions of increasing authority (1981-2003), Automatic Data Processing, Inc. | Director Qualifications Ms. Dykstra brings to our Board substantial financial expertise that includes extensive knowledge of the complex financial and operational issues facing large companies, as well as a deep understanding of accounting principles and financial reporting rules and regulations. She acquired this knowledge in the course of serving as the CFO of two global companies, working with a major business services firm for 25 years and serving as a member of the audit committee of other public company boards.
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| | | | | | | | | | Rangarajan (Raghu) Raghuram
Age: 59 Director since: 2021 Term expires: 2024 Committees: M&A |
| Background •CEO (2021-present); COO, Products and Cloud Services (2016-2021); EVP, Software-Defined Data Center (2014-2016); EVP, Cloud Infrastructure and Management (2012-2014); and various other positions of increasing authority (2003-2012), VMware •Various product management and marketing roles at Netscape Communications Corporation and Bang Networks, Inc. (former) | Director Qualifications As CEO of VMware, Mr. Raghuram has in-depth knowledge of our business and brings to our Board insight and knowledge of our operations and strategic opportunities. In addition, Mr. Raghuram’s extensive experience in guiding our product development strategy for over eighteen years as the compute industry has rapidly evolved provides unique insight into how we can leverage our technology to anticipate and meet customer needs and market opportunities.
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Selection and Nomination of Directors Our entire Board is responsible for nominating members for election to the Board and for filling vacancies on the Board that may occur between Annual Meetings. The Governance Committee identifies, evaluates and recommends director candidates to the entire Board. The Governance Committee reviews and assesses the skills and characteristics it believes are or may be required for Board service based on the needs of our business. The Governance Committee identifies director candidates through numerous sources, including recommendations from directors, executive officers and stockholders of VMware. The Governance Committee identifies those individuals most qualified to serve as members of the Board and considers many factors with regard to each candidate, including judgment, integrity, diversity, prior experience, the interplay of the candidate’s experience with the experience of other members of the Board, the extent to which a director candidate would be desirable as a member of any committees of the Board, and a candidate’s willingness to devote substantial time and effort to the Board. As such, the Board believes that a diverse mix of viewpoints and experiences is an important consideration in determining the composition of the Board. The effectiveness of the Board’s efforts to recruit members with appropriate skill sets and experiences and to promote the exchange of differing viewpoints is reviewed as part of the Board’s annual self-evaluation process. The Board believes that a board having no fewer than six and no more than twelve directors enables needed expertise, diversity of experiences, and independence, without hindering effective discussion or diminishing individual accountability. In considering director candidates, the Board considers the entirety of each candidate’s credentials in the context of these standards. With respect to the nomination of continuing directors for re-election, the individual’s contributions to the Board are also considered. Our Board
includes three members who self-identify as female and two members who self-identify as a member of an underrepresented community. The average tenure of the Board, excluding Mr. Carty, who is not seeking re-election, is 5.2 years of service, with four directors having served less than four years, four having served between four and eight years and two having served more than eight years. Our stockholders may recommend individuals to the Board for consideration as potential director candidates by submitting the suggested candidate’s name and appropriate background and biographical information to the VMware Board of Directors, 3401 Hillview Avenue, Palo Alto, California, 94304. Assuming that the appropriate information has been timely provided, the Governance Committee will consider these candidates substantially in the same manner as it considers other candidates it identifies. Our stockholders also may nominate director candidates by following the procedures set forth in the advance notice provisions of VMware’s bylaws. For additional information, see “Information About the Annual Meeting—What is the deadline to propose actions for consideration at the 2023 Annual Meeting or to nominate individuals to serve as directors?” Pursuant to a stockholders agreement dated November 1, 2021 (the “Stockholders Agreement”) by and among VMware, Michael Dell and the Susan Lieberman Dell Separate Property Trust (the “SLD Trust”) (collectively, the “MSD Stockholders”) and various stockholders affiliated with Silver Lake Partners (the “SLP Stockholders”), and subject to certain restrictions, the MSD Stockholders are entitled to nominate up to two directors for election to the Board and the SLP Stockholders are entitled to nominate one director for election to the Board. For so long as the MSD Stockholders have the right to nominate a director and Mr. Dell is a member of the Board, Mr. Dell will serve as Chairman of the Board. Mr. Dell is currently serving as the MSD Stockholders’ nominee, and Mr. Durban is currently serving as the SLP Stockholders’ nominee. The Stockholders Agreement also governs, among other things, certain voting obligations that apply to the MSD Stockholders and the SLP Stockholders. For more information on the Stockholders Agreement and related party transactions, see “Transactions with Related Persons.” Board Independence As a controlled company, underUnder the NYSE Rules, we are exempt from the requirementrequired to have a majority of independent directors on the Board. TheBoard, and the Board has affirmatively determined that fiveeight of our eighteleven directors are independent of VMware under the NYSE Rules. Specifically, each of DirectorsNicole Anasenes, Anthony Bates, Marianne Brown, Michael Brown, Donald Carty, Kenneth Denman, Karen Dykstra and Paul Sagan areis independent. The Board considered all facts and circumstances it deemed relevant in making such determinations of independence, including business relationships between VMware and companies on which our independent directors serve as board members. The Board affirmatively concluded that none of these relationships are of a material nature or are of a nature that would preclude such directors from being deemed independent under NYSE Rules.
Ownership interests of our directors or officers in the common stock of Dell, or service as both a director of Dell and VMware, or as a director of VMware and an officer or employee of Dell could create, or appear to create, potential conflicts of interest when directors and officers are faced with decisions that could have different implications for us and Dell. Since VMware’s initial public offering (“IPO”), in order to address potential conflicts of interest between us and EMC with respect to corporate opportunities, our certificate of incorporation has contained provisions regulating and defining the conduct of our affairs as they may involve EMC and its officers and directors, and our powers, rights, duties and liabilities and those of our officers, directors and stockholders in connection with our relationship with EMC. Our certificate of incorporation also contains provisions limiting the liability any of our directors and officers who are also directors or officers of EMC in the event they learn of a transaction that may be a corporate opportunity for both VMware and EMC, provided they comply with the policies set forth in our certificate of incorporation. These provisions are applicable to Mr. Dell, who serves as CEO of EMC. Transactions with Dell are also subject to review by our RPT Committee pursuant to our Related Persons Transactions Policy. From time to time, our Board may also establish ad hoc special committees comprised of independent directors who are disinterested with respect to Dell and its affiliates to review significant potential transactions involving Dell. Additionally, pursuant to resolutions adopted by our RPT Committee, we have renounced any expectancy or interest in being offered an opportunity to participate in corporate opportunities of which Mr. Dell becomes aware through his personal capacity, his capacity as Chairman and CEO of Dell, his capacity as the founder and controlling owner of MSD Capital or through any other entity in which MSD Capital or its affiliates has an interest, and of which Mr. Durban becomes aware through his personal capacity, his capacity as a member of the board of directors of Dell, his capacity as Managing Partner and Managing Director of Silver Lake or through any other entity in which Silver Lake or its affiliates has an interest. Pursuant to resolutions adopted by the Board, we have renounced any expectancy or interest in being offered an opportunity to participate in corporate opportunities of which Mr. Sagan becomes aware through his personal capacity or through his capacity as Managing Director at General Catalyst or through any other entity in which General Catalyst or its affiliates has an interest.related persons transactions. For more information regarding oversight of related persons transactions, see “Review and Approval of Transactions with Related Persons.”
Attendance at Board, Committee and Annual Stockholder Meetings The Board expects that each director will prepare for, attend and participate in all Board and applicable committee meetings and that each director will ensure that other commitments do not materially interfere with his or her service on the VMware Board. During the fiscal year ended February 1, 2019 (“FY19”),FY22, the Board held eightten meetings. Each incumbent director serving during FY19FY22 attended at least 75% of the Board and applicable committee meetings held during the period in which he or she served.served, with the exception of Mr. Durban. VMware’s Corporate Governance Guidelines provide that each director is expected to attend the Annual Meeting. All members of the then-current Board with the exception of Mr. Durban, attended our 20182021 Annual Meeting.
Committees of the Board TheDuring FY22, the Board has established four standing committees: the Audit Committee, the CCGCompensation Committee, the M&A Committee and the RPTNominating, Governance and Related Persons Transactions Committee. Prior to November 1, 2021, the Compensation Committee was called the Compensation and Corporate Governance Committee and was responsible for oversight of corporate governance matters in addition to compensation matters. Effective November 1, 2021, the Related Persons Transaction Committee charter was revised to include oversight of corporate governance and ESG matters, and the committee was re-named the Nominating, Governance and Related Persons Transactions Committee (or Governance Committee). Each committee operates pursuant to a written charter, as adopted by the Board, that is available onat the Governance subsection of the Investor Relations page of our website at http://ir.vmware.com. The current membership of each committee is listed below.
| | | | | | | | | | | | | Audit Committee | Compensation and Corporate Governance Committee
| Mergers and Acquisitions
Committee
| Nominating, Governance and Related Persons Transactions Committee | Michael Brown (C)*
Nicole Anasenes* | Anthony Bates* | Anthony Bates (C)* | Michael Brown* | Donald Carty*Marianne Brown* | Marianne Brown* | Michael Dell | Kenneth Denman* | | Michael Brown* | Michael Brown* | Egon DurbanKenneth Denman* | Karen Dykstra (C)* | Karen Dykstra*Donald Carty*+ | Paul Sagan (C)* | Patrick GelsingerEgon Durban | | | Paul Sagan* | Karen Dykstra (C)* | | Raghu Raghuram | |
____________________ (C) Chair of the Committee.Committee * Independent director under the NYSE Rules.Rules + Donald Carty is not standing for re-election, and his Board service will end on the date of the Annual Meeting. Audit Committee The Board has determined that our Audit Committee is comprised solely of independent directors within the meaning of the applicable SEC rules and regulations and the NYSE Rules. The Board has determined that all current Audit Committee members meet the additional, heightened independence criteria of Rule 10A-3 of the Exchange Act applicable to audit committee members. The Board has also determined that each of DirectorsNicole Anasenes, Michael Brown, Donald Carty and Karen Dykstra and Sagan is each an “audit committee financial expert” as defined by the SEC and that all Audit Committee members are financially literate under the current listing standards of the NYSE. The Audit Committee held nine meetings in FY19.FY22. This committee reviews with management and our auditors our financial statements, the accounting principles applied in their preparation, the scope of the audit, any comments made by our independent auditor on our financial statements and our accounting controls and procedures, the independence of our auditors, our internal controls, other matters as set forth in the Audit Committee charter as adopted by the Board, and such other matters as the committee deems appropriate. In accordance with its charter, the Audit Committee is responsible for the appointment, compensation, retention and oversight of the work of our independent auditor for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for us and pre-approves such audit, review or attest engagements. The Audit Committee also pre-approves non-audit services to be performed by our independent auditor in accordance with the Audit Committee’s pre-approval policy. Pursuant to its charter, our Audit Committee recommends, establishes and monitors procedures designed to facilitate the receipt, retention and treatment of complaints relating to accounting, internal accounting controls or auditing matters and the receipt of confidential, anonymous submissions by employees of concerns regarding questionable accounting or auditing matters. The Audit Committee also oversees management of financial risk exposures, including the integrity of our accounting and financial reporting processes and controls. In addition, the Audit Committee appoints the head of the internal audit department and oversees the Company’s internal audit function, reviews the appointments of our Chief Ethics and Compliance OfficerCECO and our CISO,CSO, receives periodic reports on ethics and compliance and information security matters, and is notified of any significant ethics and compliance and cybersecurity matters. During FY19,FY22, senior members of our financial and legal management participated in each of the Audit Committee’s regularly scheduled meetings. During the course of the year, the Audit Committee had separate executive sessions with our CFO and members of his staff, our Chief Legal Officer or General Counsel, our Chief Ethics and Compliance Officer,CECO, our CISO,CSO, the head of our internal audit department and our independent auditor at which candid discussions regarding legal matters, cybersecurity matters, financial reporting, compliance, internal controls and accounting systems and processes took place. The Audit Committee discussed with VMware’s independent auditor the overall scope and plans for its audit. The Audit Committee reviewed and discussed our FY19FY22 financial statements with our management and our independent auditor. The meetingmeetings included a discussion of the quality and not just the acceptability of the accounting principles applied, the reasonableness of the significant accounting judgments and estimates, the use of non-GAAP financial measures as a measure of financial performance, and the clarity of disclosures in the financial statements.
Additionally, the Audit Committee has primary oversight responsibility for matters relating to enterprise risk. As such, the charter for our Audit Committee provides for the committee to periodically review and discuss our practices and policies with respect to risk assessment and risk management with the enterprise risk management committee. For more information about risk management, see “Corporate Governance—Oversight of Risk Management.” In performing all of these functions, the Audit Committee acts in an oversight capacity. The Audit Committee reviews our quarterly and annual reports on Form 10-Q and Form 10-K prior to filing with the SEC.SEC and discusses with management the earnings press releases, as well as the disclosure of financial information and earnings guidance provided to investors. In its oversight role, the Audit Committee relies on the work and assurances of our management, which has the primary responsibility for establishing and maintaining adequate internal control over financial reporting and for preparing theour financial statements. The Audit Committee also relies on the work and assurances of our independent auditor who is engaged to audit and report on our consolidated financial statements and the effectiveness of our internal control over financial reporting. Compensation and Corporate Governance Committee The Board has determined that our CCGCompensation Committee is comprised solely of independent directors within the meaning of the applicable SEC rules and regulations and the NYSE Rules, although we are not required to maintain the independent composition of this committee in light of our position as a controlled company.Rules. The CCGCompensation Committee held nine13 meetings in FY19.FY22, ten prior to November 1, 2021 as the Compensation and Corporate Governance Committee and three subsequent to that date as the Compensation Committee. In accordance with its charter, the CCGCompensation Committee evaluates and sets compensation for our executive officers, and monitors our general compensation programs.programs and oversees executive succession planning. Subject to the terms of our compensation plans, and the consent of the holder of our Class B Stock to the aggregate size of the annual equity award pool pursuant to the terms of our certificate of incorporation, the CCGCompensation Committee has discretion to determine the amount, form, structure and implementation of compensation payable to our executive officers, including, when appropriate, discretion to increase or decrease awards or to award compensation absent the attainment of performance goals and to award discretionary cash compensation outside of the parameters of our compensation plans. In exercising such discretion, the CCGCompensation Committee consults with our management. The CCGCompensation Committee approves transactions under our equity plans and has the authority to administer and interpret the provisions of our equity and other compensation plans. The CCGCompensation Committee is also responsible for overseeing and reporting to the Board on succession planning for the CEO and other senior management positions. Additionally, the CCGCompensation Committee reviews compensation of our non-employee directors and recommends changes for approval by the Board, and also oversees our non-employee director stock ownership guidelines and our executive stock ownership guidelines. Our CCG Committee is also responsible for overseeing and advising the Board with respect to corporate governance matters, assisting the Board in identifying and recommending qualified For more information on director candidates, making recommendations to the Board with respect to Board committee assignments, and, if no Lead compensation, see “Director has been appointed, overseeing the Board evaluations.Compensation.”
The CCGCompensation Committee has engaged an independent consultant, Frederic W. Cook & Co. (“FW Cook”), to advise the Committee on an as-needed basis with respect to executive and non-employee director compensation matters. FW Cook reports directly to the CCGCompensation Committee and does not provide services to VMware management. For more information on the processes and procedures followed by the CCGCompensation Committee for the consideration and determination of executive compensation, see “Compensation Discussion and Analysis.” Mergers and Acquisitions Committee The M&A Committee, pursuant to its charter, reviews and assesses, with our management, potential acquisitions, divestitures and investments and, where appropriate, will make recommendations to the Board regarding potential target candidates. In connection with such review and assessment, our M&A Committee may approve acquisitions, divestitures and investments up to a specified applicable dollar limit and in accordance with any other relevant parameters as established by the Board. The M&A Committee also assesses risk to the Company in connection with proposed acquisitions, divestitures and investments. Nominating, Governance and Related Persons Transactions Committee The Governance Committee met five times in FY22, three prior to November 1, 2021 as the Related Persons Transactions Committee and two subsequent to that date as the Governance Committee. The Governance Committee is responsible for overseeing and advising the Board with respect to corporate governance matters, determining the slate of director nominees for election to the Board, recommending to the Board individuals to fill vacancies occurring between annual meetings of stockholders, making recommendations to the Board with respect to Board committee assignments and overseeing the evaluation of the Board. The RPTGovernance Committee is also responsible for overseeing the Company’s ESG programs. For more information about ESG matters, see “Environmental, Social and Governance.”
In addition, the Governance Committee, pursuant to its charter, is responsible for reviewing transactions by the Company involving related persons, including Dell and its affiliated entities,Silver Lake Partners, among others, in accordance with the Company’s Related Persons Transactions Policy. For more information on related persons transactions, see “Transactions with Related Persons.”
Compensation Committee Interlocks and Insider Participation During FY19,FY22, the CCGCompensation Committee was comprised of Directors Anthony Bates, Marianne Brown, Michael Brown and Paul Sagan. No executive officer of VMware during FY19FY22 served, or currently serves, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on the Board or the CCGCompensation Committee. ENVIRONMENTAL, SOCIAL AND GOVERNANCE
At VMware, we believe that a focus on the ESG elements of the Company and its operations are vital to our core business growth, and our approach to the ESG strategy is an important part of our business strategy. As one of the largest enterprise software companies in the world, we believe it is our responsibility, and essential for our success, to contribute to a more sustainable, equitable and secure world. VMware’s innovative solutions aim to maximize the efficiency, productivity and security of our customers’ IT infrastructures. Our core virtualization technology continues to help our customers achieve greater environmental sustainability impacts by minimizing the amount of physical infrastructure they need. In the multi-cloud era, VMware Cross-Cloud Services can help customers reduce energy consumption and carbon emissions; foster resilient, inclusive and flexible work environments; and defend against cyberattacks and protect valuable customer data. In these ways, VMware’s technology solutions inherently support more secure and sustainable outcomes for our customers. VMware’s approach to ESG also addresses the impact of our own internal operations and supply chain sourcing. During FY22, we further developed internal governance and oversight to hold ourselves accountable to the ESG commitments in our 2030 Agenda. For more information on our ESG strategy, progress and reporting, please visit vmware.com/company/esg. 2030 Agenda VMware’s 2030 Agenda is a decade-long ESG commitment to foster a more sustainable, equitable and secure world. Our 2030 Agenda is comprised of 30 cross-company goals that we aim to achieve by 2030. This Agenda is the result of our thoughtful approach to ESG and was informed by our focus on driving three outcomes: Sustainability, Equity and Trust, combined with an assessment to identify key areas of impact for VMware in relation to ESG. We plan to drive sustainability, equity and trust by providing: •Sustainable digital infrastructure supporting the transition to net zero carbon emissions and decarbonization for our customers, supply chain and operations. •Equitable, unbiased and inclusive access to opportunities for all by enabling people to work where and how they want to work. •Trusted commitments to security, data privacy, ethics and transparency. To ensure proper oversight and accountability, VMware has operationalized ownership of our 30 goals. These are embedded into our technology strategy, business model and culture.
| | | | Thoughtful Approach to ESG Strategy | | Our ESG Assessment Identified Key Areas of Focus | We conducted a comprehensive review of our stakeholder ecosystem to narrow our focus on what ESG matters most for VMware. | |
FY22 Progress Toward 2030 Agenda •Women represented 29% of our global employees in FY22, increasing by 2% from 27% in FY21.* •34% of our global hires self-identified as a woman, and 16% of U.S. hires self-identified as an underrepresented minority in FY22.* •Senior Director-level and above have bonus compensation goals tied to corporate diversity, equity and inclusion (“DEI”). •Launched VMware Responsible Sourcing program to consider sustainability, diversity and accessibility in our supply chain. •Certified once again as a CarbonNeutral Company (continuously since 2018). •Operations for our global facilities powered 100% from renewable sources (continuously since 2019). •Invited to Dow Jones Sustainability World Index and Dow Jones Sustainability North America Index. •Joined the Valuable 500, a global business collective, made up of 500 CEOs and their companies, innovating together for disability inclusion, as part of our respective commitments to diversity and inclusion. Our 2030 Agenda represents long-term commitments, and VMware continues to operationalize ESG and embed accountability throughout our business.
Sustainability Protecting Our Environment Through Climate Transition Planning Sustainable growth for VMware’s business entails decoupling our company growth from carbon emissions. To this end, we’ve accelerated our focus on decarbonization and received third-party validation from the Science Based Target Initiative (SBTi) on our science-based targets. Since 2018, we have maintained our certified CarbonNeutral® company status, in accordance with The CarbonNeutral Protocol. Since 2019, we have sourced 100 percent of our power for our global facilities from renewable sources, in accordance with RE100 Reporting Guidance. •In FY22, we furthered climate transition planning at VMware, guided by Taskforce on Climate-related Financial Disclosures (TCFD) recommendations. •As VMware continues to learn more about climate risks, we can build longer time horizon risks into our strategy to become even more sustainable and resilient. •In FY23, we will be preparing both a qualitative assessment and quantitative modeling across multiple future climate scenarios to better understand business implications. Quantifiable Carbon Reduction Goals VMware’s net zero emissions goal builds on approved science-based targets and expands the scope of our climate commitments. For us, a net zero goal means reducing emissions for our entire carbon footprint. We are focused on prioritizing energy efficiency within our operations through our commitment to green buildings and supporting distributed workforces through our Future of Work initiative. To that end, we have committed to engaging with a significant majority of our suppliers regarding establishment of their own reduction targets. Through carbon financing, we support low-carbon, sustainable development projects that enable carbon avoidance to offset our remaining emissions. In line with the leading net zero guidance, we are developing our strategy to include carbon removal projects to address residual emissions. In early 2020, these 1.5˚C-aligned, science-based targets were validated by the Science-Based Targets initiative (SBTi): •Reduce Scope 1 and Scope 2 emissions 50 percent by 2030 from (baseline year of fiscal year 2019 (“FY19”)). •Reduce employee commute, fuel and energy related emissions 50 percent by 2030 (baseline year of FY19). •Engage 75 percent of our suppliers (by spend) to set their own Science-Based Targets through 2024. Responsible Sourcing In FY22, we launched our Responsible Sourcing program to enable us to execute on our science-based target related to supplier engagement and to support sustainability, diversity and accessibility across our supply chain. VMware has committed to working with 75% of our suppliers (by spend) to set their own science-based targets by the end of 2024. We are prioritizing the sourcing of goods and services through diverse businesses and have committed to spending $1.5 billion with diverse suppliers through 2030. Our definition of diverse supplier includes: small-business enterprises, minority-owned enterprises, woman-owned enterprises, and businesses owned by other underrepresented groups such as LGBTQ, veterans, and proprietors with disabilities. As a leading software company, user accessibility is top of mind. One of our 2030 goals is to ensure the technology that we develop and source is accessible for all. In FY22, we created internal Accessibility Guidelines—within VMware and committed to assess all new software and events suppliers for accessibility standards aligned with our own guidelines. For more information on Responsible Sourcing at VMware, visit vmware.com/company/responsible-sourcing.
Equity Diversity, Equity & Inclusion VMware has set specific and measurable goals around increasing representation for women and underrepresented minorities and fostering our inclusive culture. We have assigned compensation performance goals around drivers that improve representation, including hiring and retention of women globally and underrepresented minorities in the United States, inclusive culture scores and diverse candidate slates. For interviews at every level, our goal is to have all candidate interview slates include at least one woman and one underrepresented minority (U.S. only) candidate. Each year we establish annual hiring and retention goals to progress our 2030 DEI goals. In FY22, annual DEI performance metrics were included in all Sr. Director-level and above compensation programs. 2030 DEI Targets: •Equitable pay across all genders and ethnicities. •Hire at least one woman for every one man we hire by 2030. •At least half our management team will be comprised of women and underrepresented minorities by 2030. Our Employee Resource Groups at VMware are called Power of Difference communities (“PODs”), and they play a strategic role in building a culture of belonging. We are focused on driving a culture that is inclusive of all forms of diversity: from demographic factors such as race, national origin, gender identity, sexual orientation, and age to other critical factors such as function, office location, ability, personality and life experience. To that end, we have seven global demographic PODs and seventeen site-specific (geographic) PODs across our global locations. POD participation is open to everyone. We believe when people feel a sense of belonging, they can bring their unique perspectives, creativity and innovation to their work. VMware’s commitment to transparency in DEI includes equal employment opportunity reporting (EEO-1), which started in 2019 and continues today. *For more information about our Diversity, Equity & Inclusion progress and reports, visit vmware.com/company/diversity.html. Empowering Our People At VMware, we enrich lives at work, at home and in the community because we believe that empowering our people to bring their authentic selves to work drives business excellence and enables us to achieve our business goals. For VMware, “human capital management” means a focus on the development and wellbeing of our people. We prioritize employee wellbeing and work hard to foster a culture that is ethical and respectful, kind and compassionate, which is defined by our EPIC2 values—Execution, Passion, Integrity, Customers and Community. We believe that a culture of belonging drives innovation and enables our people to bring their creativity and ideas to the table. Employee wellbeing is a top priority at VMware as we believe people are the key to our success, and we are always striving to make it easier for employees to pursue wellbeing on their own terms, which will also help them perform well at work. We recognize that VMware has a responsibility to help support our employees manage the added complexities of their work and family situations since the start of the COVID-19 pandemic. Our wellbeing benefits include: four supplemental days off (our “EPIC2” days), life coaching and emotional support, work-life services for employees and their families and a wellbeing allowance. VMware’s transition to distributed work is founded on employee choice and flexibility aligned with business needs. We call this our Future of Work initiative, and our goal is to build a diverse, innovative workforce by meeting talent where they are and how they want to work. We’ve empowered our people to be active members in their communities through our Citizen Philanthropy approach, since we believe that individual actions matter and add up to collective impact. Additionally, through public-private partnerships, we’ve committed to helping individuals gain the knowledge they need to compete in today’s workforce through VMware’s IT Academy. Our goal is to continue to be a great place to work while helping create and build sustainable and resilient communities globally.
Learn more about: •Employee Wellbeing at wellbeing.vmware.com •Future of Work at careers.vmware.com/future-of-work •Our Citizen Philanthropy approach at vmware.com/company/foundation •Our IT Academy at vmware.com/company/it-academy Trust Environmental and Social Governance VMware has implemented an ESG governance structure comprised of internal leadership and members of our executive staff to guide integration of ESG into VMware’s operations and performance management. Our governance structure includes annual oversight by the full Board of ESG topics, and in FY22, we amended the charter of the Governance Committee to provide formal, primary oversight of our ESG progress. Our Audit Committee oversees cybersecurity and data privacy matters. For more information on VMware’s cybersecurity and data privacy risk management, oversight and practices, see “Corporate Governance—Oversight of Risk Management.” To incentivize ESG progress, our executive compensation planning incorporates ESG goals as part of the Compensation Committee’s holistic evaluation of performance under our Annual Executive Bonus Program. For more information on executive compensation, see “Compensation Discussion and Analysis.” Operationally, our ESG Office drives cross-company alignment and strategic focus and measures and tracks the progress of our ESG goals. In FY22, VMware incorporated ESG objectives into its annual operating planning process. Our ESG governance structure is as follows: | | | | | | | | | | | | | Board Committees | | Governance Committee: Assigned formal oversight of ESG, meets three times per year to review strategy and program progress Audit Committee: Quarterly oversight of cybersecurity and data privacy Compensation Committee: Oversight of annual Executive Officer individual performance goals (MBOs), incorporating ESG goals
| | | | | | ESG Executive Sponsors | | Meet quarterly to provide ESG strategy direction: | | •Chief Executive Officer •Chief Financial Officer •Chief People Officer
| •General Counsel •President •Chief Technology Officer | | | | | | ESG Leadership Council | | Senior functional and business unit leaders meet quarterly to monitor progress against implementation goals | | | | | | ESG Office | | Led by VP, ESG: | | •Sustainability Innovation •Social Innovation •Environmental Sustainability | •ESG Reporting •Strategic Operations •ESG Finance |
ESG Reporting VMware publishes ESG progress updates in an annual ESG Report and DEI Report. We are furthering our alignment with leading ESG reporting frameworks, including: •SASB (Sustainable Accounting Standards Board) Standards of the Value Reporting Foundation •Task Force on Climate-related Financial Disclosures (TCFD)
•Global Reporting Initiative (GRI) •Principles of the United Nations Global Compact (UNGC) •United Nations Sustainable Development Goals (UN SDGs) For more information about our ESG reporting, visit vmware.com/company/esg. ESG Recognition •Newsweek, America’s Most Responsible Companies (2022) •Newsweek, America’s Most Trusted Companies (2022) •EcoVadis, “Silver Sustainability” Rating (2022) •MSCI, “AA” Rating (2022) •Barron’s, 100 Most Sustainable Companies (2022) •Corporate Knights’ Clean200 (2022) •S&P Global Sustainability Yearbook (2022) •100% Score on the Human Rights Campaign’s Corporate Equality Index, Named One of Best Places to Work for LGBTQ Equality (2022) •America's Most JUST Companies for 5th Consecutive Year, Awarded Top Environmental Ranking (2022) •Glassdoor, Best Places to Work for 5th Consecutive Year (2022) •Dow Jones Sustainability Indices (2021) •Forbes, America’s Best Employers (2021) •Forbes, The Best Employers for Diversity (2021) •Forbes, The Best Employers for Women (2021) •Disability Equality Index, Best Places to Work for Disability Inclusion (2021) PROPOSAL 1 ELECTION OF DIRECTORS We are asking our stockholders to elect twothree Class III Group I directors, each to serve for an additional three-year term. Thewhich the current term of office for Class III, Group I directors expires at the Annual Meeting. The Board has nominated the following two persons, each an incumbent Class III Group I director, for election at the Annual Meeting:director: Donald Carty•Nicole Anasenes
•Marianne Brown •Paul Sagan These Class III directors must be elected by a majority of the votes of the Common Stock. We expect each nominee for election as a director at the Annual Meeting to be able to accept such nomination. ForSee “Board of Directors” for more information about the nominees, see “Our Board of Directors and Nominees.”nominees. Each director elected at the 20192022 Annual Meeting will serve until the 20222025 Annual Meeting or special meeting in lieu thereof and until that director’s successor is elected and qualified. Class III, Group I director nominees Carty and Sagan must be elected by a majority of the votes of the Class B Stock cast with respect to such nominee at the Annual Meeting.
The Board unanimously recommends that the holders of our Class B Stockstockholders vote “FOR” the election of the Class III, Group I director nominees.
PROPOSAL 2 ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION In accordance with Section 14A of the Exchange Act, we are asking our stockholders to vote, on a non-binding advisory basis, on the compensation of our named executive officers (each a “NEO”) as disclosed in this proxy statement (in accordance with the compensation disclosure rules of the SEC). This proposal, commonly known as a “Say-on-Pay” proposal, gives our stockholders the opportunity to express their views on the compensation of our named executive officersNEOs listed in the “Summary Compensation TableTable.” (each a “NEO”). See “Compensation of Executive Officers—Summary Compensation Table.” The objectives of our executive compensation program are to: •motivate our executives to achieve our strategic, operational and financial goals; •reward superior performance; •attract and retain exceptional executives; and •reward behaviors that result in long-term increased stockholder value. To achieve these objectives, we have implemented and maintained compensation plans that tie a substantial portion of our executive compensation to the achievement of pre-determined performance goals and increases in total stockholder return. Stockholders are urged to read the “Compensation Discussion and Analysis” section of this proxy statement for greater detail about our executive compensation programs, including our compensation philosophy, policies and practices and information about the FY19FY22 compensation of our NEOs. We are asking our stockholders to indicate their support for the compensation of our NEOs as described in this proxy statement by voting in favor of the following resolution: “RESOLVED: That the stockholders approve, on an advisory basis, the compensation of the Company’s named executive officers as disclosed in the Compensation Discussion and Analysis section, the Summary Compensation Table, and the other
related tables as set forth in the proxy statement in accordance with the compensation disclosure rules of the Securities and Exchange Commission relating to the Company’s 20192022 Annual Meeting of Stockholders.” Even though your vote is advisory, and therefore will not be binding on the Company, the CCGCompensation Committee and the Board value the opinions of our stockholders and will consider the outcome of the vote when determining future executive compensation. We have adopted a policy providing for annual advisory votes to approve the compensation of our NEOs. The next advisory vote to approve the compensation of our NEOs will be at the 2020 annual meeting of stockholders.2023 Annual Meeting. The Board unanimously recommends that you vote “FOR” approval of the compensation of the Company’s named executive officers. PROPOSAL 3 APPROVAL OF AMENDMENT TO AMENDED AND RESTATED
2007 EQUITY AND INCENTIVE PLAN
The Board, based on the recommendation of the CCG Committee, approved an amendment to the Amended and Restated 2007 Equity and Incentive Plan (“Incentive Plan”), subject to stockholder approval at the Annual Meeting that would increase the number of shares of Class A Stock issuable under the Incentive Plan by 13,000,000. All other provisions of the Incentive Plan will remain in full force and effect.
We are asking our stockholders to approve this amendment.
Purpose of the Incentive Plan
The purpose of the Incentive Plan is to attract, motivate and retain our employees, consultants, advisors and non-employee directors and to provide compensation opportunities to reward superior performance. We believe that equity is a key element of our compensation package and that equity awards encourage participant loyalty and align participant interests directly with those of our stockholders. The Incentive Plan has allowed us to provide our service providers with equity-based incentive awards and non-equity based compensation that are competitive with those of companies with which we compete for talent.
Purpose of the Increase in the Number of Shares Reserved Under the Incentive Plan
The Incentive Plan is our sole plan for providing equity incentive compensation to eligible employees, consultants and non-employee directors. The Incentive Plan is a vital component of our compensation programs, and increasing the number of shares of Class A Stock that may be issued under equity awards ensures that we have an adequate reserve of shares available for issuance in order to attract, motivate and retain personnel and to provide compensation opportunities to reward superior performance. If the amendment and restatement of the Incentive Plan is not approved and we are unable to grant equity compensation in the future, we may need to consider other compensation alternatives, such as increasing cash compensation.
The Board, based on the recommendation of the CCG Committee, is recommending that stockholders approve an additional 13,000,000 shares of Class A Stock under the Incentive Plan. The members of our CCG Committee, which administers the Incentive Plan, possess significant experience in the review and oversight of equity compensation plans at global technology companies and at VMware. Based on that experience, the CCG Committee has exercised its business judgment in concluding that increasing the number of shares of Class A Stock reserved under the Incentive Plan is in the Company’s best interests. The Company is committed to effectively managing our equity compensation share reserve while minimizing stockholder dilution.
Each year the CCG Committee and our management review our overall compensation strategy and determine allocations of cash and equity compensation in light of our pay-for-performance philosophy and an equity budget for the year. In determining the annual equity budget, the CCG Committee reviews, among other things, the annual “gross burn rate” for the past three years, the “shareholder value transfer percentage,” the “issued overhang” percentage, historical share utilization and expectations regarding our future headcount and hiring needs. Gross burn rate means the total number of equity awards granted during the fiscal year divided by the number of shares outstanding. Shareholder value transfer percentage means the value of all outstanding equity awards shares available for grant under the Incentive Plan divided by the Company’s market capitalization. Issued overhang means the total number of all outstanding equity awards divided by our total outstanding shares. As a general
matter, we strive to achieve a gross burn rate, shareholder value transfer percentage and issued overhang percentage that approximate the average rates for our peer group companies identified in “Compensation Discussion and Analysis” as well as for the software and services industry more generally, and that these measures are within the limits recommended by independent shareholder advisory groups, such as Institutional Shareholder Services (“ISS”). The CCG Committee has exercised its business judgment in determining that the Company’s equity awards are reasonable and generally competitive based on, among other things, consideration of the foregoing measures with the benefit of the extensive experience that the CCG Committee has in understanding the benefits and limitations of such measurements, making compensation decisions and evaluating the Company’s performance, business objectives and strategic goals.
In reaching its decision regarding the appropriate number of shares of Class A Stock by which to increase the share reserve, the CCG Committee considered these same factors and determined a number that it believes complies with ISS’s guidelines while providing the Company with a sufficient share reserve to cover the awards we anticipate granting to eligible participants for approximately two years, although the actual number of shares utilized will depend on a variety of factors, including our headcount growth rate, employee turnover, the level of equity compensation offered by other companies with whom we are competing for talent, our stock price and the mix of Restricted Stock Units (“RSUs”), Performance Stock Units (“PSUs”) and stock options granted.
Key Data
As of March 1, 2019, a total of 12,093,046 shares of Class A Stock remained available for future awards under the Incentive Plan, the Company’s only active stock plan other than the Amended and Restated 2007 Employee Stock Purchase Plan. As of March 1, 2019, approximately 25,000 employees (including executive officers) were eligible to participate in the Incentive Plan. All five outside directors are eligible to participate in the Incentive Plan. Consultants that provide services to us are also eligible to receive equity awards under the Incentive Plan. As of March 1, 2019, we had approximately 9,500 consultants eligible to participate in the Incentive Plan. However, historically, only in very limited circumstances have consultants been granted equity awards under the Incentive Plan. The following table sets forth, as of March 1, 2019, information regarding outstanding equity awards (including awards under the Incentive Plan and equity awards assumed by VMware in connection with acquisitions) and shares of Class A Stock available for future equity awards under the Incentive Plan (without giving effect to approval of the proposed amendment to the Incentive Plan):
| | | Total shares of Class A Stock underlying outstanding stock options | 1,887,052 | Weighted-average exercise price of outstanding stock options | $36.96 | Weighted-average remaining contractual life of outstanding stock options | 5.43 years | Total shares of Class A Stock underlying outstanding unvested restricted stock, RSUs and PSUs | 19,195,942 | Total shares of Class A Stock currently available for grant | 12,093,046 |
The additional 13,000,000 shares of our Class A Stock for which stockholder approval is sought represents approximately 11.72% of our 110,902,312 outstanding shares of Class A Stock (measured as of March 1, 2019).
The closing price of our Class A Stock on March 1, 2019 was $178.20.
In administering our equity compensation program, we take into consideration the number of shares we utilize. Each year, we measure our “burn rate,” which we define as the sum of the number of stock options and RSUs granted in each year, as well as the number of PSUs earned and released (i.e. vested) in each year, divided by the weighted-average basic common stock shares outstanding (“CSO”) for the applicable year. This metric provides insight into our stewardship of equity in order to attract and retain talent critical to achieving business results. The table below details our utilization in each of fiscal years 2016, 2018 and 2019.
| | | | | | | Fiscal Year | Granted Time-Based RSUs(1) | Earned Performance-Based Restricted Stock Units (PSUs)(1) | Total Granted Options and RSUs; and Earned PSUs(2) | Weighted- Average Basic CSO | Burn Rate | | 2019 | 5,812,190 | 311,624 | 6,123,814 | 407,766,000 | 1.50% | | 2018 | 6,859,133 | 130,486 | 6,989,619 | 406,738,000 | 1.72% | | 2016 | 12,361,813 | 214,278 | 12,576,091 | 420,520,000 | 2.99% |
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(1) Reflects stock options and RSUs granted in each year as well as PSUs earned and released in each year only from VMware’s Incentive Plan. Does not include shares added to the Incentive Plan pursuant to the assumption or substitution of equity awards of acquired entities in connection with the acquisitions of other companies.
(2) VMware did not grant stock options under the Incentive Plan during the fiscal years shown. All stock options indicated as having been granted in VMware’s annual reports on Form 10-K for such years were pursuant to the assumption or substitution of stock option awards of acquired entities in connection with the acquisitions of other companies.
Plan Summary
The following is a summary of the material terms and conditions of the Incentive Plan. This summary, however, does not purport to be a complete description of all provisions of the Incentive Plan and is qualified in its entirety by reference to the full text of the Incentive Plan. A copy of the Incentive Plan has been filed with the SEC with this proxy statement, and any stockholder who wishes to obtain a copy of the Incentive Plan may do so by written request to our Secretary at VMware’s principal executive offices in Palo Alto, California.
Awards under the Incentive Plan may be in the form of stock options (either incentive stock options or non-qualified stock options) or other stock-based awards, including awards of restricted stock, restricted stock units and stock appreciation rights. The Incentive Plan also provides for the grant of cash-based awards.
Authorized Shares. Subject to stockholder approval of the amendment to the Incentive Plan, 145,167,881 shares of our Class A Stock (not including 6,434,433 shares of Class A Stock previously added to the Incentive Plan pursuant to the assumption or substitution of equity awards of acquired entities in connection with the acquisitions of other companies (“Acquired Awards”)) will have been reserved for the grant or settlement of awards under the Incentive Plan since the Incentive Plan’s inception, subject to adjustment in the event of an extraordinary dividend or other distribution, recapitalization, stock split, reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase or share exchange or other similar corporate transaction (“Recapitalization”). The share reserve was automatically increased by 6,117,881 shares in connection with payment of a special dividend of $26.81 on December 28, 2018. Any shares of Class A Stock subject to awards that are canceled, forfeited or otherwise terminated or satisfied without the issuance of shares will again be available for grants under the Incentive Plan. The number of shares of Class A Stock available for issuance under the Incentive Plan will also be increased by the number of shares subject to Acquired Awards. Shares subject to Acquired Awards that are canceled, forfeited or otherwise terminated or satisfied without the issuance of shares do not again become available for grants under the Incentive Plan.
Eligibility. Substantially all of our employees, non-employee directors and consultants are eligible to participate in the Incentive Plan. Accordingly, each member of the Board and each executive officer has an interest in this proposal.
Types of Awards Under the Incentive Plan. The following principal types of awards are available under the Incentive Plan:
Stock Options. Stock options represent the right to purchase shares of our Class A Stock within a specified period of time at a specified price and may be subject to vesting conditions. The exercise price for a stock option may not be less than 100% of the fair market value of the Class A Stock on the date of grant. Stock options will have a maximum term of ten years from the date of grant. Stock options granted may include those intended to be “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (“Code”). Stock options awarded under the Incentive Plan may vest as determined by the CCG Committee. The purchase price of stock as to which an option is exercised must be paid in full at the time of exercise. Payment may be made in cash, which may be paid by check or other instrument acceptable to the Company, or, with the consent of the CCG Committee, in shares of Class A Stock, or the CCG Committee may permit such payment of the purchase price by any other method it deems satisfactory in its discretion.
Restricted Stock and Restricted Stock Units. Restricted stock is a share of our Class A Stock that is subject to a risk of forfeiture or other restrictions that will lapse subject to the recipient’s continued employment or the attainment of performance goals or other events. RSUs represent the right to receive shares of our Class A Stock in the future, with the right to future delivery of the shares also subject to the recipient’s continued employment or the attainment of performance goals or other events. Vesting requirements of restricted stock and RSUs vary and are established by the CCG Committee.
Stock Appreciation Rights. Stock appreciation rights entitle the holder upon exercise to receive shares of our Class A Stock having a value equal to the excess of (1) the value of the number of shares with respect to which the right is being exercised (which value is based on fair market value at the time of such exercise) over (2) the exercise or base price applicable to such shares. The exercise price for a stock appreciation right will be not less than 100% of the fair market value of our Class A Stock on the date of grant. Stock appreciation rights under the Incentive Plan may vest as determined by the CCG Committee.
Other Stock-Based or Cash-Based Awards. The CCG Committee is authorized to grant awards in the form of other stock-based awards or other cash-based awards, as deemed to be consistent with the purposes of the Incentive Plan. The maximum value of the aggregate payment to any Covered Employee (defined below) with respect to cash-based awards under the Incentive Plan in respect of an annual performance period is $5,000,000 (with proportional adjustment for longer performance periods, as described below).
Performance Based Awards. The CCG Committee may grant awards under the Incentive Plan subject to the satisfaction of performance goals. Prior to its amendment pursuant to the 2017 Tax Cuts and Jobs Act (“Tax Act”), Section 162(m) of the Code generally disallowed a tax deduction to public corporations for compensation greater than $1 million paid for any fiscal year to the corporation’s CEO and certain other executive officers. However, performance-based compensation was not subject to the $1 million deduction limit if certain requirements were met. The performance goals were designed to enable performance-based awards granted under the Incentive Plan to qualify for the exception to the 162(m) deduction limit. Among other changes to Section 162(m), the Tax Act eliminated the exemption for performance-based compensation. Although the 162(m) exception to the deductibility limit is no longer available for future performance-based awards to the CEO and certain other executive officers, the CCG Committee may elect, in its discretion, to continue to grant performance-based awards under the Incentive Plan utilizing the performance goals listed in the Incentive Plan. The CCG Committee may also utilize other performance goals that it deems appropriate to achieve the objectives of our executive and employee compensation programs. The criteria designated as performance goals under the Incentive Plan may consist of any one or any combination of the following areas of performance: an objective formula or standard determined by the CCG Committee with respect to each performance period utilizing one or more of the following factors and any objectively verifiable adjustment(s) thereto permitted and pre-established by the CCG Committee: (1) (A) earnings including operating income, (B) earnings before or after (i) taxes, (ii) interest, (iii) depreciation, (iv) amortization, or (v) special items or book value per share (which may exclude nonrecurring items), or (C) growth in earnings before interest, tax, depreciation or amortization; (2) pre-tax income or after-tax income; (3) earnings per common share (basic or diluted); (4) operating profit; (5) revenue, revenue growth or rate of revenue growth; (6) return on assets (gross or net), return on investment, return on capital, return on invested capital or return on equity; (7) returns on sales or revenues; (8) operating expenses; (9) stock price appreciation; (10) cash flow, free cash flow, cash flow from operations, cash flow return on investment (discounted or otherwise), net cash provided by operations, or cash flow in excess of cost of capital; (11) implementation or completion of critical projects or processes; (12) economic value created; (13) cumulative earnings per share growth; (14) operating margin or profit margin; (15) common stock price or total stockholder return; (16) cost targets, reductions, savings, productivity or efficiencies; (17) strategic business criteria, consisting of one or more objectives based on meeting specified market penetration, geographic business expansion, customer satisfaction, employee satisfaction, human resources management, supervision of litigation, information technology, goals relating to acquisitions, divestitures, joint ventures or similar transactions, research or development collaborations or budget comparisons; (18) personal professional objectives, including any of the foregoing performance goals, the implementation of policies and plans, the negotiation of transactions and the development of long-term business goals; and (19) any combination of, subset or component of, or a specified increase in, any of the foregoing. Where applicable, the performance goals may be expressed in terms of attaining a specified level of the particular criteria or the attainment of a percentage increase or decrease in the particular criteria, and may be applied to one or more of the Company, a subsidiary or affiliate, or a division or strategic business unit of the Company, or may be applied to the performance of the Company relative to a market index, a group of other companies or a combination thereof, all as determined by the CCG Committee. The performance goals may include a threshold level of performance below which no payment will be made (or no vesting will occur), levels of performance at which specified payments will be made (or specified vesting will occur), and a maximum level of performance above which no additional payment will be made (or at which full vesting will occur). Objectively verifiable adjustment(s) to performance goals can include but are not limited to adjustment(s) to reflect: (1) the impact of specific corporate transactions; (2) accounting or tax law changes; (3) asset write-downs; (4) significant litigation or claim adjustment; (5) foreign exchange gains and losses; (6) disposal of a segment of a business; (7) discontinued operations; (8) refinancing or repurchase of bank loans or debt
securities; or (9) unbudgeted capital expenditures. Each of the foregoing performance goals will be subject to certification by the CCG Committee; provided that, to the extent an award is intended to satisfy the performance-based compensation exception to the limits of Section 162(m) and then to the extent consistent with such exception, the CCG Committee has the authority to make equitable adjustments to the performance goals in recognition of unusual or non-recurring events affecting the Company, any subsidiary or affiliate or the financial statements of the Company or any subsidiary or affiliate, in response to changes in applicable laws or regulations, related to the disposal of a segment of a business or related to a change in generally accepted accounting principles (“GAAP”).
Limitation on Awards. The following limits apply to awards granted under the Incentive Plan:
Awards to Non-employee Directors. The maximum value of awards granted during a single fiscal year under the Incentive Plan or under any other equity plan maintained by the Company, taken together with any cash fees paid during such fiscal year for services on the Board, will not exceed $1,000,000 in total value for any non-employee director, except that such limit will be $1,250,000 for any non-employee director serving as the Lead Director of the Board or Chairman. Such applicable limit will include the value of any stock awards that are received in lieu of all or a portion of any annual committee cash retainers or other similar cash-based payments.
Awards to Other Participants. Awards covering no more than 3,611,400 shares may be granted to any plan participant under the Incentive Plan in any fiscal year, subject to adjustment in the event of a Recapitalization. The maximum aggregate payment which any Covered Employee (defined below) under Section 162(m) may receive pursuant to a cash-based award will be $5,000,000 in any annual performance period, and for any performance period in excess of one year, such amount multiplied by a fraction, the numerator of which is the number of months in the performance period and the denominator of which is twelve. Currently, our CEO, CFO and our three other highest compensated officers are considered Covered Employees under Section 162(m). Additionally, any person who was considered a Covered Employee for any prior tax year beginning after December 31, 2016 is deemed to be a Covered Employee.
Administration. The CCG Committee administers the Incentive Plan. The CCG Committee has the ability to: select individuals to receive awards; select the types of awards to be granted; determine the terms and conditions of the awards, including the number of shares, the purchase price of the awards and restrictions and performance goals relating to any award; establish the time when the awards or restrictions become exercisable, vest or lapse; determine whether options will be incentive stock options or nonqualified stock options; determine whether and to what extent an award may be settled, canceled, forfeited, accelerated, exchanged or surrendered (including upon a “change in control” or similar transaction); and make all other determinations deemed necessary or advisable for the administration of the Incentive Plan.
Dividends. Subject to compliance with the requirements of Section 409A of the Code, an award may provide the grantee with the right to receive dividend or dividend equivalent payments with respect to Class A Stock actually or notionally subject to the award, which payments will be credited to an account for the grantee, and may be settled in cash or Class A Stock, as determined by the CCG Committee. Any such dividend or dividend equivalents will be settled in cash or Class A Stock to the grantee only if, when and to the extent the related award vests. The value of dividend or dividend equivalent payments payable with respect to any award that does not vest will be forfeited.
Effects of Certain Corporate Transactions. The CCG Committee may grant awards that, upon the occurrence of certain events specified by the CCG Committee, become fully vested and exercisable. If the Company is the surviving corporation in any merger or consolidation (other than a merger or consolidation in which the Company survives but in which a majority of its outstanding shares are converted into securities of another corporation or are exchanged for other consideration), any award granted thereunder will pertain and apply to the securities that a holder of the number of shares of stock of the Company then subject to the award is entitled to receive. In the event of a (1) dissolution or liquidation of the Company, (2) sale or transfer of all or substantially all of the Company’s assets or (3) merger or consolidation in which the Company is not the surviving corporation or in which a majority of its outstanding shares are converted into securities of another corporation or are exchanged for other consideration, the Company must, contingent upon consummation of such transaction, either (1) arrange for any corporation succeeding to the business and assets of the Company to (A) assume each outstanding award, or (B) issue to the participants replacement awards (which, in the case of incentive stock options, satisfy, in the determination of the CCG Committee, the requirements of Section 424 of the Code), for such corporation’s stock that will preserve the value, liquidity and material terms and conditions of the outstanding awards; or (2) make the outstanding awards fully exercisable or cause all of the applicable restrictions to which outstanding stock awards are subject to lapse, in each case, on a basis that gives the holder of the award a reasonable opportunity, as determined by the CCG Committee, following the exercise of the award or the issuance of shares of Class A Stock, as the case may be, to participate as a stockholder in any such dissolution, liquidation, asset sale or transfer, merger or consolidation, and the award will terminate immediately following consummation of any such transaction.
In the event of a Recapitalization, the CCG Committee will make such equitable changes or adjustments as necessary or appropriate to any or all of (1) the number and kind of shares of stock or other property (including cash) that may thereafter be issued in connection with awards or the total number of awards issuable under the Incentive Plan, (2) the number and kind of shares of stock or other property issued or issuable in respect of outstanding awards, (3) the exercise price, grant price or purchase price relating to any award, (4) the performance goals and (5) the individual limitations applicable to awards; provided that, with respect to incentive stock options, any adjustment will be made in accordance with the provisions of Section 424(h) of the Code, and provided further that no such adjustment will cause any award which is or becomes subject to Section 409A to fail to comply with the requirements of such section. The CCG Committee may also make such modifications to the Incentive Plan and the awards granted thereunder as necessary in order to conform each with the laws and regulations of jurisdictions outside of the United States.
Clawback Provision for Executive Officers. All awards granted under the Incentive Plan will be subject to recoupment in accordance with any clawback policy that the Company determines to adopt pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law. In addition, the CCG Committee may impose additional clawback, recovery or recoupment provisions in an award agreement as the CCG Committee determines necessary or appropriate, including but not limited to a reacquisition right in respect of previously acquired shares of stock or other cash or property upon the occurrence of cause as determined by the CCG Committee.
In the event of a restatement of incorrect financial results, the CCG Committee will review all awards held by executive officers (within the meaning of Rule 3b-7 of the Exchange Act) of the Company that (1) were earned based on performance or were vesting during the course of the financial period subject to such restatement or (2) were granted during or within one year following such financial period. If any award would have been lower or would not have vested, been earned or been granted based on such restated financial results, the CCG Committee will, if it determines appropriate in its sole discretion and to the extent permitted by governing law, (1) cancel such award, in whole or in part, whether or not vested, earned or payable or (2) require the participant to repay to the Company an amount equal to all or any portion of the value of any gains from the grant, vesting or payment of the award that would not have been realized had the restatement not occurred.
If a participant’s employment or service is terminated for cause (as defined in the Incentive Plan), all unvested (and, to the extent applicable, unexercised) portions of awards will terminate and be forfeited immediately without consideration. In addition, the CCG Committee may in its sole discretion and to the extent permitted by applicable law cause the cancellation of all or a portion of any outstanding vested awards held by such participant or payable to such participant or require such participant to reimburse the Company for all or a portion of the gains from the exercise of, settlement or payment of any of the participant’s awards realized after the event giving rise to cause first occurred.
For more information regarding our incentive compensation recovery policies, see “Compensation Discussion and Analysis—Compensation Recovery Policies.”
Transferability. Under the Incentive Plan, awards are generally non-transferable other than by will or by the laws of descent and distribution.
Amendment and Termination. The Board can amend, alter or discontinue the Incentive Plan, but no amendment, alteration or discontinuation can be made that would impair the rights of a participant under any award granted without such participant’s consent or that would increase the total number of shares of Class A Stock reserved under the Incentive Plan (other than pursuant to the adjustment provisions summarized above). In addition, stockholder approval may be required with respect to certain amendments, due to stock exchange rules or requirements of applicable law. The Incentive Plan, unless sooner terminated by the Board, will remain in effect through June 5, 2027.
U.S. Federal Income Tax Consequences
Incentive Stock Options. In general, neither the grant nor the exercise of an incentive stock option granted under the Incentive Plan will result in taxable income to the option holder or a deduction to us. In general, if the option holder does not dispose of stock received upon exercise of an incentive stock option within two years after the date the option is granted and within one year after the date of exercise, any later sale of such stock will result in a capital gain or loss (and we are not entitled to a corresponding deduction).
If stock received upon the exercise of an incentive stock option is disposed of before the holding period requirements described above have been satisfied, the option holder will generally realize ordinary income at the time of disposition. The
amount of such ordinary income will generally be equal to the difference between the fair market value of the Class A Stock on the date of exercise and the exercise price (or, if less, the difference between the amount realized on disposition of the stock and the exercise price). In the case of a disqualifying disposition in which a loss (if sustained) would be recognized, then the amount of ordinary income will not exceed the excess of the amount realized on the sale over the adjusted basis of the stock (that is, in general, the price paid for the stock). We will generally be entitled to a deduction for Federal income tax purposes equal to the amount of ordinary income realized by the option holder, subject to any necessary withholding and reporting requirements.
Certain option holders exercising incentive stock options may become subject to the alternative minimum tax, under which the difference between (1) the fair market value of stock purchased under incentive stock options, determined on the date of exercise, and (2) the exercise price, will be an item of tax preference in the year of exercise for purposes of the alternative minimum tax.
Non-Qualified Stock Options. Options granted under the Incentive Plan which are not incentive stock options are “non-qualified options.” In general, no income results upon the grant of a non-qualified option. When an option holder exercises a non-qualified option, he or she will generally realize ordinary income subject to withholding. Generally, such income will be realized at the time of exercise and in an amount equal to the excess, measured at the time of exercise, of the then fair market value of our Class A Stock over the option price. We will generally be entitled to a deduction for Federal income tax purposes equal to the amount of ordinary income realized by the option holder, subject to certain withholding and reporting requirements.
Restricted Stock. Generally, restricted stock is not taxable to a participant at the time of grant, but instead is included in ordinary income (at its then fair market value less any amount paid for the stock) when the restrictions lapse. A participant may elect to recognize income at the time of grant, in which case the fair market value of our Class A Stock at the time of grant is included in ordinary income and there is no further income recognition when the restrictions lapse. We are generally entitled to a tax deduction in an amount equal to the ordinary income recognized by the participant.
Restricted Stock Units. Generally, the participant will not be subject to tax upon the grant of an award of RSUs but will recognize ordinary income in an amount equal to the fair market value of any shares received on the date of delivery of the underlying shares of Class A Stock. We will generally be entitled to a corresponding tax deduction.
Stock Appreciation Rights. Generally, the participant will not be subject to tax upon the grant of a stock appreciation right. However, upon the receipt of shares pursuant to the exercise of a stock appreciation right, the participant, generally, will recognize ordinary income in an amount equal to the fair market value of the shares received. The ordinary income recognized with respect to the receipt of shares upon exercise of stock appreciation rights will be subject to any necessary withholding and reporting requirements. Generally, we will not be entitled to a tax deduction upon the grant or termination of stock appreciation rights. However, we will, generally, be entitled to a deduction for Federal income tax purposes equal to the amount of ordinary income realized by the participant.
Section 162(m). Section 162(m) limits to $1 million the deduction a public company may claim in any year for compensation to certain executive officers. Grants awarded under the Incentive Plan to executive officers covered by Section 162(m) since the Tax Act took effect are subject to the $1 million deduction limitation.
Section 409A. Awards held by participants that are subject to, but fail to comply with, Section 409A are subject to a penalty tax of 20% in addition to ordinary income tax, as well as to interest charges and, potentially, state-level penalties. In addition, the failure to comply with Section 409A may result in an acceleration of the timing of income inclusion in respect of awards for income tax purposes. Awards granted under the Incentive Plan are intended to be exempt from or comply with the rules of Section 409A and will be administered accordingly. The CCG Committee intends to administer any award resulting in a deferral of compensation subject to Section 409A consistent with the requirements of Section 409A to the maximum extent possible, as determined by the CCG Committee.
This summary is not a complete description of the U.S. Federal income tax aspects of the Incentive Plan. Moreover, this summary relates only to Federal income taxes; there may also be Federal estate and gift tax consequences associated with the Incentive Plan, as well as foreign, state and local tax consequences.
New Plan Benefits
The future benefits or amounts that would be received under this amendment to the Incentive Plan are discretionary and are therefore not determinable at this time. Similarly, the benefits or amounts which would have been received by or allocated to executive officers and our other employees for the last completed fiscal year if this amendment to the Incentive Plan had been in effect cannot be determined. For more information about awards granted in FY19 to the NEOs, see “Compensation of Executive Officers—Grants of Plan-Based Awards.” For more information about awards granted in FY19 to our outside directors, see “Director Compensation.”
The Board unanimously recommends that you vote “FOR” the approval of the amendment to the Amended and Restated 2007 Equity and Incentive Plan.
PROPOSAL 4
APPROVAL OF AN AMENDMENT TO THE AMENDED AND RESTATED
2007 EMPLOYEE STOCK PURCHASE PLAN
In April 2019, the Board, based on the recommendation of the CCG Committee, approved an amendment to the Amended and Restated 2007 Employee Stock Purchase Plan (“Purchase Plan”), subject to stockholder approval at the Annual Meeting, to increasethe number of shares of Class A Stock authorized for issuance under the Purchase Plan by 9,000,000.
We adopted the Purchase Plan to offer employees of VMware and eligible subsidiaries the opportunity to purchase shares of Class A Stock at a discounted price as an incentive for continued employment. The Purchase Plan also provides eligible employees with the opportunity to become VMware stockholders and participate in our success, which aligns the interests of participating employees with those of stockholders. As of March 1, 2019, there were 6,091,377 shares of Class A Stock available for future purchase under the Purchase Plan. Additional shares of Class A Stock are needed for use in the Purchase Plan so that it can continue to be used as a benefit to attract and retain employees. In reaching its decision regarding the appropriate number of shares of Class A Stock by which to increase the Purchase Plan share reserve, the CCG Committee considered a number of factors, including historical purchases under the Purchase Plan, the percentage of the Company’s outstanding shares represented by the share reserve, forecasts of expected share utilization and the expected length of time before the share reserve is depleted. Our forecast indicates that the addition of 9,000,000 shares of Class A Stock will allow continued employee participation for at least two years, although the actual number of shares utilized will depend on a variety of factors, including our headcount growth rate, employee participation levels and our stock price. The proceeds received by VMware from the sale of Class A Stock under the Purchase Plan are used for the general corporate purposes of VMware.
Summary of the Purchase Plan
The following is a summary of the material terms and conditions of the Purchase Plan, as amended. This summary, however, does not purport to be a complete description of all provisions of the Purchase Plan and is qualified in its entirety by reference to the full text of the Purchase Plan. A copy of the Purchase Plan has been filed with the SEC with this proxy statement, and any stockholder who wishes to obtain a copy of the Purchase Plan may do so by written request to our Secretary at VMware’s principal executive offices in Palo Alto, California.
The Purchase Plan was adopted by the Board on June 5, 2007 and was first approved by VMware’s stockholders on August 9, 2007. Up to 23,300,000 shares of Class A Stock are currently authorized for issuance under the Purchase Plan. If the proposed amendment is approved by the stockholders at the Annual Meeting, an additional 9,000,000 shares of Class A Stock will be available for issuance under the Purchase Plan, bringing the total number of shares of Class A Stock that have been authorized for issuance under the Purchase Plan since its inception to 32,300,000 shares.
As of March 1, 2019, 6,091,377 shares of Class A Stock were available for future purchases under the Purchase Plan. As of March 1, 2019, approximately 24,000 employees were eligible to participate in the Purchase Plan, and approximately 17,500 employees were participating. The closing price of the Class A Stock on the NYSE on March 1, 2019 was $178.20.
Eligibility. Currently, any individual who has completed two or more months of continuous service at VMware (or any eligible and participating subsidiary) and whose customary employment is more than 20 hours a week and more than fivemonths in any calendar year is eligible to participate in the Purchase Plan, subject to the limitations described below under “—Special Limitations.” Individuals employed outside the United States are subject to similar eligibility restrictions, unless prohibited by the laws of the jurisdiction in which they are employed. Employees participate in the Purchase Plan by electing
payroll deductions that accumulate to purchase shares of Class A Stock at a discount. Non-employee directors are not eligible to participate in the Purchase Plan.
Employees (including employee directors and executive officers) are eligible to participate in the Purchase Plan. Accordingly, each employee member of the Board, each executive officer and each person who previously served as an executive officer during FY19 and remains employed by VMware has an interest in this proposal.
Option Periods and Purchase Periods. Shares of Class A Stock are offered under the Purchase Plan through a series of successive option periods established by the Board, not to exceed 27 months. Currently, each option period commencing under the Purchase Plan (each, an “Option Period”) is approximately 12 months in duration and is divided into two consecutive six-month periods at the end of which purchases are made (each, a “Purchase Period”). Purchase Periods currently begin on March 1 and September 1 of each year and end on the last day of February and August of each year, subject to adjustment by the CCG Committee.
Purchase Price and Amount of Stock Purchased. When a participant enrolls in the Purchase Plan, the participant receives an option to purchase shares of Class A Stock on the last day of each upcoming Purchase Period at the lower of 85% of the fair market value of the shares on the first or last trading day of the Purchase Period, whichever price is lower, provided, however, that each Option Period will expire early (on the first day of the second Purchase Period within the Option Period) if the fair market value of the Class A Stock on the first day of the second Purchase Period is lower than the fair market value of the Class A Stock on the first day of the first Purchase Period of the Option Period, and all participants in the expired Option Period will automatically be granted an option in a new Option Period commencing on the same day that the second Purchase Period was scheduled to commence. The number of shares of Class A Stock a participant will be able to purchase will generally be equal to the payroll deductions during the Purchase Period, divided by the purchase price per share, subject to the limitations described below in “—Special Limitations.”
If the number of shares of Class A Stock available in any Option Period under the Purchase Plan is otherwise insufficient to fully exercise the options based on participants’ accumulated payroll deductions, the number of shares of Class A Stock each participant is entitled to purchase will be proportionately reduced, and the remaining cash balance in each participant’s contribution account will be returned to such participant.
Payroll Deductions and Withdrawal. Options are exercisable at the end of each Purchase Period through accumulations of payroll deductions. The amount of payroll deduction is determined by each eligible employee. Eligible employees can select payroll deduction rates in 1% increments from 2% to 15% of their compensation (subject to a maximum of $7,500, pro-rated for longer or shorter periods) each Purchase Period. No interest accrues on payroll deductions. After an eligible employee enrolls in the Purchase Plan, the employee is automatically enrolled in subsequent Option Periods unless the employee actively withdraws. A participant may withdraw from any Option Period up to 31 days, or such other number ofdays as the CCG Committee determines, before the end of the applicable Purchase Period, and upon such cancellation, all accumulated payroll deductions in the participant’s contribution account will be returned. For purposes of the Purchase Plan, compensation generally includes base salary, bonuses, commissions and overtime pay.
If a participant’s employment is terminated for any reason prior to the end of a Purchase Period, no stock will be purchased, and all accumulated payroll deductions will be returned to the participant (or to the participant’s legal representative in the event of the participant’s death). Additionally, nothing in the Purchase Plan grants eligible employees the right to be retained in the services of VMware.
If a participant holds any option under the Purchase Plan at the time of his or her death, his or her legal representative may, pursuant to a written request delivered on or before the date such option is exercisable, elect either (i) to cancel any such option and receive in cash the balance in the participant’s contribution account, or (ii) to have the balance in the withholding account applied as of the last day of the Purchase Period to the exercise of such option, and have the balance, if any, in excess of the total purchase price of the whole shares of Class A Stock returned in cash.
Special Limitations. The Purchase Plan imposes certain limitations upon a participant’s right to acquire VMware’s Class A Stock, including the following:
A participant is ineligible to receive an option pursuant to the Purchase Plan if, immediately after the grant of such option, the participant would be deemed under section 423 or 424 of the Code to own 5% or more of the total combined voting power or value of all classes of stock of the Company or any of its affiliates;
A participant cannot be granted options to purchase more than $25,000 worth of Class A Stock (valued at the time each option is granted) in any calendar year;
A participant cannot be granted options to purchase more than 750 shares of Class A Stock under the Purchase Plan in any Purchase Period, pro-rated for longer or shorter periods; and
A participant’s accumulated payroll deductions cannot exceed $7,500 in any Purchase Period, pro-rated for longer or shorter periods, or $15,000 per a calendar year, less any rollover amounts.
Special Provisions Applicable to International Employees. The Purchase Plan is generally intended to provide eligible employees of VMware’s eligible foreign subsidiaries with the opportunity to participate in the Purchase Plan in a manner that is intended to qualify under Code Section 423. However, the Purchase Plan also authorizes the establishment of alternative terms and conditions to facilitate participation in the Purchase Plan by eligible employees residing outside the United States in a manner that does not comply with Code Section 423 if necessary or desirable to achieve tax, securities law or other objectives or as necessary to comply with local laws, regulations or rules.
Transferability. Awards granted under the Purchase Plan are not transferable except by will or the laws of descent and distribution.
Changes in Capitalization. In the event of any change to our outstanding Class A Stock, such as a recapitalization, stock split, merger in which we are the surviving corporation or similar event, the aggregate number of shares of Class A Stock available under the Purchase Plan and other relevant provisions of the Purchase Plan will be appropriately adjusted. If we sell substantially all of our assets or merge with another corporation and are not the surviving corporation, the Board may designate a date for the open Option Periods to terminate and allow each participant to purchase shares of Class A Stock with accumulated payroll deductions or, if there is a surviving corporation, the Board may arrange for equivalent option to be substituted by the successor corporation. Otherwise, prior to the effective date of the merger or sale, the participant’s accumulated payroll deductions will be returned and all outstanding options will terminate.
Administration, Amendment and Termination. The Board or a committee of the Board (currently the CCG Committee) administers the Purchase Plan, makes determinations regarding all questions arising thereunder, and adopts, administers and interprets such rules and regulations relating to the Purchase Plan as it deems necessary or advisable. The Board may generally amend or terminate the Purchase Plan at any time. However, the Board must obtain stockholder approval for any amendment to the Purchase Plan that increases the number of shares of Class A Stock issuable under the Purchase Plan, reduces the option price of outstanding options or the price at which options can be granted, or modifies the requirements for eligibility to participate in the Purchase Plan.
U.S. Federal Income Tax Information. The following information is a general summary of some of the current federal income tax consequences of the Purchase Plan to U.S. based participants and to VMware. Tax laws may change, and actualtax consequences will depend on a participant’s individual circumstances as well as foreign, state and local tax laws. VMware encourages all participants to seek tax advice when they participate in the Purchase Plan. The Purchase Plan is intended to qualify as an “employee stock purchase plan” under Section 423 of the Code.
Tax Treatment of U.S. Participants. Participants will not recognize income when they enroll in the Purchase Plan or when they purchase shares of Class A Stock. All tax consequences are deferred until the participant disposes of the shares of Class A Stock. If the participant holds the shares for one year or more after the purchase date and two years or more after the offering date, or if the participant dies while owning the shares, the participant will generally recognize ordinary income when disposing of the shares equal to the difference between the purchase price and the fair market value of the shares on the date of disposition, or 15% of the fair market value of the shares on the offering date, whichever is less. Any additional gain will be taxed as long-term capital gain. If the shares of Class A Stock are sold for less than the purchase price, there is no ordinary income, but the participant will have a long-term capital loss for the difference between the purchase price and thesale price. If a participant disposes of the shares less than one year after the purchase date or less than two years after the offering date, the participant will generally have ordinary income equal to the difference between the purchase price and the fair market value on the purchase date. The difference between the sale price and the fair market value on the purchase date will be a capital gain or loss.
Tax Treatment of VMware. When a participant recognizes ordinary income by disposing of shares before the one-year or two-year holding period ends, we will generally be entitled to a tax deduction in the amount of the ordinary income.
New Plan Benefits
Participation in the Purchase Plan is voluntary and each eligible employee will make his or her own decision whether and to what extent to participate in the Purchase Plan. It is therefore not possible to determine the benefits or amounts that will be received in the future by individual employees or groups of employees under the Purchase Plan.
The Board unanimously recommends that you vote “FOR” the approval of the amendment to the Amended and Restated 2007 Employee Stock Purchase Plan.
PROPOSAL 5
RATIFICATION OF SELECTION OF INDEPENDENT AUDITOR We are asking our stockholders to ratify the selection by the Audit Committee of PwC as our independent auditor for the fiscal year ending January 31, 2020.February 3, 2023. PwC, an independent registered public accounting firm, has served as our independent auditor since 2007. We expect that representatives of PwC will be present at the Annual Meeting and will be given the opportunity to make a statement if they desire to do so and to respond to appropriate questions. PwC is also the independent auditor of Dell, our ultimate parent and controlling stockholder. We are required by the Master Transaction Agreement between VMware and Dell to use our reasonable best efforts to use the same independent registered public accountant selected by Dell. For further information, see “Transactions with Related Persons.” Although ratificationapproval by the stockholders is not required by law, the Board has determined that it is desirable to request approvalratification of thisits selection by the stockholders as a matter of good corporate governance. In the event the stockholders fail to ratify the appointment of PwC, the Audit Committee will consider this factor when making any determinations regarding PwC. Even though your vote is advisory, and therefore will not be binding on the Company, the Audit Committee and the Board value the opinions of our stockholders. The Board unanimously recommends that you vote “FOR” the ratification of the selection of PwC as our independent auditor for the fiscal year ending January 31, 2020.February 3, 2023.
Pre-Approval of Audit and Non-Audit Services During FY19,FY22, the Audit Committee approved all audit, review and attest services performed by PwC. In accordance with the Audit Committee’s pre-approval policy, the Audit Committee pre-approves permissible non-audit services and audit, review or attest engagements. The Audit Committee has delegated to its Chair the authority to pre-approve any specific non-audit service that was not previously pre-approved by the Audit Committee. Any decisions of the Chair to pre-approve non-audit services are then presented to the Audit Committee at its next scheduled meeting. During FY19,FY22, the Audit Committee pre-approved all non-audit services in accordance with this policy.
For the fiscal years ended February 1, 2019January 28, 2022 and February 2, 2018,January 29, 2021, fees for services provided by PwC were as follows: | | | | | | | Fiscal Year | Audit Fees(1) ($) | Audit Related Fees(2) ($) | Tax Fees(3) ($) | All Other Fees(4) ($) | 2019(5) | 8,029,615 | 1,509,846 | 2,358,917 | 63,728 | 2018(6) | 9,572,910 | 1,311,453 | 2,429,477 | 62,132 |
| | | | | | | | | | | | | | | | Fiscal Year | Audit Fees(1) ($) | Audit Related Fees(2) ($) | Tax Fees(3) ($) | All Other Fees(4) ($) | 2022(5) | 12,556,042 | 2,064,600 | 1,252,563 | 65,250 | 2021(6) | 10,639,133 | 2,160,525 | 2,685,987 | 74,300 |
____________________ (1) Includes fees in connection with the audit of our financial statements and internal control over financial reporting, review of interim financial statements included in our quarterly reports on Form 10-Q and other professional services provided in connection with statutory and regulatory filings or engagements. (2) Includes fees in connection with other technical, financial reporting and compliance services. (3) Includes fees in connection with tax compliance and tax consulting services. (4) Includes fees principally in connection with sustainability reporting services and for subscriptions to PwC’s web-based research program, training courses and conferences. (5) Includes current estimates of fees for unbilled services. (6) VMware revised its fiscal calendar effective January 1, 2017. VMware’s first fiscal year under its revised fiscal calendar began on February 4, 2017 and ended February 2, 2018. The period from January 1, 2017 through February 3, 2017 was recorded as a transition period (“Transition Period” or “Transition”). FY18 fees include fees relating to the Transition Period.Reflects actual amounts invoiced for FY21 services.
EQUITY COMPENSATION PLAN INFORMATION The following table sets forth certain information regarding our equity compensation plans, including the Amended and Restated 2007 Equity and Incentive Plan (the “Incentive Plan”) and Amended and Restated 2007 Employee Stock Purchase Plan (the “Purchase Plan”), as of February 1, 2019.January 28, 2022. Only shares of Class ACommon Stock may be issued under these plans. | | | Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) | | Weighted-Average Exercise Price Per Share of Outstanding Options, Warrants and Rights (b) | | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) | | Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options,
Warrants and Rights (a) | Weighted-Average Exercise Price Per Share of Outstanding Options, Warrants and Rights (b) | Number of Securities
Remaining Available for Future Issuance Under Equity Compensation Plans
(Excluding Securities Reflected in
Column (a)) (c) | | Equity compensation plans approved by security holders | 21,700,927 |
| (1)(2) | $36.50 | (3) | 18,627,325 |
| (4) | Equity compensation plans approved by security holders | 24,497,714(1)(2) | $46.95(3) | 51,657,755(4) | | Equity compensation plans not approved by security holders | — |
| | — |
| | — |
| | Equity compensation plans not approved by security holders | — | | Total: | 21,700,927 |
| |
| $36.50 |
| | 18,627,325 |
| | Total: | 24,497,714 | $46.95 | 51,657,755 |
____________________ (1) Includes 1,968,693685,992 shares subject to outstanding options, 17,109,84321,987,049 shares of Class ACommon Stock subject to outstanding restricted stock units (“RSUs”) and 2,622,3911,824,673 shares subject to outstanding PSUs (assuming achievement of the maximum performance). (2) Includes 2,078,3102,210,574 shares issuable pursuant to equity awards outstanding under the Incentive Plan that were granted in substitution for outstanding grants of companies that we have acquired (“Substitution Grants”). The Incentive Plan provides that the number of shares reserved for issuance under the Incentive Plan will be increased by the corresponding number of outstanding equity grants assumed or substituted for in connection with mergers and similar transactions. Substitution Grants typically remain subject to the terms that governed the grants when initially awarded by the acquired companies. When VMware makes Substitution Grants, VMware does not assume the stock plans of such acquired companies and does not make additional grants under such plans. (3) Represents the weighted-average exercise price of outstanding options under the Incentive Plan and is calculated without taking into account the 19,732,23423,811,722 shares of Class ACommon Stock subject to outstanding RSUs and PSUs (assuming achievement of the maximum performance) that become issuable as those units vest, without any cash consideration or other payment required for such shares. (4) Represents the number of securities remaining available for issuance under the Incentive Plan and the Purchase Plan.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth information, as of May 3, 2019,2022, about the beneficial ownership of Class ACommon Stock and Class B Stockheld by (i) Dell, (ii) each person who is known by us to own beneficially more than 5% of either class of our common stock, (iii)Common Stock, (ii) each of our directors and nominees for director, (iv)(iii) each of our NEOs and (v)(iv) all directors and executive officers of VMware as a group. Applicable percentage ownership is based on 110,266,640421,381,120 shares of Class A Stock and 300,000,000 shares of Class BCommon Stock outstanding as of May 3, 2019.2022. In computing the number of shares of common stockCommon Stock beneficially owned by a person and the percentage ownership of that person, we deemed as outstanding shares of common stockCommon Stock subject to options, warrants, rights or conversion privileges related to securities beneficially owned by that person that are currently exercisable or exercisable within 60 days of May 3, 2019.2022. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated in the table or footnotes below, the address for each beneficial owner is c/o VMware, Inc., 3401 Hillview Avenue, Palo Alto, California, 94304.
| | | | | | | | | | Name of Beneficial Owner | Class A Shares Beneficially Owned(1) (#) | Outstanding Class A Shares (%) | Class B Shares Beneficially Owned (#) | Outstanding Class B Shares (%) | Total Vote(2) (%) | | Principal Stockholders: | | | | | | Dell Technologies Inc.(3) | 30,678,605 |
| 27.8 | 300,000,000 |
| 100 | 97.4 | Michael Dell(4) | 30,678,605 |
| 27.8 | 300,000,000 |
| 100 | 97.4 | | Other 5% Beneficial Owners: | | | | | | T. Rowe Price(5) | 13,296,580 |
| 12.1 | — |
| ** | ** | | Other Directors and Executive Officers: | | | | | | Anthony Bates(6) | 11,200 |
| ** | — |
| ** | ** | Michael Brown(6) | 17,202 |
| ** | — |
| ** | ** | Maurizio Carli(7) | 20,598 |
| ** | — |
| ** | ** | Donald Carty*(6)(8) | 11,605 |
| ** | — |
| ** | ** | | Egon Durban | — |
| ** | — |
| ** | ** | Karen Dykstra(6) | 8,360 |
| ** | — |
| ** | ** | Patrick Gelsinger(9) | 497,919 |
| ** | — |
| ** | ** | Sanjay Poonen(10) | 239,567 |
| ** | — |
| ** | ** | Rangarajan (Raghu) Raghuram(11) | 171,391 |
| ** | — |
| ** | ** | Rajiv Ramaswami(12) | 108,743 |
| ** | — |
| ** | ** | | Zane Rowe | 67,975 |
| ** | — |
| ** | ** | Paul Sagan*(6) | 15,075 |
| ** | — |
| ** | ** | All directors and executive officers as a group (14 persons)(13) | 31,849,702 |
| 28.8 | 300,000,000 |
| 100 | 97.5 |
| | | | | | | | | | Name of Beneficial Owner | Common Stock
Beneficially Owned (#) | Outstanding
Common Stock (%) | | | | | Principal Stockholders: | | | Michael Dell(1) | 169,278,015 | 40.2 | SLP Stockholders(2) | 42,050,818 | 10.0 | | | | | Other 5% Beneficial Owners: | | | Dodge & Cox(3) | 25,453,582 | 6.0 | | | | | Other Directors and Executive Officers: | | | Nicole Anasenes*(4) | — | ** | Anthony Bates(5) | 16,267 | ** | Marianne Brown*(4) | — | ** | Michael Brown(5) | 22,269 | ** | Jean-Pierre Brulard(6) | 14,875 | ** | Donald Carty(5)(7) | 17,689 | ** | Kenneth Denman(4) | — | ** | Sumit Dhawan(8) | 17,306 | ** | | Egon Durban | — | ** | Karen Dykstra(4) | 13,705 | ** | Amy Fliegelman Olli(9) | 23,046 | ** | Patrick Gelsinger(10) | 437,144 | ** | Sanjay Poonen(11) | 172,877 | ** | Raghu Raghuram(12) | 236,354 | ** | Zane Rowe(13) | 78,989 | ** | Paul Sagan*(5) | 20,142 | ** | All directors and executive officers as a group (15 persons)(14) | 169,738,657 | 40.3 |
____________________ * Nominee for director ** Represents less than 1% (1) All amounts shownInformation concerning Mr. Dell is based solely on a Schedule 13D/A filed by Mr. Dell with the SEC on November 2, 2021, reporting that Mr. Dell and the SLD Trust are the beneficial owners, in the aggregate, of 169,278,015 shares of Common Stock, consisting of 155,005,746 shares of Common Stock owned by Mr. Dell and 14,272,269 shares of Common Stock owned by the SLD Trust. Mr. Dell and the SLD Trust constitute the MSD Stockholders (as defined in this column include shares obtainable upon exerciseproxy statement). Mr. Dell disclaims beneficial ownership of stock options currently exercisable or exercisable within 60 days of May 3, 2019 and shares underlying RSUs vesting within 60 days of May 3, 2019. In addition to the amounts shown, each share of Class B Stock may be converted to one share of Class A Stock upon election of the holder. To our knowledge, except as noted above, no other person or entity is the beneficial owner of more than 5% of either the Class A Stock or the Class B Stock.
(2) Percentage of total voting power represents voting power with respect to all shares of Class A Stock and Class B Stock, as a single class, calculated on the basis of 10 votes per share of Class B Stock and one vote per share of Class A Stock. Each holder of Class B Stock is entitled to 10 votes per share of Class B Stock, and each holder of Class A Stock is entitled to one vote per share of Class A Stock on all matters submitted to our stockholders for a vote on which they vote as a single class, with the exception of the election of Group II directors, in which Class A Stock and Class B Stock are each entitled to one vote per share. Class B stockholders have sole voting authority over the election of Group I directors and certain other matters specified in our Certificate of Incorporation. Additionally, following a Distribution, (i) Class B stockholders are entitled to only one vote per share on any proposal to require the conversion of all then-outstanding shares of Class B Stock to Class A Stock; and (ii) Class B stockholders may not vote in elections for the Board without obtaining the prior consent of the Board if they have acquired 10% or more of the then-outstanding shares of Class B Stock other than through the Distribution and do not also hold an equivalent percentage of shares of the then-outstanding Class A Stock, in each case as further set forth in our certificate of incorporation.
(3) As of May 3, 2019, EMC is the holder of record of 240,000,000 shares of Class B Stock and 10,678,605 shares of Class A Stock reported as beneficially owned by Dell, and VMW Holdco LLC, a direct wholly owned subsidiary of EMC, is the holder of record of 20,000,000 of the shares of Class A Stock and 60,000,000 of the shares of Class B Stock reported as beneficially owned by Dell. EMC is indirectly wholly owned by Dell through its directly and indirectly held wholly owned subsidiaries, consisting of Denali Intermediate Inc., a Delaware corporation, and Dell Inc., a Delaware corporation. Dell, and each such subsidiary in the chain of subsidiaries through which Dell owns EMC (collectively, “Dell Entities”), by reason of its ownership of the voting securities of the subsidiary below it in the chain, has the right to elect or appoint the members of the governing body of that subsidiary and, therefore, to direct the management and policies of that subsidiary. As a result, each Dell Entity shares, or has the right to acquire, voting and investment power over the Class A Stock and Class BCommon Stock held of record by EMC and VMW Holdco LLC. As reported in a Schedule 13G filed on April 13, 2017 and Schedule 13D filed on December 26, 2018, VMW Holdco LLC has pledged 20,000,000 shares of Class A Stock and 60,000,000 shares of Class B Stock owned by it to certain financial institution lenders to secure margin loan agreement and security agreements, each dated as of April 12, 2017 and December 20, 2018.the SLD Trust. The address for each of EMC,Mr. Dell and VMW Holdco LLC is c/o Dell Technologies Inc., One Dell Way, Round Rock, Texas 78682. See “Transactions with Related Persons” for information about the MSD Stockholders’ voting rights and obligations.
(2) As describedInformation concerning the SLP Stockholders is based solely on a Schedule 13D filed with the SEC on November 3, 2021, reporting that the SLP Stockholders may be deemed the beneficial owners, in this proxy statement, Mr. Dell is the Chairman and CEOaggregate, of Dell. Mr. Dell beneficially owns voting securities of Dell representing a majority of the total voting power of the outstanding42,050,818 shares of all outstanding classesCommon Stock. The shares of common stockCommon Stock reported as beneficially owned by the SLP Stockholders consist of Dell16,133,485 shares of Common Stock owned of record by SL SPV-2, L.P (“SPV-2”), 16,561,833 shares of Common Stock owned of record by Silver Lake Partners IV, L.P. (“SLP IV”), 8,964,898 shares of Common Stock owned of record by Silver Lake Partners V DE (AIV), L.P. (“SLP V”), 243,679 shares of Common Stock owned of record by Silver Lake Technology Investors IV, L.P. (“SLTI IV”), 109,885 shares of Common Stock owned of record by Silver Lake Technology Investors V, L.P. (“SLTI V”) and has37,038 shares of Common Stock owned of record by Silver Lake Group, L.L.C (“SLG”). The general partner of SPV-2 is SLTA SPV-2, L.P. (“SLTA GP”) and the power to elect directors who control a majoritygeneral partner of SLTA GP is SLTA SPV-2 (GP), L.L.C, (“SLTA SPV GP”). The general partner of each of SLP IV and SLTI IV is Silver Lake Technology Associates IV, L.P. (“SLTA IV”), and the total votes entitled to be cast ongeneral partner of SLTA IV is SLTA IV (GP), L.L.C. (“SLTA IV GP”). The general partner of each of SLP V and SLTI V is Silver Lake Technology Associates V, L.P. (“SLTA V”), and the Dell boardgeneral partner of directors. As a result, Mr. DellSLTA V is SLTA V (GP), L.L.C. (“SLTA V GP”). The managing member of each of SLTA SPV GP, SLTA IV GP and SLTA V GP is SLG. SLG may be deemed to behave beneficial ownership of the securities held by the SLP Stockholders. The managing members of Silver Lake are Egon Durban, also a VMware director, Kenneth Hao, Gregory Mondre and Joseph Osnoss. Mr. Durban disclaims beneficial ownerownership of all shares of Common Stock held by the SLP Stockholders. The address of each of the shares of Class A StockSLP Stockholders and Class B Stock beneficially owned by Dell. Mr. Dell’s addressentities named above is c/o Dell Inc., One Dell Way, Round Rock, Texas 78682.Silver Lake, 2775 Sand Hill Road, Suite 100, Menlo Park, CA 94025. See “Transactions with Related Persons” for information about the SLP Stockholders’ voting rights and obligations. (5)(3) Based solely upon a Schedule 13G13G/A filed with the SEC on February 14, 20192022 by T. Rowe Price Associates, Inc.Dodge & Cox. The address for T. Rowe Price AssociatesDodge & Cox is 100 E. Pratt555 California Street, Baltimore, Maryland 21202.40th Floor, San Francisco, CA 94104.
(6)(4) Excludes shares of Common Stock that would have vested but for the director’s election to defer to future years the settlement of RSUs pursuant to a Board-approved program.
(5) Includes 549494 shares of Class ACommon Stock issuable under RSUs that will vest within 60 days of May 3, 2019.2022. (7)(6) Includes 16,2834,094 shares of Class A Stock subject to options exercisable within 60 days of May 3, 2019.
(8) Includes 1,350 shares of Class A Stock held in the name of Director Carty’s spouse.
(9) Includes 85,766 shares of Class A Stock subject to options exercisable within 60 days of May 3, 2019 and 151,869 shares of Class A Stock held in a grantor retained annuity trust (GRAT).
(10) Includes 157,365 shares of Class A Stock subject to options exercisable within 60 days of May 3, 2019.
(11) Includes 32,474 shares of Class A Stock subject to options exercisable within 60 days of May 3, 2019.
(12) Includes 76,981 shares of Class ACommon Stock issuable under RSUs that will vest within 60 days of May 3, 2019.2022.
(13)(7) Includes 291,8887,734 shares held in a joint account with Mr. Carty’s spouse over which Mr. Carty has shared voting power and 1,350 shares of Class ACommon Stock subject to options exercisableheld in the name of Mr. Carty’s spouse. Mr. Carty is not standing for re-election and his Board service will end on the date of the Annual Meeting.
(8) Includes 10,016 shares of Common Stock issuable under RSUs that will vest within 60 days of MarchMay 3, 20192022. (9) Includes 4,233 shares of Common Stock issuable under RSUs that will vest within 60 days of May 3, 2022. (10) Mr. Gelsinger resigned his position as CEO effective February 12, 2021 and resigned from the Board effective April 21, 2021. Amounts include 158,401 shares of Common Stock held in grantor retained annuity trusts (“GRAT”) and 103,958 shares of Common Stock held in four irrevocable trusts for the benefit of members of his immediate family of which Mr. Gelsinger is the sole trustee. (11) Mr. Poonen resigned his role as COO, Customer Operations effective May 11, 2021 pursuant to the “good reason” provision of our Executive Severance Plan. Following a transition period, his last day of employment with VMware was August 6, 2021. His departure qualified as an “Involuntary Termination” pursuant to the Executive Severance Plan, and, as such, he received a related severance payment on September 7, 2021, including the acceleration of certain equity awards. Information concerning Mr. Poonen is based solely on the Company’s records as of September 7, 2021. (12) Includes 21,500 shares of Common Stock held in the name of Mr. Raghuram’s spouse, 41,000 shares of Common Stock held in an irrevocable trust for the sole benefit of his spouse and 47,379 shares of Common Stock held in a GRAT. Also, includes 10,299 shares of Common Stock issuable under RSUs that will vest within 60 days of May 3, 2022. (13) Includes 5,291 shares of Common Stock issuable under RSUs that will vest within 60 days of May 3, 2022. (14) Includes 35,909 shares of Common Stock issuable to all those who are held by allVMware executive officers and directors as a group and 79,726 shares of Class A Stock issuable to all executive officers and directorsMay 3, 2022, as a group, under RSUs that will vest within 60 days of May 3, 2019.2022.
COMPENSATION DISCUSSION AND ANALYSIS This Compensation Discussion and Analysis section (“CD&A”) discusses the compensation programs and policies for our NEOs. The CD&A also provides an overview of the CCGCompensation Committee and its role in the design and administration of these programs and policies and its role in making specific compensation decisions for our NEOs. The CD&A is organized as follows: •Section 1: Executive Summary •Section 2: CEO Pay for Performance AlignmentCompensation Components •Section 3: Compensation ComponentsBase Salary •Section 4: Base Salary Section 5: Annual Performance-Based Bonus
•Section 5: Long-Term Incentives •Section 6: Long-Term Incentives Section 7: Overview of the Compensation-Setting Process
•Section 8:7: Benefits, Perquisites and Other Compensation Policies Section 1: Executive Summary
Objectives of our Executive Compensation Program
The objectives of our executive compensation program are to:
motivate our executives to achieve our strategic, operational and financial goals;
reward superior performance;
attract and retain exceptional executives; and
reward behaviors that result in long-term increased stockholder value.
To achieve these objectives, we have implemented and maintain compensation plans that tie a substantial portion of our executive compensation to the achievement of pre-determined performance goals and increases in total stockholder return (“TSR”). As detailed below, our pay mix is balanced among base salary, short-term performance cash bonus awards and long-term equity compensation. We may adopt other arrangements from time to time to best meet our compensation objectives.
FY19 Summary
We revised our fiscal calendar effective January 1, 2017. References in this CD&A to our prior fiscal years cover the following periods:
| | | | | | | | | Fiscal Year(1) | | Dates Covered in Fiscal Year | Fiscal Year 20162020 (“FY16FY20”) | | February 2, 2019 through January 1, 2016 through December 31, 20162020 | Fiscal Year 20182021 (“FY18FY21”) | | February 4, 20171, 2020 through February 2, 2018January 29, 2021 | Fiscal Year 20192022 (“FY19FY22”) | February 3, 2018 | January 30, 2021 through February 1, 2019January 28, 2022 |
____________________Section 1: Executive Summary
(1) The period from January 1, 2017 through February 3, 2017 was recorded as a transition period (“Transition Period”) in place of a full fiscal year.
Named Executive Officers
In FY19, our executive compensation program emphasized achievement of Company financial, strategic and operational performance designed for alignmentFY22, we completed a leadership transition with stockholder interests. As described in the graphic below, our CEO’s total compensation opportunity was primarily in the form of equity and performance-based compensation. In FY19, our executive compensation program incentivized achievement of revenue, non-GAAP operating margin and license and hybrid cloud and Software-as-a-Service (“SaaS”) revenue growth objectives, which, in turn, contributed to a one-year TSR of 44%.
Pay-for-performance yielded above-target annual incentive bonus plan and performance stock unit (“PSU”) payouts in alignment with corporate financial results and stockholder returns. Our incentive plans focused on revenue, non-GAAP operating margin and license and hybrid cloud and SaaS revenue metrics, which we believe are important indicatorsappointment of our current performancenew CEO and future growth opportunities. In FY19, we exceeded targets for each of these metrics, and TSR increased by 44% from the end of FY18 as shown below:
President. The table below details our NEOs in FY22. | | | Closing Stock Price at end of FY18 (Feb. 2, 2018) | $122.72 | Closing Stock Price at end of FY19 (Feb. 1, 2019) | $150.51 | Value of Special Cash Dividend Paid Dec. 28, 2018 | $26.81 | One-Year TSR | 44% = (($150.51 + $26.81) / $122.72) - 1 |
Utilized a single PSU plan design for the PSU portion of our FY19 long-term incentive award grants, while ongoing prior-year PSU plans continue to incentivize positive company performance over a multi-year period. In FY19, we granted NEO equity awards that were split equally between restricted stock units (“RSUs”) and PSUs. For the PSU component, we continued the same plan design for our FY19 Operating PSU Plan that we used for our FY18 Operating PSU Plan, with its focus on sustained, multi-year growth in revenue, non-GAAP operating margin and non-GAAP operating income. In addition, FY19 was the second year of the three-year Hybrid Cloud PSU Plan (“FY18 HC PSU Plan”), which is designed to incentivize continuing progress in growing the
Company’s cloud and SaaS-based business. Accordingly, in FY19, NEOs were incentivized to balance investment to grow the Company’s cloud- and SaaS-based solutions business with the ongoing imperative of continuing to deliver on total revenue growth and profitability metrics. For more information on both FY18 PSU plans, see “Section 6: Long-Term Incentives” of this CD&A.
| | | | | | | Financial Performance Metric in FY19NEO | | FY16, FY18 and FY19 Operating PSU PlansRole | | FY18 HC PSU PlanFY22 Transition | Revenue GrowthRaghu Raghuram | | ü
(metric in FY19 tranche)•CEO effective June 1, 2021
| | | Non-GAAP Operating Margin | | ü
(metric in FY19 tranche)
| | | Non-GAAP Operating Income | | ü
(3-year goal)
| | | Hybrid•Previously COO, Products and Cloud and SaaS Revenue Growth | | | | ü
(metric in FY19 tranche)Services
| Total Stockholder ReturnZane Rowe | | | | ü•CFO
| | (3-year goal covering FY18-FY20, relative TSR compared to companies in S&P 500 IT Index)•Served as Interim CEO from February 13, 2021 until June 1, 2021
| | Sumit Dhawan | | •President effective June 1, 2021 | | •Previously SVP, Chief Customer Officer | | Jean-Pierre Brulard | | •EVP, Worldwide Sales | | — | | Amy Fliegelman Olli | | •EVP, General Counsel | | — | | Patrick Gelsinger | | •Former CEO | | •Resigned effective February 12, 2021 | | Sanjay Poonen | | •Former COO, Customer Operations | | •Executive role concluded on May 11, 2021 and employment terminated effective August 6, 2021 |
Business and Performance Update Market Backdrop Technologies emerge faster than organizations can absorb, creating increasingly complex environments. Organizations’ IT departments and corporate divisions are working at an accelerated pace to harness new technologies, platforms and cloud models, ultimately guiding businesses and their product teams through a digital transformation. To take on these challenges, we are helping customers drive their multi-cloud strategy by providing the multi-cloud platform for C-level NEOs. In FY19,all applications, enabling digital innovation and enterprise control. Our multi-cloud portfolio, spanning application modernization, cloud management, cloud infrastructure, networking, security and anywhere workspaces, forms a flexible, consistent digital foundation on which customers can build, run, manage, connect and protect their mission-critical workloads. Our portfolio supports and addresses our C-level NEOs became subjectcustomers’ key priorities, including modernizing their applications, managing multi-cloud environments, accelerating their cloud journey, modernizing the network using commodity hardware, embracing zero-trust security and empowering anywhere workspaces. We enable digital transformation of customers’ applications, infrastructure and operations for their constantly evolving business and employee needs by providing them with a ubiquitous software platform, enabling them to stock ownership guidelinesbuild, run and manage IT workloads from anywhere on any cloud. During FY22, we continued to see an increase in order to further promote the alignment of executive officer interests with thoseportion of our stockholders. The stock ownership guidelines took effect on April 1, 2018sales occurring through our subscription and coverSaaS offerings compared to the Company’s CEO, COOsportion of our on-premises solutions sold as perpetual licenses. We expect this trend to continue and CFO, setting ownership levels as a multiple of base salary (6x for our CEO, 3x for COOsresult we began reporting subscription and 2x for our CFO). For more information, see the “—Section 8: Benefits, Perquisites and Other Compensation Policies—Executive Stock Ownership Guidelines” of this proxy statement. Established severance plan. During FY19, the CCG Committee approved a severance plansoftware-as-a-service (“Severance PlanSaaS”) coveringannual recurring revenue (“ARR”) as a key metric for measuring our progress.
Spin-Off from Dell Technologies FY22 was a historic year for VMware executives, including each NEO. The Severance Plan is intended to provideas we completed a consistent framework to administer terminations inSpin-Off from Dell, our former controlling stockholder. In connection with the event of an involuntarily termination without “cause” or for “good reason” (each such term as defined in the Severance Plan). The components of the Severance Plan reflect similar practices that are common among a number of companies in our peer group. Upon a qualifying termination under the Severance Plan, each NEO is eligible to receive (1) a lump sum payment equal to annual base salary, target annual bonus, as well as the value of 12-months’ coverage in health insurance premiums; (2) full accelerated vesting of outstanding RSU and stock option awards that were otherwise scheduled to vest within and including the 12 months following termination; and (3) accelerated vesting of outstanding PSU awards to the extent that performance periods have been completed, as further detailed in the Severance Plan. Corporate Performance During FY19
Our executive compensation programs are designed to reward strong corporate performance and align the executive compensation opportunity with stockholder interests. Accordingly, our compensation decisions reflect both our performance and outlook.
During FY19, the Company achieved financial and operational results that contributed to our stock price increasing from $122.72spin-off on February 2, 2018, the last day of FY18, to $150.51 on FebruaryNovember 1, 2019, the last day of FY19, while the Company also paid2021, VMware issued a special cash dividend of $26.81$11.5 billion ($27.40 per share duringof Common Stock). As a standalone company, VMware has a simplified capital structure and governance model and additional operational and financial flexibility while maintaining our strategic partnership with Dell. Alongside the same period. Highlightscompleted Spin-Off, and with consideration and input from FY19 include:our shareholders, we eliminated the dual-class stock structure for a one-share, one-vote structure.
FY22 also marked another year of revenue growth and increased profitability as we executed on our multi-cloud and subscription and SaaS roadmap. FY22 highlights include the following: Delivered positive financial results. VMware’s executive team remained focused on driving financial and operational results for VMware’s stockholders, as revenue, non-GAAP operating margin, non-GAAP operating income, license revenue and unearned revenue balance each increased year over year.
| | | | | | Financials | FY19 | FY18 | Year-Over-Year Change | | Revenue ($M) | $8,974 | $7,862 | 14% | Non-GAAP operating margin(1) | 33.9% | 33.8% | 0.1% | Non-GAAP operating income(1) ($M) | $3,041 | $2,657 | 14% | | License revenue ($M) | $3,788 | $3,200 | 18% | Unearned revenue balance(2) ($M) | $6,978 | $5,839 | 20% |
 ____________________ (1) For a reconciliation of our non-GAAP operating margin and operating income to GAAP operating margin and operating income, respectively, see “Appendix A.”
Balance
Leadership Transition and Related Equity Compensation Leadership Transition In January 2021, Mr. Gelsinger announced his resignation as CEO effective February 12, 2021, and our Board commenced a search for his successor. During the CEO search, Mr. Rowe served as our Interim CEO in addition to his CFO role. In May 2021, the Board announced its selection of fiscal year end.Mr. Raghuram as CEO and Mr. Dhawan as President, both effective June 1, 2021. We believe that the successful execution of the leadership transition results in a strong executive team that embodies our innovative culture, represents our values and demonstrates a clear vision for VMware’s future success. Raghu Raghuram, CEO In selecting Mr. Raghuram, the Board noted his prior performance helping to lead VMware’s strategic direction and its technology evolution after he joined the Company in 2003 and served in various roles since that time. Most recently, Mr. Raghuram served as the COO of Products and Cloud Services, a role in which he oversaw the growth of VMware from its core virtualization business to its cloud computing business while playing a pivotal role in M&A strategy and development of strategic partnerships. Mr. Raghuram embodies VMware’s innovative culture, represents our values and has a clear vision for the future of the Company. Sumit Dhawan, President In his role as President, Mr. Dhawan leads all go-to-market functions including worldwide sales, the worldwide partner and commercial organization, the customer experience and success team and marketing and communications. Mr. Dhawan was selected based on his broad experience building and scaling subscription businesses and his customer-centric orientation. Prior to assuming the role of President, Mr. Dhawan served as Senior Vice President and Chief Customer Officer at VMware. He has extensive experience designing our business strategy for emerging multi-cloud and subscription offerings and has played a vital role in transforming how VMware’s customers can consume the Company’s services. One-Time Promotional FY22 TSR PSU Awards The compensation packages provided to Mr. Raghuram and Mr. Dhawan upon their promotion to CEO and President, respectively, included increases to their existing salaries and performance-based annual cash bonus opportunities as well as additional time-based and performance-based equity (in the form of restricted stock units, or RSUs, and performance-based restricted stock units, or PSUs). Each executive’s new compensation packages are heavily weighted toward performance-based awards.
In addition, in connection with their promotions, the Compensation Committee granted Messrs. Raghuram and Dhawan FY22 TSR PSUs. The FY22 TSR PSUs are the largest single component of the compensation packages for Messrs. Raghuram and Dhawan, with earnout conditioned upon the achievement of rigorous TSR goals over the next five years, ranging from +50% to +300%. Following the leadership transition, the Compensation Committee does not intend to issue any additional one-time awards going forward to Messrs. Raghuram and Dhawan; their ongoing annually awarded incentive compensation will consist of an annual bonus opportunity and their annual awards of Operating PSUs and RSUs. Advanced our cloud
To achieve any level of payout under the FY22 TSR PSU awards, VMware must achieve TSR of at least 50% from the base price. Performance below 50% appreciation will result in zero payout under the FY22 TSR PSUs. Full funding of the TSR PSUs requires a TSR of at least 300% from the base price. The value of the FY22 TSR PSU awards was equal to $12 million for Mr. Raghuram and SaaS strategy to address our customers’ evolving IT requirements. In FY19, we continued to expand and increase the capabilities of our cloud and SaaS-based offerings that$10 million for Mr. Dhawan. The awards are designed to further our long-term strategy to broaden offeringsprovide substantial incentive value that allow organizations to manage IT resources across private clouds and complex multi-cloud, multi-device environments. We announced the expansion of VMware Cloud Servicescan only be realized if VMware’s stockholders achieve meaningful returns on AWS, a product of our strategic alliance with Amazon Web Services, across multiple regions globally, including the U.S., Europe and Asia-Pacific. We also announced a major partnership expansion with IBM, including a new IBM Services offering to help migrate and extend mission-critical VMware workloads to the IBM Cloud. We continued to grow our VMware Cloud Provider Program business. Overall, revenue from our Hybrid Cloud Computing and SaaS-based offerings experienced healthy growth and accounted for approximately 10% of our overall revenues in FY19. Experienced growth across our portfolio, including in our strategic growth areas. Overall, we experienced growth across our portfolio, including in strategic growth areas such as VMware NSX, our network virtualization solution (including VMware NSX SD-WAN by VeloCloud); VMware vSAN, our enterprise-grade virtual storage offering, which is also built into our hyper-converged infrastructure solutions, such as VxRAIL; and our end user computing solutions led by VMware Workspace ONE, our virtual workspace platform. Customers continued to demonstrate interest and investtheir investment in VMware products as the foundation for their digital platforms, as demonstrated by our 18% year-over-year growth in license revenue.
over a long-term time frame.
Returned earnings and capital to investors. During FY19, we declared and paid a special cash dividend of $26.81 per share that returned $11 billion to our stockholders. Of that amount, 62.04% was treated as a taxable dividend and 37.96% was treated as a return on capital to stockholders to the extent of their basis in VMware common stock, and then as capital gain.
Alignment of Corporate Performance and Incentive Compensation During FY19
During FY19, our NEOs were eligible to participate in an annual cash-based incentive bonus plan and in PSU plans. In the case of the PSU plans, FY19 was an annual performance period in four overlapping, multi-year PSU plans:
our FY16 Operating PSU Plan, under which shares may be earned based on performance during FY16, FY18 and FY19;
our FY18 Operating PSU Plan, under which shares may be earned based on performance during FY18, FY19 and FY20;
our FY18 HC PSU Plan, under which shares may be earned based on performance during FY18, FY19 and FY20; and
our FY19 Operating PSU Plan, under which shares may be earned based on performance during FY19, FY20 and FY21.
Each of the above PSU plans includes performance tranches for individual fiscal years and a multi-year performance goal measured over the duration of the plan. For more information, see “—Section 6: Long-Term Incentives.”
Taking into consideration our financial, strategic, operational and stock price performance, we believe we demonstrated alignment in pay-for-performance during FY19 as described below.
| | | | Plan | Achievement | Impact on Payout Funding | Executive
Annual Incentive
Bonus Plan
| •
102.5% of target revenue•
Exceeded non-GAAP operating margin target by 0.8%•
106% of target license and hybrid cloud and SaaS revenue | •
NEO payout from financial component of bonus plan was 130.0% of target, resulting from over-achievement in each component•
NEO payouts from the Individual performance objectives (“MBO”) component of bonus plan ranged from 115% to 150% of target based on achievements in expanding the Company’s portfolio of products, solutions and services and enhancing strategic partnerships | FY16, FY18 and FY19 Operating PSU Plans
| •
FY19 tranche applicable to FY16, FY18 and FY19 Operating PSU Plans achieved 102.0% of target adjusted revenue and 0.8% improvement in non-GAAP operating margin•
Multi-year non-GAAP operating income growth modifier applicable to FY16 PSU Plan: 10.7% average annual growth compared to 5.0% target | •
FY19 tranche: 142.8% of target due to overachievement in adjusted revenue and non-GAAP operating margin•
Multi-year revenue growth modifier applicable to FY16 PSU Plan: 1.25x multiplier (maximum) on PSUs otherwise subject to vest based on performance in FY16, FY18 and FY19 tranches (157.2%, 187.1% and 142.8% of target, respectively); shares paid out represented 200% of target PSUs (maximum) issued at beginning of performance period, reflecting above-target performance in all three tranches and in multi-year goal | FY18 HC
PSU Plan
| •
FY19 tranche applicable to FY19 HC PSU Plan: Achieved 37.0% growth compared to 26.0% target in year-over-year growth in hybrid cloud and SaaS revenue | •
FY19 tranche: 100% of target; payout capped at target, no increase for above-target performance |
In addition to the above-referenced PSU plans, FY19 was included in the performance period covered by the special PSU plan designed for Mr. Carli during FY18 (“FY18 Sales PSU Plan”). The FY18 Sales PSU Plan is based on sales performance over two-and-a-half years, commencing with the second half of FY18 and running through the end of FY20. The FY18 Sales PSU Plan does not have separate annual performance tranches and is described further in “—Performance Stock Units—FY18 Sales PSU Plan” below.
NEOs
Our NEOs for FY19 set forth in this proxy statement are: | | | Patrick Gelsinger | CEO | Zane Rowe | CFO and Executive Vice President | Maurizio Carli | Executive Vice President, Worldwide Sales and Services | Sanjay Poonen | COO, Customer Operations | Rangarajan (Raghu) Raghuram | COO, Products and Cloud Services |
Executive Compensation Governance
| | | | | | | Objectives | | Design Considerations | | | | Incentivize CEO and President to create significant value for stockholders over the next five years
| | •Opportunity tied directly to stock price appreciation and TSR performance relative to peers •Challenging goals tied to significant returns for stockholders, with maximum funding at 300% TSR •Thresholds below which no payout occurs (50% appreciation in TSR threshold for 12.5% payout)
| Balance ongoing operating performance with incentive to generate stockholder returns over longer-term
| | •Incremental to standard executive compensation program that is focused on driving year-over-year operating performance •Minimize risk of short-term actions to raise stock price by requiring sustained stock price performance
| Long-term Performance and Service Required
| | •5-year performance period •Up to 50% of funded PSUs is eligible to vest on third anniversary •Up to 75% of funded PSUs is eligible to vest on fourth anniversary •Up to 100% of funded PSUs is eligible to vest on fifth anniversary
|
To ensure that both Mr. Raghuram and Mr. Dhawan only derive value from the FY22 TSR PSU awards if significant sustainable shareholder value is created, the Compensation Committee incorporated substantial governance safeguards, described in the table below: | | | | | | | Corporate Governance Safeguards for FY22 TSR PSU Plan | | Substantial TSR performance required | •300% increase above base price to achieve 100% of PSUs (base price is 15-day trailing volume-weighted average stock price (“VWAP”) of our Common Stock on June 1, 2021) | | Sustained TSR performance required | •Measurement based on 90-day trailing VWAP | | Relative TSR Analysis | •Significant penalty of reduced payout if sustained relative TSR is below 50%ile compared to TSR of companies in S&P 500 IT Index •If relative TSR is between 50th %ile and 25th %ile, penalty scales linearly from 0% to 50% of funded shares •None of funded shares vest if relative TSR is below 25th %ile | | Long-term vesting | •Up to 50% of PSUs is eligible to vest 3 years following the start of the performance period •Up to 75% is eligible to vest 4 years following the start of the performance period •Up to 100% is eligible to vest 5 years following the start of the performance period | | Additional post-vest holding period | •50% of PSUs eligible to vest on the 3rd and 4th anniversaries of the start of the performance period must be held until the completion of the performance period on the 5th anniversary | | Not subject to acceleration | •Excluded from acceleration under Executive Severance Plan •Unvested PSUs are forfeited upon termination other than due to death or disability or following a change in control |
Any dividends paid by VMware or any company in the Index during the performance period will be included in the calculation of the respective 90-day trailing VWAPs. Accordingly, the special dividend of $27.40 per share of Common Stock issued by VMware on November 1, 2021 in connection with the Spin-Off, presuming reinvestment of dividends on the ex-dividend date, will be included when calculating achievement of VMware’s TSR appreciation and relative TSR performance milestones.
Leadership Transition—Additional Equity Awards In connection with our leadership transition, the Compensation Committee granted additional equity awards as follows: •Upon their promotions to CEO and President, respectively, the Compensation Committee awarded top-up FY22 Operating PSUs and FY22 RSUs to Mr. Raghuram and also granted FY22 Operating PSUs and RSUs to Mr. Dhawan to reflect competitive pay levels associated with their new roles. •In addition, the Compensation Committee awarded additional FY22 Operating PSUs to Mr. Rowe, and awarded retention RSUs to Messrs. Rowe and Brulard to promote their retention and ensure alignment of the reconstituted leadership team. Post-Termination Forfeitures and Payout Obligations to Former Executive Officers •Upon Mr. Gelsinger’s resignation, he did not qualify to receive severance payments and benefits under our Executive Severance Plan because his departure was voluntary. •Mr. Gelsinger received no further base salary, and all unvested equity awards were forfeited effective as of his termination date with no shares issued. •Mr. Gelsinger’s participation in the FY21 Executive Bonus Program (the “Bonus Program”) was also terminated without a bonus being paid, and he was not eligible for any compensation under our FY22 performance-based compensation plans.
The table below describes the amounts forfeited by Mr. Gelsinger in connection with his resignation.
| | | | | | | | | | Awards / Incentives | Forfeited Award Opportunity | Value Forfeited Upon Termination(1) | | FY20 TSR PSU | 135,851 PSUs | $0 (below funding threshold) | | FY19 Operating PSUs | 73,125 PSUs at target | $10,612,631 | | FY20 Operating PSUs | 41,339 PSUs at target | $5,999,529 | | FY21 Operating PSUs | 83,295 PSUs at target | $12,088,603 | | FY18 RSUs | 7,409 RSUs | $1,075,268 | | FY19 RSUs | 27,423 RSUs | $3,979,900 | | FY20 RSUs | 25,838 RSUs | $3,749,869 | | FY21 RSUs | 34,725 RSUs | $5,039,639 | | FY21 Cash Bonus Target | Entire opportunity | $1,530,048 | | Sum of Above | | $44,075,487 |
____________________ (1) Value reflects number of PSUs and RSUs forfeited multiplied by closing price of our Common Stock on Mr. Gelsinger’s February 12, 2021 termination date ($145.13).
In connection with the leadership transition, VMware materially and adversely altered Mr. Poonen’s role and responsibilities and did not provide Mr. Poonen with a comparable opportunity. As a result, in May 2021 Mr. Poonen resigned pursuant to the “good reason” provision of our Executive Severance Plan (the “Severance Plan”) and, following a transition period, his last day of employment with VMware was August 6, 2021. Mr. Poonen’s termination qualified as an “Involuntary Termination” pursuant to the Severance Plan. The table below enumerates the severance payments and benefits Mr. Poonen received conditioned on the execution of our standard release of claims per the Severance Plan, as well as awards forfeited, in connection with his employment termination as follows:
| | | | | | | | | | | | | Component | Severance Provision Per Severance Plan | Severance Amount Obligated to Mr. Poonen | Amounts and Awards Forfeited by Mr. Poonen in Connection with Termination | | Salary | •Amount equal to annual salary rate | $700,000 | n/a | | Bonus Target | •Amount equal to annual bonus target | $700,000 | n/a | RSUs(1) | •Acceleration of RSUs scheduled to vest within one year anniversary of termination date | Accelerated
31,187 RSUs ($4.5M) | Canceled
47,589 RSUs ($6.9M) | PSUs(1) | •Acceleration of all tranches of PSUs for which performance was completed and certified at level of actual performance •Pro-rata acceleration of PSUs whose tranche is scheduled to vest within one year following termination date at target | Accelerated
59,585 PSUs ($8.7M) | Canceled
83,152 PSUs ($12.1M) | | Benefits | •Lump sum in lieu of COBRA continuation | $44,717 | n/a |
____________________ (1) Value reflects number of PSUs and RSUs multiplied by the closing price of the Common Stock on September 7, 2021 ($145.63), the date VMware paid Mr. Poonen’s severance following his August 6, 2021 termination date. Key Components of Executive Compensation The objectives of our executive compensation program are to: •motivate our executives to achieve our strategic, operational and financial goals; •reward superior performance; •attract and retain exceptional executives; and •reward behaviors that result in long-term increased stockholder value. Our executive compensation program emphasizes achievement of Company financial, strategic and operational performance designed for alignment with stockholder interests. As described in the following graphic, the structure of our standard executive compensation program primarily takes the form of equity- and performance-based compensation.
Executive Compensation Governance | | | | | | | | | | | | | | | | What We Do | | | What We Do Not Do | | ü | 94%Significant majority of CEO’s target direct compensation is in the form of incentive-based compensation, with 84% tied to stock price performance | | ü☒ | No guaranteed bonuses | | ü | At least half of the NEO target cash compensation opportunity is in the form of cash incentive bonuses that are funded on the basis of quantitative financial results | | ü☒ | No excessive perquisites or tax gross-ups | | ü | Performance stock units (“PSUs”) constitute at least 50% of total target value of long-term incentive compensation equity mix for the CEO, President and CFO. In FY19, PSUs constituted 50% of total target value of long-term incentive compensation equity mix for all NEOs
CFO | | ü☒ | No employment agreements with executives other than customary expatriot expatriate
and localization arrangements
| | ü | PSU Plansplans typically include a three-year or longer performance period | | ü☒ | No single-trigger change-in-control provisions
| | ü | Below-target performance in incentive plans results in disproportionately lower payouts | | ü
☒ | No hedging transactions allowed | | ü | StockMaintain stock ownership guidelines for our C-level NEOsCEO, CFO and President in order to further promote the alignment of executive officer interests with those of our stockholders | | | | | ü | Independent compensation consultant is engaged by our CCGCompensation Committee to advise on executive compensation | | | | | ü | Severance planPlan establishes consistent framework for benefits in case of separation from service of NEOs | | | | | ü | Clawback provisions enable recovery of performance bonuses and gains on equity awards | | | |
Advisory Vote on NEO Compensation We conducted our annual non-binding, advisory Say-on-Pay vote at our 20182021 Annual Meeting held on July 19, 2018.23, 2021. Our stockholders demonstrated strong support for our executive compensation program, with over 99% of the total votes cast in support of our executive compensation program. In light of this strong support of our executive compensation practices and plans, we have maintained our existing compensation philosophy, which is focused on delivering compensation that rewards performance and helps to achieve the objectives of our executive compensation program described above, including attracting and retaining exceptional executives.
Additionally, in FY22 VMware strengthened its stockholder engagement program focused on, among other things, executive compensation matters. For more information regarding stockholder engagement, see “Corporate Governance—Stockholder Engagement.”
Section 2: CEO Pay-for-Performance Alignment CEO Pay-for-Performance Alignment—“Granted” vs. “Realizable” Pay
The CCG Committee takes seriously its responsibility to maintain appropriate pay-for-performance alignment with emphasis on long-term shareholder value. Our compensation program is designed to base CEO pay on the Company’s operational and financial performance while maintaining relative alignment between the CEO’s realizable pay and stockholder returns. During the period from the end of FY15 through FY19, our stock price increased in value by 213%, when taking into account the value of our special cash dividend paid in FY19, while the current realizable value of the compensation awarded to our CEO over the same period increased by 148% from its value when granted, due to year-over-year stock price increases during the period from FY16 through FY19 (as measured on the last day of each fiscal year), and above-target performance achievement in the FY16, FY18 and FY19 executive bonus plans and the FY16, FY18 and FY19 PSU performance periods in the PSU plans.
Summary of Relationship Between CEO Pay and Company Stock Price(1)
Note: Stock prices reflect last trading day in applicable fiscal year.
| | | | | Value of Granted Pay(2) vs. Value of Realizable Pay (FY16-FY19)(3)(4)
| | Value of CEO Realizable Pay from FY16 through FY19 increased 148% from value when granted due to stock price increase in FY16 through FY19 and above-target performance on the FY16, FY18 and FY19 performance periods in the PSU plans.
At the same time, the Company’s TSR has been 213% from the end of FY15 through FY19.
| Granted Pay ($000) | $48,645 | Realizable Pay ($000) | $120,653 | Delta in Pay - Realizable vs. Granted | 148% | | | Three-Year Stock Price (Through FY19-end) | December 31, 2015 Closing Price of VMware Class A Stock | $56.57 | February 1, 2019 Closing Price of VMware Class A Stock | $150.51 | Amount of Special Cash Dividend in December 2018 | $26.81 | Delta in Stock Price | 213% |
____________________ (1) Value of “Granted Pay” reflects compensation awarded and granted to our CEO during FY16, FY18 and FY19.
(2) The value of Granted Pay is calculated as the sum of Salary, Bonus and Stock Awards reported in the “Summary Compensation Table” of this proxy statement for each applicable year (excluding PSU awards that were awarded prior to FY16), as well as the target opportunity for Non-Equity Incentive Plan Compensation reported for each year in the “Grants of Plan-Based Awards” table of the applicable year’s proxy statement. No stock options were granted during the period.
(3) The value of “Realizable Pay” reflects the value of Salary and Bonus amounts delivered during FY16, FY18 and FY19, the earned value of non-equity incentive awards during FY16, FY18 and FY19 and the value of equity awards made during the period based on their value at the end of FY19.
(4) The Realizable Pay is calculated as the sum of Salary, Bonus and Non-Equity Incentive Compensation reported for each year in the “Summary Compensation Table” of this proxy statement and the amounts of stock options, RSUs and PSUs granted in FY16, FY18 and FY19 (excluding PSU awards that were awarded prior to FY16) valued as of the closing stock price of VMware’s Class A Stock as of February 1, 2019. No stock options were granted during the periods presented. The value of PSUs is further adjusted to reflect the effect of the performance multiplier on shares subject to vest for completed tranches as follows:
| | | | | | PSU Plan | FY16 Tranche | FY18 Tranche | FY19 Tranche | 3-Year Performance Modifier | FY16 Operating PSU Plan | 157.2% of target | 187.1% of target | 142.8% of target | 1.25x | FY18 Operating PSU Plan | - | 187.1% of target | 142.8% of target | Modeled at 1.00x (Not determined until after FY20) | FY18 HC PSU Plan | - | 100% of Target | 100% of Target | Modeled at 1.00x (Not determined until after FY20) | FY19 Operating PSU Plan | - | - | 142.8% of target | Modeled at 1.00x (Not determined until after FY21) |
Future tranches of the FY18 and FY19 Operating PSU Plans and FY18 HC PSU Plan are not included in this calculation, because those future tranches will not be assigned an accounting grant date fair value until FY20 in the case of the FY18 Operating and FY18 HC PSU Plans, and each of FY20 and FY21 in the case of the FY19 Operating PSU Plan when, in each case, performance goals for each tranche are approved by the CCG Committee. The value of the FY18 and FY19 tranches of the FY18 Operating PSU Plan, the FY18 HC PSU Plan and the FY19 Operating PSU Plan included in the realizable pay calculations assume achievement at target in the three-year performance modifiers for each plan. The actual values will be determined upon completion of each respective three-year performance period, as described below in “—Long-Term Incentives.”
The CCG Committee takes seriously its responsibility to align the MBO payout under the Cash Bonus Program with the Company’s overall financial results. As illustrated in the table below, the CCG has utilized its negative discretion over the individual performance component of the bonus to calibrate payouts to its assessment of CEO performance.
FY19 CEO MBO Bonus Payout as a Percentage of Target and Calculated Payout
| | | | | | | | | | | Calculated Funding Result Per Corporate Financial Metrics | | Calculated Funding Result For MBO Component @ 1.25x | | Actual MBO Payout Reflecting Negative Discretion from Calculated Funding Result | | FY19 | | 130.0% | | 162.5% | | 150.0% | | FY18 | | 130.1% | | 162.6% | | 130.0% | | FY16 | | 110.5% in H1; 120% in H2 | | 138.1% in H1; 154.6% in H2 | | 120% in H1; 125% in H2 |
Section 3: Compensation Components
The compensation packages of our NEOs include a mix of cashcash- and equity-based compensation. The major compensation components are as follows: | | | | | | | Base salary | Primary element of fixed compensation | Annual cash bonus | Based on annual financial, strategic and operational performance measured against specific pre-established goals | Long-term performance-based equity incentive compensation | PSUs that are tied to stock price appreciation and long-term performance objectives important to our companyCompany | Long-term equity incentive compensation | RSUs that are tied to stock price appreciation and enhance retention and long-term focus |
Pay Mix When designing the executive compensation program, the CCGCompensation Committee gives significant weight to cash bonuses and equity incentives, which reflects the CCGCompensation Committee’s belief that a largepredominant portion of executive compensation should be performance-based. This compensation is performance-based, because payment and vesting are tied to achievement of individual orand corporate performance metrics. In addition, withWith respect to the equity awards, the value ultimately realized by the recipient fluctuates withis determined by the price of our Class ACommon Stock, thereby explicitlydirectly linking executivean executive’s compensation opportunity with shareholderstockholder value. The CCGCompensation Committee believes that equity incentives are particularly significant because they drive the achievement of VMware’s long-term operational and strategic goals and align the executives’ interests with those of our stockholders, while the cash bonusesincentives are utilized to drive the achievement of shorter-term performance goals. The CCGCompensation Committee reviews NEO compensation packages on an annual cycle, taking into account peer group data, Company and individual performance,performances, unvested equity holdings and internal pay equity. In its review, the CCGCompensation Committee may adjust the pay mix and typically considers apportioning annual equity awards between PSUs and RSUs.
____________________ Note: The charts above reflect the pay mix applicable to our CEO and to the other NEOs, on average.average, effective with the appointment of our new CEO and President. For purposes of determining the percentages shown above for NEO annual compensation opportunities: (1) annual base salary rate reflects the pro-rated amount, where applicable, during FY19;rates approved in connection with the appointment of our new CEO and President as discussed in “Section 3: Base Salary” of this CD&A; (2) cash bonus target opportunity reflects amounts indicatedthe target opportunity expressed as a percentage of salary effective in connection with the appointment of our new CEO and President as discussed in “—Section 5:4: Annual Performance-Based Bonus”Bonus” of this CD&A; and (3) the equity component reflectscomponents reflect the “Selected Equity Value” indicatedas discussed in “—Section 6:5: Long-Term Incentives” of this CD&A.&A, including one-time, retention and promotion awards made during FY22. Section 4:3: Base Salary Base salary serves as the primary form of fixed compensation for our NEOs. Base salary can also impact other compensation and benefit opportunities, including annual bonuses, as such opportunities are expressed as a percentage of base salary. In the first quarter of FY19, the CCG Committee conducted its annual review of executive compensation. During the annual review, the CCG Committee determined to make no adjustments to the base salaries of any NEO except for Mr. Carli, who changed the location of his employment to the U.S. From the start of FY19 until May 1, 2018, Mr. Carli was based in the Company’s headquarters in Palo Alto, California on an expatriate assignment from his home location in the United Kingdom. Effectiveconnection with the changeappointment of Mr. Carli’s home location toMessrs. Raghuram and Dhawan as our CEO and President, respectively, the U.S. on May 1, 2018,Compensation Committee increased their annual salaries, taking into account the CCGcompensation level of our former CEO and market data from our Peer Group. The Compensation Committee established Mr. Carli’salso increased the annual salary rate at $800,000for Messrs. Rowe and Brulard to better align their salary rates with the scope of their respective duties. In the case of Ms. Olli, the Compensation Committee considered market data and the promotional salary increase she received in considerationthe fourth quarter of Mr. Carli’s priorFY21 when determining to keep her salary rate and market data forconstant during FY22. In addition, the Compensation Committee temporarily raised Mr. Carli’s role.Rowe’s base pay by $100,000 per month during the period he served as Interim CEO. | | | | | | | Annual Salary Rate in Effect at Start of FY19 | Annual Salary Rate in Effect at End of FY19 | % Change | | Patrick Gelsinger | $1,000,000 | $1,000,000 | - | | Zane Rowe | $750,000 | $750,000 | - | | Maurizio Carli | £560,000 | $800,000 | n/a(1) | | Sanjay Poonen | $700,000 | $700,000 | - | | Rangarajan (Raghu) Raghuram | $700,000 | $700,000 | - |
| | | | | | | | | | Name | Annual Salary Rate in Effect at
Start of FY22 | Annual Salary Rate In Effect at
End of FY22 | | Raghu Raghuram | $700,000 | $1,000,000 | Zane Rowe(1) | $750,000 | $850,000 | | Sumit Dhawan | $500,000 | $850,000 | | Jean-Pierre Brulard | $700,000 | $800,000 | | Amy Fliegelman Olli | $600,000 | $600,000 | Patrick Gelsinger(2) | $1,000,000 | Not applicable | Sanjay Poonen(2) | $700,000 | Not applicable |
____________________ (1) Mr. Carli’sRowe also received an incremental $100,000 of salary rate change reflects market data for his roleper month of service as Interim CEO, from February 13, 2021 until June 1,
2021, resulting in a total of $350,000 of incremental compensation. (2) Messrs. Gelsinger and the rounded value in U.S. dollars basedPoonen terminated employment on the applicable exchange rate from English pounds to U.S. dollars when his employment was localized to the U.S.February 12, 2021 and August 6, 2021, respectively.
Section 5:4: Annual Performance-Based Bonus Each of our NEOs is eligible to earn cash bonuses tied to our financial results and individual performance under our annual executive bonus program (“Executive Bonus Program”).Program. We believe it is important to provide rewards for specific results and behaviors that support our overall long-term business strategy. Incentive PlanFY22 Executive Bonus Program Design
In FY19,FY22, the CCGCompensation Committee maintained the plan designgeneral structure of the FY18 ExecutiveFY21 Bonus Program. Program, with bonuses paid based on achievement against corporate financial performance metrics and individual goals for a performance period that spanned the full fiscal year, while continuing to retain negative discretion to reduce actual payouts below the amounts calculated under the plan formulas as deemed appropriate. In FY21, the Compensation Committee adjusted the Bonus Program funding scale for threshold, target and maximum payouts due to uncertainty in the business climate in the early days of the
COVID-19 pandemic. In FY22, the Compensation Committee reestablished the Bonus Program funding scale of threshold, target and maximum pay for performance that had been in effect prior to FY21. As illustrated below, the planFY22 Bonus Program design involved the following parameters: | | | | | | | Plan funding | • Entirely funded on the basis of quantitative, algorithmic measurement of financial performance which yields a plan funding percentage (“plan funding level”)• The payout algorithm provides for proportionately greater funding as performance achievement exceeds target goals, as well as disproportionategreater reductions in funding as performance achievement drops below target goals, with zero funding below threshold performance levels
| | Plan funding metrics | • 60%100% of the plan funding level is determined based upon the achievement of GAAP revenue and non-GAAP operating margin. The CCGCompensation Committee placed primary focus on achievement of widely-recognizedwidely recognized metrics that are tracked by our shareholdersstockholders and analysts and that we believe are indicators of the performance and health of our companyCompany from growth and profitability perspectives•
40% of the plan funding level is determined based upon achievement of license and hybrid cloud and SaaS revenue. License revenue is considered an indicator of customer willingness to adopt and expand their use of our products, while hybrid cloud and SaaS revenue is considered a measure of progress in our plans to provide more cloud and SaaS-based offerings
| | Thresholds must be achieved for any funding | • For any bonus amount to be paid out, a threshold level of achievement of each of the pre-established corporate financial objectives was required• No funding unless 90%threshold performance is achieved in revenue and non-GAAP operating margin. In FY22, the Compensation Committee returned to its pre-COVID-19 structure and set threshold performance at 95% of revenue and adjusted license revenue targets and ~95% of non-GAAP operating margin targets were achievedinstead of the reduced 90% threshold used in FY21 due to economic uncertainty resulting from COVID-19• At threshold performance, the plan funding level would equal only 26%25% of target | Cap on funding | •
Irrespective of actual performance, funding is capped at 240% of target, reflecting the maximum funding applicable to each component of our incentive plan | CCG Committee can exercise negative discretion on funding and payouts | •
The CCG Committee has the authority to exercise negative discretion on actual plan funding, irrespective of funding calculated on the basis of our formulaic approach
| | Payouts | • 50% of the bonus opportunity is payable to the executive formulaically at the plan funding level in order to reinforce the connection between objective financial results and bonus payouts• 50% of the bonus opportunity is funded at 1.25 times the plan funding level and actual payouts to executives are subject to negative discretion based on the Compensation Committee’s assessment of individual performance relative to strategic and operational goals•In FY22, the Compensation Committee set target funding in connection with achieving target performance under revenue and non-GAAP operating margin at 100% instead of the reduced 90% funding used in FY21 due to economic uncertainty resulting from COVID-19
| | Caps on plan funding and payouts | •Plan funding based on achievement of objective financial results is capped •In FY22, the Compensation Committee returned to its pre-COVID-19 structure and set the maximum funding cap at 200% of target instead of the reduced 150% of target used in FY21 due to economic uncertainty resulting from COVID-19. Taking into account the 1.25x maximum multiplier for the MBO portion of the plan, the maximum payout in FY22 under the plan was 225% instead of the 168.75% maximum in FY21
| Compensation Committee can exercise negative discretion on funding and payouts
| •The Compensation Committee has the authority to exercise negative discretion on actual plan funding, irrespective of funding calculated on the basis of our formulaic approach
|
Target Opportunity In FY19,connection with the CCGappointment of Messrs. Raghuram and Dhawan as our CEO and President, respectively, the Compensation Committee determined that bonuses would be paid based on achievement against corporate financial performance metricsincreased annual target bonus opportunities, taking into account the compensation level of our former CEO (with respect to Mr. Raghuram) and individual goals for a performance period that spanned the full fiscal year. The CCG Committee retained negative discretion to reduce actual payouts below the amounts calculated under the plan formulas. The target opportunity for Mr. Gelsinger was increased from 150% to 175% effective May 1, 2018 based on the CCG Committee’s review of market data from our peer group andgroup. The Compensation Committee also increased the annual target bonus opportunity for Mr. Gelsinger’s performance. Rowe to better align his target opportunity with that of Mr. Dhawan. In addition, the Compensation Committee provided an incremental amount of bonus target opportunity equal to 100% of the incremental salary awarded to Mr. Rowe during the period in which he served as Interim CEO in FY22. | | | | | | | Annual Salary Rate During FY19 | Target Bonus (as percentage of base salary) | Bonus Target During FY19 | Patrick Gelsinger(1) | $1,000,000 | 175% | $1,690,247 | | Zane Rowe | $750,000 | 100% | $750,000 | Maurizio Carli(2) | $795,316 | 100% | $795,316 | | Sanjay Poonen | $700,000 | 100% | $700,000 | | Rangarajan (Raghu) Raghuram | $700,000 | 100% | $700,000 |
| | | | | | | | | | Name | Bonus Target Percentage of Salary at Start of FY22 | Bonus Target Percentage of Salary at End of FY22 | | Raghu Raghuram | 100% | 150% | | Zane Rowe | 100% | 125% | | Sumit Dhawan | 100% | 125% | | Jean-Pierre Brulard | 100% | 100% | | Amy Fliegelman Olli | 100% | 100% | Patrick Gelsinger(1) | 175% | Not applicable | Sanjay Poonen(1) | 100% | Not applicable |
____________________ (1) Mr. Gelsinger’sMessrs. Gelsinger and Poonen terminated employment on February 12, 2021 and August 6, 2021, respectively, and were not eligible to receive FY22 bonus payouts. The target opportunity under the FY22 Bonus Program reflected the actual salary earned in FY22 for each executive multiplied by the executive’s prorated target bonus opportunity reflects(expressed as a percentage of salary). In the weighted average annualcase of Mr. Rowe, the target opportunity includes $350,000, reflecting the $100,000 per month of salary rate of $1,000,000 andin connection with his service as Interim CEO from February 13, 2021 until June 1, 2021 multiplied by Mr. Rowe’s 100% bonus target of 150%percentage in effect fromduring that period. The table below describes the start of FY19 through April 30, 2018target opportunity for each NEO under the FY22 Bonus Program. | | | | | | | | | | | | | Name | Calculation of Annual Salary Prorated for Target Bonus Calculation(1) | Target Bonus Prorated for Target Bonus Calculation(1) (as percentage of base salary) | FY22 Bonus Target Opportunity | | Raghu Raghuram | $899,451 | 100% (Jan 29, 2021 until June 1, 2021)
150% (June 1, 2021 through FY-end) | $1,231,868 | | Zane Rowe | $1,166,484 | 100% (Jan 29, 2021 until June 1, 2021)
125% (June 1, 2021 through FY-end) | $1,307,761 | | Sumit Dhawan | $167,582 for Exec Officer Bonus Plan
$565,110 for Exec Officer Bonus Plan | 100% for Company bonus plan for non-executive employees (Jan 29, 2021 until June 1, 2021)
125% for Executive Bonus Program (June 1, 2021 through FY-end) | $167,582 for Company Bonus Plan
$706,387 for Exec Officer Bonus Plan | | Jean-Pierre Brulard | $749,725 | 100% | $749,725 | | Amy Fliegelman Olli | $600,000 | 100% | $600,000 | Patrick Gelsinger(3) | Not applicable | Not applicable | Not applicable | Sanjay Poonen(3) | Not applicable | Not applicable | Not applicable |
____________________(1) Reflects actual salary and annual salary rate of $1,000,000 andprorated bonus target of 175% in effect from May 1, 2018 through the end of FY19.opportunity for Messrs. Raghuram, Dhawan, Rowe and Brulard. (2) Mr. Carli’s target bonus opportunity reflects the weighted average annual salary rateMessrs. Gelsinger and Poonen terminated employment on February 12, 2021 and August 6, 2021, respectively.
Corporate Financial Metrics The following table shows the revenue, non-GAAP operating margin and license and hybrid cloud and SaaS revenue targets for FY19.funding scale in the FY22 Bonus Program. The non-GAAP operating margin target utilizes the non-GAAP operating margin reported in our quarterly earnings releases, which is calculated by excluding stock-based compensation, employer payroll taxes on employee stock transactions, amortization of intangible assets, items related to acquisitions, divestitures and other corporate transactions restructuringsuch as the Spin-Off, realignment charges, certain litigation and other contingencies and unusual non-recurring charges, from our operating margin calculated in accordance with GAAP. For purposes of measuring performance under the Executive Bonus Program, we adjust our reported revenue and non-GAAP operating margin results to remove the impact of large acquisitions. Accordingly, the actual performance metrics calculated for purposes of the Executive Bonus Program listed in the table below differ from VMware’s reported financial results for the periods shown.
| | | | FY19 Bonus Plan (Revenue in $M) | | FY22 Bonus Program (Revenue in $M) | | Metric | Threshold | Target | Max | Actual(1) | Metric | Threshold
(50% Funding) | Target
(100% Funding) | Maximum
(200% Funding) | Actual Performance(1) | Funding % of Target | Revenue (0%-200% funding) | $7,852.5 | $8,725.0 | $9,597.5 | $8,938.9 | Revenue (0%-200% funding) | td2,065.0 | td2,700.0 | >=td3,970.0 | td2,850.6 | 128.7% | Non-GAAP Operating Margin (0%-200% funding) | 31.7% | 33.3% | 38.9% | 34.1% | Non-GAAP Operating Margin (0%-200% funding) | 26.6% | 28.0% | >=32.0% | 30.2% | License and Hybrid Cloud and SaaS Revenue (0%-240% funding) | $3,351.0 | $3,723.3 | $4,281.8 | $3,950.6 | |
____________________ (1) Reported results as adjusted to remove the impact of large acquisitions.
The performance targets and thresholds forgoals in the ExecutiveFY22 Bonus Program were established based uponset higher than the Company’sperformance goals in the FY21 Bonus Program with respect to threshold, target and maximum revenue and threshold operating planmargin. The Compensation Committee selected goals reflecting expectations for revenue growth from the prior year and the priority we placed on investingcontinuing investment in our strategic initiativesbusiness. The FY22 non-GAAP operating margin target was below our actual FY21 non-GAAP operating margin achievement because the FY21 achievement was inflated due to unplanned underspend as a result of the COVID-19 pandemic. In addition, the Committee determined that the goal-setting for the FY22 non-GAAP operating margin target was appropriate given that the targets were still intended to be challenging and provide a similar level of rigor as those established for past years in order to achieve revenue, license and hybrid cloud and SaaS revenue growth. Additionally, the CCG Committee determined that, regardless of non-GAAP operating margin performance, payouts in excess of 100% of the target bonus amounts would be paid only if revenue exceeded 98% of the performance target, and payouts for license and hybrid cloud and SaaS revenue achievement could exceed 100% only if the target non-GAAP operating margin goal was achieved.provide a consistent incentive compensation opportunity. | | | | | | | | | | | | | | | | | | | | | | | FY21 Bonus Program | | FY22 Bonus Program | | | Revenue $M | Non-GAAP Operating Margin | | Revenue $M | Non-GAAP Operating Margin | | Maximum | | $12,518.0 | 32.0% | | $13,970.0 | 32.0% | | Target | | $11,380.0 | 28.0% | | $12,700.0 | 28.0% | | Threshold | | $10,242.0 | 25.2% | | $12,065.0 | 26.6% | | Actual in Plan Funding Calculation | | $11,766.6 | 31.8% | | $12,850.6 | 30.2% |
Performance in the corporate financial metrics for FY19FY22 yielded funding equal to 130.0%128.7% of target. target, and the Compensation Committee exercised negative discretion in approving payouts at 110.0% of target for the financial component of the Bonus Program. The above-target percentages were due in part to continued underspend in return to office, travel and expenses and marketing events as a consequence of COVID-19.
| | | | | | | FY19 Executive Annual Incentive Bonus Payout of Financial Component | | | Financial Component Target Amount (50% of Total) | Bonus Calculated Per Formula @ 130.0% | Approved Bonus @ 130.0% | | Patrick Gelsinger | $845,124 | $1,098,661 | $1,098,661 | | Zane Rowe | $375,000 | $487,500 | $487,500 | | Maurizio Carli | $397,658 | $516,955 | $516,955 | | Sanjay Poonen | $350,000 | $455,000 | $455,000 | | Rangarajan (Raghu) Raghuram | $350,000 | $455,000 | $455,000 |
| | | | | | | | | | | | | | | | | FY22 Bonus Program Payout of Financial Component | | Name | Financial Component Target Amount
(50% of Total) | Bonus Calculated
Per Formula
@ 128.7% | Approved Financial Component of Bonus @ 110.0% | Amount Paid Below Funded Amount | | Raghu Raghuram | $615,934 | $792,997 | $677,527 | $(115,470) | | Zane Rowe | $653,880 | $841,852 | $719,269 | $(122,583) | Sumit Dhawan(1) | $353,194 | $454,561 | $388,513 | $(66,048) | | Jean-Pierre Brulard | $374,863 | $482,624 | $412,349 | $(70,275) | | Amy Fliegelman Olli | $300,000 | $386,241 | $330,000 | $(56,241) | Patrick Gelsinger(2) | Not applicable | Not applicable | Not applicable | Not applicable | Sanjay Poonen(2) | Not applicable | Not applicable | Not applicable | Not applicable |
____________________
(1) Mr. Dhawan’s executive bonus program payout shown in the above table was prorated for the period of his service as President during FY22 (effective June 1, 2021). In addition to the amount shown above, he also received a pro-rata bonus of $101,387 under the financial component of the Company’s bonus plan for non-executive employees for the period prior to his appointment to executive officer. The Company bonus plan funding was based on annual financial metrics consistent with the FY22 Bonus Program and per plan terms and conditions was paid formulaically without discretion.
(2) Messrs. Gelsinger and Poonen did not receive a bonus payout under the Bonus Program because they terminated employment on February 12, 2021 and August 6, 2021, respectively.
Individual Performance Assessments IndividualFY22 individual performance goals, or MBOs, for the NEOs were established taking into account the importance of cross-functional collaboration and accountability to our priority business objectives. The Compensation Committee assigned substantially the same set for FY19.
| | | Patrick Gelsinger | Achievementof performance goals to each of objectives related to:
- FY19 operating plan including plans for products and cloud services
- Product and customer satisfaction
- The Company’s networking business, including NSX and SD-WAN
- Expanding the Company’s cloud and as-a-service technologies
- The Company’s private cloud products and solutions
- Growing the Company’s end-user computing business into a leading digital workspace
platform
- Establishing new bets as future growth accelerators
- Driving product and go-to-market objectives with Dell Technologies
- Executing on capital allocation objectives
- Executing on go-to-market objectives and people- and workforce-related objectives
| Zane Rowe | Achievement of objectives related to:
- FY19 operating plan, guidance and forecasts
- As-a-service financial and business model
- Capital allocation objectives
- People- and workforce-related objectives
| Maurizio Carli | Achievement of objectives related to:
- FY19 operating plan including plans for products and cloud services
- Product and customer satisfaction
- Accelerating cloud and as-a-service go-to-market
- Driving go-to-market objectives with Dell Technologies
- Executing on go-to-market objectives and people-related objectives
| Sanjay Poonen | Achievement of objectives related to:
- FY19 operating plan including plans for products and cloud services
- Product and customer satisfaction
- The Company’s networking business, including deployments
- Expanding the Company’s cloud and as-a-service technologies
- Establishing new bets as future growth accelerators
- Driving go-to-market objectives with Dell Technologies
- Executing on go-to-market objectives and people-related objectives
| Rangarajan (Raghu) Raghuram | Achievement of objectives related to:
- FY19 operating plan including plans for products and cloud services
- Product and customer satisfaction
- The Company’s networking business, including NSX and SD-WAN
- Expanding the Company’s cloud and as-a-service technologies
- The Company’s private cloud products and solutions
- Growing the Company’s end-user computing business into a leading digital workspace
platform
- Establishing new bets as future growth accelerators
- Driving product objectives with Dell Technologies
- Executing on people-related objectives
|
As discussed above, our Executive Bonus Program provided that payouts for individual performance would be funded, subjectNEOs as described below. Consistent with the setting of rigorous Subscription and SaaS revenue goals in the Company’s FY22 Operating PSUs annual tranche detailed in “Section 5: Long-Term Equity Awards,” the FY22 MBOs placed an emphasis on stretch goals relating to the CCG Committee’s potential useCompany’s SaaS transformation and its transition to multi-cloud SaaS, as described below.
Typically, the same ratio as payoutsCompensation Committee determines payout percentages based on the corporate financial metrics, if threshold achievementCEO’s assessment of corporate financial goals sufficient to trigger a minimum payout was reached.individual achievement. There were no formulas or weightings assigned to individual performance objectivesMBOs, and achievement was assessed overall on a holistic basis that also took into account overall individual and company performance. performance while rigorously assessing Company execution on its subscription and SaaS transformation.
| | | | | | | Name | Strategic and Operational Objectives | | Raghu Raghuram | •VMware Cloud progress with Tanzu portfolio, unified cloud infrastructure to deliver industry-leading multi-cloud infrastructure-as-a-service, plans to measure and aggregate workloads •SaaS transition progress in operations and usage, SaaS-first product roadmaps, strategic sales plays for customers and routes to market •Work-from-Anywhere objectives with partner ecosystem, product roadmap and security •On-premises business objectives in networking and security offerings, management offerings established as the multi-cloud SaaS control plane, private cloud and storage industry leadership and leadership in telco and edge computing •Corporate objectives for 2030 ESG goals, research and innovation in advanced technologies •Completing Spin-Off transaction from Dell | | Zane Rowe | •Completing Spin-Off transaction from Dell •Debt raise enabling financial and strategic flexibility to VMware and stockholders, including funding a special dividend •SaaS operations •Corporate objectives for 2030 ESG goals
| | Sumit Dhawan | •Go-to-market objectives in customer experience and success, with sales leading and driving SaaS to customers and routes to market •VMware Cloud objectives with Tanzu portfolio, unified cloud infrastructure to deliver industry-leading multi-cloud infrastructure-as-a-service, plans to measure and aggregate workloads •Work-from-Anywhere objectives with partner ecosystem •On-premises business objectives in networking and security offerings, management offerings established as the multi-cloud SaaS control plane, private cloud and storage industry leadership and strategic partnerships in telco and edge computing
| | Jean-Pierre Brulard | •SaaS transition progress in operations and usage, SaaS-first product roadmaps, strategic sales plays for customers and routes to market •Work-from-Anywhere objectives with partner ecosystem •On-premises business objectives in networking and security offerings, management offerings established as the multi-cloud SaaS control plane, private cloud and storage industry leadership and strategic partnerships in telco and edge computing
| | Amy Fliegelman Olli | •Completing Spin-Off transaction from Dell •Corporate objectives for 2030 ESG goals •Legal objectives enabling VMware to achieve its business priorities, including contracts and contracting process, data security and privacy operations
|
As discussed above, during FY19,our Bonus Program provided that payouts for individual performance would be funded, subject to the Compensation Committee’s potential use of negative discretion, at 1.25 times the same ratio as funding based on the corporate financial goals abovemetrics, provided the threshold levelsfinancial goals were achieved.attained. See “Environmental, Social and Governance” for more detailed information regarding how the Company performed against its ESG objectives. With respect to payouts for individual goals, the CCGCompensation Committee exercised its negative discretion to reduce payouts below the calculated plan funding, in consultation with management, in determining payouts for FY19.FY22.
| | | | | | | | FY19 Executive Annual Incentive Bonus Payout of Individual Component | | | Target Amount (50% of Total Target) | Bonus Calculated Per Formula @ 162.5% | Approved Bonus % of MBO Target | Approved Bonus Value | | Patrick Gelsinger | $845,124 | $1,373,326 | 150% | $1,267,685 | | Zane Rowe | $375,000 | $609,375 | 125% | $468,750 | | Maurizio Carli | $397,658 | $646,194 | 130% | $516,955 | | Sanjay Poonen | $350,000 | $568,750 | 120% | $420,000 | | Rangarajan (Raghu) Raghuram | $350,000 | $568,750 | 115% | $402,500 |
| | | | | | | | | | | | | | | | | FY22 Bonus Program Payout of
Individual Component | | Name | Target Amount
(50% of Total
Target) | Bonus Calculated
Per Formula
@160.9% | Approved Bonus %
of MBO Target | Approved Bonus
Value | | Raghu Raghuram | $615,934 | $991,246 | 85% | $523,544 | | Zane Rowe | $653,880 | $1,052,314 | 100.0% | $653,880 | Sumit Dhawan(1) | $353,194 | $568,408 | 90.0% | $317,874 | | Jean-Pierre Brulard | $374,863 | $603,280 | 90.0% | $337,376 | | Amy Fliegelman Olli | $300,000 | $482,801 | 110.0% | $330,000 | Patrick Gelsinger(2) | Not applicable | Not applicable | Not applicable | Not applicable | Sanjay Poonen(2) | Not applicable | Not applicable | Not applicable | Not applicable |
____________________ (1) Mr. Dhawan’s Bonus Program payout shown in the above table was prorated for the period of his service as President during FY22 (effective June 1, 2021). In addition to the amount shown above, he also received a pro-rata bonus of $75,412 under the individual component of the Company’s bonus plan for non-executive employees for the period prior to his appointment to executive officer. (2) Messrs. Gelsinger and Poonen did not receive a bonus payout under the Bonus Program because they terminated employment on
February 12, 2021 and August 6, 2021, respectively. Negative Discretion in MBO Component of Bonus Program Payout for CEO The Compensation Committee takes seriously its responsibility to align the individual component (or MBO) cash payout under the Bonus Program with the Company’s overall financial results. As illustrated in the table below, and consistent with past practice, the Compensation Committee exercised its negative discretion over the MBO component of the bonus to our CEO (Mr. Gelsinger resigned as CEO prior to the Compensation Committee’s evaluation of his individual performance for FY21, so the application of negative discretion was not applicable to that fiscal year). | | | | | | | | | | | | | | | | FY20 - FY22 CEO MBO Bonus Program Payout as a Percentage of Target and Calculated Payout | | Fiscal Year | Incumbent in CEO Role | Calculated Funding
Result
per Corporate Financial
Metrics | Calculated Funding
Result
for MBO Component
@ 1.25x | Actual MBO Payout
Reflecting Negative
Discretion from
Calculated
Funding Result | | FY22 | Raghu Raghuram | 128.7% | 160.9% | 85% | | FY21 | Patrick Gelsinger(1) | 130.2% | 162.8% | n/a | | FY20 | Patrick Gelsinger | 95.5% | 119.4% | 80.3% |
___________(1) Mr. Gelsinger terminated employment effective February 12, 2021 and forfeited his opportunity under the FY21 Bonus Program.
Total Bonus Payouts (Financial Component + Individual Component) for FY19:FY22: Target vs. Actual The table below details the total bonus payouts including both Financialfinancial and Individualindividual components to each of our NEOs for FY19.FY22.
| | | | | | | FY19 Executive Annual Incentive Bonus Total Payout | | | Total Target (Financial + Individual) | Total Actual (Financial + Individual) | Total Actual as a % of Target | | Patrick Gelsinger | $1,690,247 | $2,366,346 | 140.0% | | Zane Rowe | $750,000 | $956,250 | 127.5% | | Maurizio Carli | $795,316 | $1,033,911 | 130.0% | | Sanjay Poonen | $700,000 | $875,000 | 125.0% | | Rangarajan (Raghu) Raghuram | $700,000 | $857,500 | 122.5% |
| | | | | | | | | | | | | | FY22 Bonus Program Total Payout | | Name | Total Target
(Financial + Individual) | Total Actual
(Financial + Individual) | Total Actual
as a % of Target | | Raghu Raghuram | $1,231,868 | $1,201,071 | 97.5% | | Zane Rowe | $1,307,761 | $1,373,149 | 105.0% | Sumit Dhawan(1) | $706,387 | $706,387 | 100.0% | | Jean-Pierre Brulard | $749,725 | $749,725 | 100.0% | | Amy Fliegelman Olli | $600,000 | $660,000 | 110.0% | Patrick Gelsinger(2) | Not applicable | Not applicable | Not applicable | Sanjay Poonen(2) | Not applicable | Not applicable | Not applicable |
Discretionary____________________
(1) Mr. Dhawan’s Bonus The CCG Committee has Program payout shown in the authorityabove table was prorated for the period of his service as President during FY22 (effective June 1, 2021). In addition to approve discretionary bonuses outsidethe amount shown above, he also received a pro-rata bonus of $176,799 under the Executive Annual Performance-Based Bonus Plan to address circumstances and achievements that were not contemplated at the beginning of the year when the annualCompany’s bonus plan structure was approved. In March 2018,for non-executive employees for the CCG Committee approvedperiod prior to his appointment to executive officer.
(2) Messrs. Gelsinger and Poonen did not receive a one-time discretionary bonus paid to Mr. Raghuram inpayout under the amount of $75,000. The bonus was intended to recognize Mr. Raghuram for his significantBonus Program because they terminated employment on
February 12, 2021 and innovative contributions to align VMware’s business and product objectives to evolving market conditions and emerging technological developments.August 6, 2021, respectively. Section 6:5: Long-Term Incentives
We strongly believe that equity awards are an important part of the executive compensation program as they further align the interests of our NEOs with those of our stockholders. Equity awards are also an important part of the compensation packages that we use to recruit and hire new executive hires. Additionally, we annuallyexecutives. We conduct an annual review of the composition, value and vesting timeline of long-term equity-based incentive awards held by our NEOs, and our CCGCompensation Committee periodically approves refreshannual ongoing awards, which are designed to reward for execution against our long-term business strategy, support alignment with our stockholders, and promote long-term retention of our executive team and meet the objectives of our executive compensation program.team. Target Vehicle Mix During FY19,FY22, our CCGCompensation Committee continued to make performance-based equity awards a substantial portion of the overall value of equity awards granted to our NEOs. Accordingly,As described below under “Equity Awards in FY22,” as part of its April 2021 annual review of executive compensation, the CCGCompensation Committee continuedawarded 50% of the foundationaltarget selected equity award value (as discussed below) to NEOs in FY22 Operating PSUs and 50% of the target selected equity award value in FY22 RSUs, consistent with our historical equity vehicle mix with 50%for NEOs. In setting the FY22 equity vehicle mix of annual50/50 (compared to 67/33 in FY21) the Compensation Committee took into consideration the objective to stabilize retention among the executives during our CEO selection process and the smaller values of the target value tied to FY19 Operating PSUs utilizing revenue, operating margin and profitability metrics similarselected equity award values to the FY16NEOs in FY22. The Compensation Committee awarded Mr. Rowe and FY18Mr. Brulard supplemental RSU awards in recognition of their continuing leadership roles following the departure of our former CEO. Subsequently, in connection with the leadership transition, in May 2021 the Compensation Committee awarded promotional FY22 TSR PSU and additional FY22 Operating PSU plans and 50% of annual target value tiedRSU awards to RSUs. In addition, FY19 was the second year of the three-year performance period for the FY18 HC PSUs, intended as a one-time, performance-based equity award designed to incentivize continuing progress in the Company’s plans to broaden our portfolio of cloudCEO and SaaS-based offerings over a multi-year period, while maintaining alignment with stockholder returns.President and also awarded Mr. Rowe an additional FY22 Operating PSU.
| | | | FY19 Operating PSUs
(50% of annual
target value)
| | FY19 RSUs
(50% of annual
target value)
| –
Three-year performance period–
Vest in the first quarter of FY22 subject to continued employment and achievement of objective, quantitative performance criteria related to core business results | | –
Vest over four-year period subject to continued employment–
Value subject to fluctuation in alignment with VMware’s stock price |
We believe that the FY19FY22 mix of PSUs and RSUs for our NEOs met the primary objectives of our annual NEO equity award grant program by aligning executive compensation with total stockholder return,TSR and focusing executive performance on overall financial metrics that are key to our success whileand promoting long-term retention. Additionally, we believe that the one-time award of FY18 HC PSUs continues to incentivize NEOs to focus on increasing the level of hybrid cloud and SaaS-based offerings in our product mix, objectives that are critical to our long-term success in the multi-cloud, multi-device world while continuing to align executive payouts with stockholder returns. Equity Awards in FY19FY22 The table below details equity awards approved by the CCGCompensation Committee for our NEOs during FY19. As noted above, awards for the NEOs’ annual target values were weighted 50% to FY19 Operating PSUs and 50% to FY19 RSUs.FY22. In granting equity awards to our NEOs, the CCGCompensation Committee selects a nominal dollar value for each award (“Selected Equity Value”). The Selected Equity Value utilized for FY19 equity awards is set forth in the table below.
| | | | | | | | | | | | | | | | | | | Name | FY19FY22 Operating
PSU Plan
Selected Value
| FY19FY22 RSU
Selected
Value
| FY22 Retention RSU Selected Value | FY22 TSR PSU Selected Value | Total
Selected
Value
| Patrick GelsingerRaghu Raghuram | Award in Apr as COO: $7,500,0004,000,000 (73,12533,674 Target PSUs) |
Leadership Transition Award in May: $7,500,0002,500,000 (73,125 RSUs)20,034 Target PSUs)
| Award in Apr as COO:
$15,000,000 4,000,000
(146,25033,674
RSUs)
Leadership Transition Award in May:
$2,500,000
(20,034 RSUs)
| - | Leadership Transition Award in May as CEO:
$12,000,000
(286,960 PSUs) | $25,000,000
(394,376 shares) | | Zane Rowe | Award in Apr:
$3,500,000 4,250,000
(34,12535,780 Target PSUs)
Leadership Transition Award in May:
$5,000,000
(40,069 Target PSUs)
Leadership Transition Award in May to promote retention given leadership transition and align performance-based incentives with CEO and President | $3,500,000
Award in Apr: $4,250,000
(34,12535,780 RSUs) | Award in Apr: $4,000,000
(33,674 RSUs)
Award to promote retention given leadership transition and to recognize Mr. Rowe for service as Interim CEO | - | $7,000,00017,500,000
(68,250145,303 shares) | Maurizio CarliSumit Dhawan | $2,750,000
Leadership Transition Award in May: $5,000,000
(26,81340,069 Target PSUs) | $2,750,000
Leadership Transition Award in May: $5,000,000
(26,81340,069 RSUs) | - | Leadership Transition Award in May: $10,000,000
(239,133 PSUs) | $5,500,00020,000,000
(53,626319,271 shares) | Sanjay PoonenJean-Pierre Brulard | $2,500,000
Award in Apr: $3,000,000
(24,37525,257 Target PSUs) | $2,500,000
Award in Apr: $3,000,000
(24,37525,257 RSUs) | Award in Apr: $4,000,000
(33,674 RSUs)
Award to promote retention given leadership transition | - | $5,000,00010,000,000
(48,75084,188 shares) | Rangarajan (Raghu) RaghuramAmy
Fliegelman
Olli | $3,500,000
Award in Apr: $2,500,000
(34,12521,047 Target PSUs) | Award in Apr: $2,500,000
(21,047 RSUs) | - | - | $5,000,000
(42,094 shares) | Patrick Gelsinger(1) | Not applicable | Not applicable | Not applicable | Not applicable | Not applicable | $3,500,000Sanjay
(34,125 RSUs)Poonen(2)
| Award in Apr: $4,000,000
(27,622 Target PSUs) | Award in Apr: $4,000,000
(27,622 RSUs) | - | - | $7,000,0008,000,000
(68,25055,244 shares) |
____________________ Note: The number of PSUs and RSUs covered by each award was determined by dividing the Selected Equity Value by the 45-day trailing average price of VMware Class ACommon Stock as of the last day of the month preceding the month during which the award was granted to derive a quotient. The number of PSUs and RSUs was equal to 1x the quotient. The number of PSUs and RSUs shown in the table above reflects the subsequent value-neutral equitable adjustment applied to outstanding equity awards in connection with the special cash dividend paid by VMware on December 28, 2018. AccordingNovember 1, 2021. Pursuant to the terms of the equitable adjustment, shares underlying all unvested equity awards held by VMware employees, including the NEO awards listed above, were adjusted to reflect a conversion factor of 1.2038.1.2191. (1) Mr. Gelsinger did not receive equity awards in FY22 because he terminated employment on February 12, 2021. (2) Mr. Poonen received equity awards as COO, Customer Operations in April 2021. Mr. Poonen terminated employment on August 6, 2021. The FY19number of PSUs and RSUs shown in the table does not reflect value-neutral equitable adjustment applied to outstanding equity awards in connection with the special cash dividend paid by VMware on November 1, 2021 because Mr. Poonen’s employment terminated prior to this date. Equity and Performance Plan Vehicle Summary Included below is a summary of each of the four vehicles used in VMware’s performance plan and the Compensation Committee’s decision for specific NEOs. In determining the Selected Value of equity awards, the Compensation Committee took into consideration data from compensation benchmarking of our peer group, the unvested equity retention values of our NEOs and each NEO’s performance and impact to the Company. In May 2021, the Compensation Committee determined the size and mix of the equity awards granted to Mr. Raghuram and Mr. Dhawan in connection with their promotions to CEO and President, respectively, so that the total Selected Value of FY22 Operating PSUs and FY22 RSUs was in line with their new roles. FY22 Operating PSU Plan — for further detail on the FY22 Operating PSU Plan, see “Performance Stock Units— FY20, FY21 and FY22 Operating PSU Plans” •The Compensation Committee approved the design and performance metrics for the FY22 Operating PSU Plan in April 2021 when it approved the annual equity awards for NEOs. Consistent with the FY21 Operating PSU Plan, the FY22 Operating PSU Plan provides for three annual performance tranches based on financial performance goals to be determined following the start of each fiscal year and a three-year multiplier based on TSR achievement. In April 2021 the Compensation Committee also approved the financial goals for the FY22 annual tranche. •The FY22 Operating PSU Plan awards, other than the supplemental grant to Mr. Rowe (as discussed further below), vest subject to continued employment and achievement of performance goals after the completion of a multi-year performance period detailed further below. The goals included in the FY22 Operating PSU Plan awards granted to Messrs. Raghuram, Dhawan and Rowe in connection with our leadership transition were identical to those in the FY22 Operating PSU Plan awards granted previously to our NEOs. For more information on the vesting schedules of equity awards granted to NEOs, see “Compensation of Executive Officers — Outstanding Equity Awards at Fiscal-Year End.” •Mr. Raghuram was granted supplemental FY22 Operating PSUs with a total Selected Value of $6.5 million, including the awards granted to him in April 2021 in his prior role as COO, while maintaining the FY22 equity vehicle mix apportioning 50% of Selected Value to Operating PSUs. •Mr. Dhawan was granted FY22 Operating PSUs with a total Selected Value of $5.0 million. Mr. Dhawan had not received equity awards in FY22 prior to his appointment to President. •In recognition of Mr. Rowe’s key role in supporting the future success of the new leadership team, the Compensation Committee issued supplemental FY22 Operating PSUs to Mr. Rowe. Mr. Rowe’s supplemental FY22 Operating PSUs have a vesting schedule similar to the FY22 TSR PSUs awarded to Messrs. Raghuram and Dhawan whereby 50% of the supplemental FY22 Operating PSUs awarded to Mr. Rowe in May 2021 are eligible to vest after completion of the 3-year performance period on June 1, 2024, 25% are eligible to vest on June 1, 2025 and the remaining 25% are eligible to vest on June 1, 2026. In addition, Mr. Rowe’s supplemental FY22 Operating PSU award includes a post-vest holding period in which 50% of PSUs net of tax withholding that are eligible to vest on each of June 1, 2024 and June 1, 2025 must be held until June 1, 2026.
FY22 RSUs •The FY22 RSU grants to NEOs vest over a four-year period, subject to continued employment, with 25% of the shares vesting on the one-year anniversary of the vest base date and the remaining shares vesting ratably thereafter on a semi-annual basis. In •Mr. Raghuram was granted FY22 RSUs with a total Selected Value of $6.5 million, including the case of PSU awards, shares vest subject to continued employment and achievement of performance goals after the completion of a multi-year performance period detailed further below. For more information on the vesting schedules of equity awards granted to NEOs, see “Compensation of Executive Officers—Outstanding Equity Awards at Fiscal-Year End.”him in April 2021 in his prior role as COO. The CCG Committee approved the annual•Mr. Dhawan was granted FY22 RSUs with a total Selected Value of $5.0 million. Mr. Dhawan had not received equity awards in FY22 prior to his appointment to President.
FY22 Retention RSUs •In April 20182021, the Compensation Committee awarded supplemental RSUs to Mr. Rowe and Mr. Brulard in orderconnection with Mr. Rowe’s service as Interim CEO and to timepromote both Mr. Rowe’s and Mr. Brulard’s retention. FY22 TSR PSU Plan — for further detail on the grant of PSUs with a performance tranche applicable to FY19. TheFY22 TSR PSU Plan structure, including performance metrics for one-thirdand hurdles, see “One-Time Promotional FY22 TSR PSU Awards” in “Section 1: Executive Summary.” •In connection with the appointment of our CEO and President the FY19Compensation Committee awarded to Messrs. Raghuram and Dhawan promotional TSR PSUs in addition to FY22 Operating PSU awards are applicable to annual performance periods that commenced in FY19.and RSUs. The performance metrics for the FY19 tranches were established in April 2018. Performance metrics for the second and third tranchespurpose of the FY19 Operating PSU awards will be applicableFY22 TSR PSUs was to directly align significant performance periods commencingincentive opportunities to the achievement of substantial appreciation in FY20 and FY21, respectively, and will be established early in each of those fiscal years.
Approved Award Value vs. Accounting Grant Date Fair Value for PSU Awards
Grant date fair values for PSUs are not determined untilstockholder returns over a five-year performance metrics are established. Accordingly, the grant date fair values for the second and third tranches of the FY19 Operating PSU grants discussed below are not reflected in the “SummaryCompensation Table” and the other tables in the “Compensation of Executive Officers” section of this proxy statement. Instead, one-third of the FY19 Operating PSU grant date fair values is reflected in this proxy statement, one-third of the FY19 Operating PSU grant date fair value will be reflected in our 2020 proxy statement and one-third of the FY19 Operating PSU grant date fair value will be reflected in our 2021 proxy statement.period.
During FY19, the CCG•The Compensation Committee also established performance metrics for the second tranches of FY18 Operating PSUs and FY18 HC PSUs that it had awarded to our NEOs in FY18 under the FY18 Operating PSU and HC PSU Plans, and for the third tranche of FY16 Operating PSUs that it had awarded to our NEOs in FY16 under the FY16 Operating PSU Plan. Accordingly, the grant date fair values for the second tranche of the FY18 Operating and HC PSUs and the third tranche of the FY16 Operating PSUs are reflected in the “Summary Compensation Table” and the other tables in the “Compensation of Executive Officers” section of this proxy statement.
The FY20 performance metrics applicable to the second of the three tranches of the FY19 Operating PSU Plan and the third of three tranches in the FY18 Operating and FY18 HC PSU Plans will be established in early FY20. Accordingly, grant date fair values for those tranches will be reflected in the 2020 proxy statement.
The FY21 performance metrics applicable to the third of the three tranches of the FY19 Operating PSU Plan will be established in early FY21. Accordingly, grant date fair values for the third tranche of FY19 Operating PSU Plan will be determined in FY21 and will be reflected in the 2021 proxy statement.
| | | | | | | | PSU Award | Year Approved | Grant Date Fair Value in 2017 Proxy | Grant Date Fair Value in 2018 Proxy | Grant Date Fair Value in 2019 Proxy | Grant Date Fair Value in 2020 Proxy | Grant Date Fair Value in 2021 Proxy | FY16 Operating PSU | FY16 | FY16 Tranche | FY18 Tranche | FY19 Tranche | - | - | FY16 RSU | FY16 | Full Award | - | - | - | - | FY18 Operating PSU | FY18 | - | FY18 Tranche | FY19 Tranche | FY20 Tranche | - | FY18 HC PSU | FY18 | - | FY18 Tranche | FY19 Tranche | FY20 Tranche | - | FY18 RSU | FY18 | - | Full Award | - | - | - | FY19 Operating PSU | FY19 | - | - | FY19 Tranche | FY20 Tranche | FY21 Tranche | FY19 RSU | FY19 | - | - | Full Award | - | - |
The difference of as much as two years between the date when the CCG Committee approves PSU grants and the date when individual annual tranches are assigned a grant date fair value can result in significant deviations between the grant value that the CCG Committee approved and the grant value that appears in the Summary Compensation Table for the year in which the grant date fair value is assigned because the respective values are based on VMware’s stock price on the applicable dates. The impact of fluctuations in our stock price on the values of equity grants to our CEO from FY16 through FY19 is illustrated in the chart below.
 ____________________(1) The CCG Committee approved an annual selected equity value ofissued FY22 TSR PSUs to issue to our CEOMessrs. Raghuram and Dhawan in each of FY16, FY18 and FY19May 2021 effective June 1, 2021 as well as the number of shares underlying PSU awards using a 45-day trailing stock price as the quotient to calculate number of shares issued.
As illustrated in the chart, the CCG Committee has approvedpromotional performance-based equity awards specifically designed to our CEO with 50% or more of total approved award value tied to PSUs in each of FY16, FY18 and FY19. However, asreward significant stockholder returns over a result of our PSU design, which features both successive annualfive-year performance tranches, as well as a multi-year performance goal, the grant date accounting fair value of the PSU awards reflects the number of PSU awards issued per each applicable fiscal year tranche multiplied by the closing trading price of our stock on the date that each annual performance metric is determined. As a result, the values in the Summary Compensation Table will often not reflect the CCG Committee determinations on the division between PSU and RSU value in any particular year. Additionally, the above chart demonstrates that the value of equity awards to our CEO when approved by our CCG Committee in each of FY16, FY18 and FY19 (“Approved Value”) ranged from $13.0 million to $15.0 million, an increase of 15.4% over the time period, while the grant date “Accounting Value” of those equity awards ranged from $8.93 million to $20.2 million, an increase of 126.2%. Accordingly, the “Approved Values” discussed in this CD&A and shown in the chart reflect the compensation determinations made by the CCG Committee, whereas the increases in the value of equity awards shown in the Summary Compensation Table in the respective proxy statements largely reflects VMware’s positive operations results during the period as reflected by the increases in stock price.period.
Performance Stock Units—FY16, FY18FY20, FY21 and FY19FY22 Operating PSU Plans The design of the FY19FY22 Operating PSU Plan addresses our objective to incentivize continuing progress in broadening our portfolio of subscription and SaaS-based offerings while maintaining alignment with stockholder returns. The plan design is substantially consistent with the FY16FY20 and FY18FY21 Operating PSU Plans and includes the following design features.
| | | | | | | Focus on long-term performance | • Three successive annual performance tranches covering FY19, FY20FY22, FY23 and FY21FY24 to drive achievement of sustained results. Annual tranches enable more precise and meaningful goal-setting during a highly dynamic period• If an annual tranche is completed at below-target performance, a catch-up is not available in subsequent tranches• Multi-year goal to hold NEOs accountable for long-term performance
| | Focus on value creation | • Focus on revenue adjusted forIn FY22 the change in deferred hybrid cloudCompensation Committee utilized subscription and SaaS revenue asin order (i) to provide a performance metric that is an accurate indicator of future top-line growth prospectsprospects; (ii) to reduce overlap of metrics in the FY22 Bonus Program; (iii) to reinforce the importance of subscription and non-GAAP operating margin,SaaS revenue as anIT consumption models increasingly transition from on-premises to cloud-based subscription services; and (iv) to reflect that license is becoming less important as a standalone indicator of NEOs’ stewardship of Company profitability in each tranchefuture growth• Focus onIn FY22 the Compensation Committee utilized non-GAAP operating income to focus on the profitability produced from our operations as metriccompared to a relative percentage of revenue to drive focus on generation of operating profit available for investment in Company growth or return of earningswhile we grow our hybrid and capital to stockholders through stock repurchases, as well as the one-time special cash dividend of $11 billion in FY19multi-cloud business• Substantially penalizesIn FY22 the Compensation Committee focused on multi-year TSR in the FY22 Operating PSU Plan to hold NEOs accountable for under-performingstockholder returns that are competitive relative to three-year non-GAAP operating income goalcompanies in the S&P 500 IT Index. Relative TSR multiplier modifies PSUs by 0.75x to 1.25x in proportion to relative TSR achievement of <=25th percentile to >= 75th percentile, scaled linearly•
Three-year non-GAAP operating income goal adds diversity to portfolio of performance metrics while maintaining cohesion with annual incentive plan and PSU tranches
|
We designed the metrics for our FY19 Operating PSU awards to NEOs to focus on indicators that will measure the degree to which we successfully deliver on VMware’s core business opportunities in the software-defined data center delivered on-premises or in the cloud, as well as end-user and mobile computing. We selected the achievement
The CCGCompensation Committee continues to evaluate alternative structures with the goal of best aligning our PSU Planplans with the long-term performance of the Company. The three-year performance modifier is critical to the plan design, because it modifies the number of shares otherwise subject to vesting based on performance in each annual tranche. Performance achievement is adjusted for the impact of significant merger-, acquisition- and divestiture-related transactions during the period. Taken together, the CCGCompensation Committee believes the balanced focus on sustained performance over individual annual tranches enables goals to be adjusted each year to reflect changing business conditions while a multi-year performance goal focused on total profitabilitytop-line revenue growth incentivizes our NEOs to deliver tangible results from their strategic decisions that will drive longer-term shareholderstockholder value. Performance in FY19FY22 applied to the three PSU plans as follows: (1) the first of three tranches of the FY19FY22 Operating PSU Plan, (2) the second of three tranches of the FY18FY21 Operating PSU Plan and (3) the third of three tranches of the FY16FY20 Operating PSU Plan. Under each Plan, metrics for the FY19FY22 performance tranche were total revenue plus change in unearned hybrid cloudsubscription and SaaS license revenue (weighted 70%) and non-GAAP operating marginincome (weighted 30%).
An illustration of the staggered design of our operational PSU plans that were ongoing during FY19FY22 is below.
| | | | | | | | | | | | | | | | | | | | | | Plan | FY16 | FY18 | FY19 | FY20 | FY21 | FY22 | FY23 | FY24 | FY25 | FY16FY20 Operating PSU Plan | 33% of target PSU award: | 33% of target PSU award: | 33% of target PSU award: | Vests March 31, 2019April 1, 2022 subject to continued employment. Actual number of shares subject to vest equals PSUs achieved from each tranche multiplied by 3-year non-GAAP operating incometotal revenue growth multiplier (0.75x-1.25x); maximum number of shares capped at 200% of target shares | | | | FY16 Adj.FY20 License & HC Sub and SaaS Rev
(70% weight)
| FY18 Adj.FY21 Subscription and SaaS Rev
(70% weight)
| FY19 Adj.FY22 Subscription and SaaS Rev
(70% weight)
| | | | + | + | + | | | | FY16FY20 non-GAAP operating margin
(30% weight)
| FY18FY21 non-GAAP operating margin
income
(30% weight) | FY19FY22 non-GAAP operating margin
income
(30% weight) | | | | = | = | = | | | | FY16FY20 tranche opportunity (0%-200% of target) | FY18FY21 tranche opportunity (0%-150% of target) | FY22 tranche opportunity (0%-200% of target) | FY19 tranche opportunity (0%-200% of target) | | | | Ú | | | | 3-year non-GAAP operating income averagetotal revenue growth multiplier on FY16, FY18FY20, FY21 and FY19FY22 tranches | | | | | | | | | | | | | | | | | Plan | FY16 | FY18 | FY19 | FY20 | FY21 | FY22 | FY18 Operating PSU Plan(1) | | 33% of target PSU award: | 33% of target PSU award: | 33% of target PSU award: | Vests April 1, 20202023 subject to continued employment. Actual number of shares subject to vest equals PSUs achieved from each tranche multiplied by 3-year non-GAAP operating income growthTSR relative to companies in S&P 500 IT Index multiplier (0.75x-1.25x); maximum number of shares capped at 200% of target shares | | | | FY18 Adj.FY21 Subscription and SaaS Rev
(70% weight)
| FY19 Adj.FY22 Subscription and SaaS Rev
(70% weight)
| FY20 metric to be determined [(“TBD”)
(70% weight)
| Determined in FY23 | | | + | + | + | | | FY21 non-GAAP operating income
(30% weight) | FY22 non-GAAP operating income
(30% weight) | Determined in FY23 | | | FY18 non-GAAP operating margin
(30% weight)
| FY19 non-GAAP operating margin
(30% weight)
| FY20 metric TBD
(30% weight)]
| | | | = | = | = | | | | FY18FY21 tranche opportunity (0%-150% of target) | FY22 tranche opportunity (0%-200% of target) | FY19 tranche opportunity (0%-200% of target) | FY20 tranche opportunity (0%-200% of target) | Determined in FY23 | | | Ú | | | 3-year TSR relative to companies in S&P 500 IT Index, multiplier on FY21, FY22 and FY23 tranches | | | 3-year non-GAAP operating income average growth multiplier on FY18, FY19 and FY20 tranches | | | | | | | | | | | | | | | | | | | Plan | FY16 | FY18 | FY19 | FY20 | FY21 | FY22 | FY19 Operating PSU Plan | | | 33% of target PSU award: | 33% of target PSU award: | 33% of target PSU award: | Vests April 1, 20212024 subject to continued employment. Actual number of shares subject to vest equals PSUs achieved from each tranche multiplied by 3-year non-GAAP operating income growthTSR relative to companies in S&P 500 IT Index multiplier (0.75x-1.25x); maximum number of shares capped at 200% of target shares | | | | FY19 Adj.FY22 Subscription and SaaS Rev
(70% weight)
| [FY20Determined in FY23
| FY24 metric TBD (70% weight)
| [FY21 metric TBD
(70% weight)
| | | | + | + | + | | | | FY19FY22 non-GAAP operating margin
income
(30% weight) | FY20Determined in FY23
| FY24 metric TBD (30% weight)]
| FY21 metric TBD
(30% weight)]
| | | | = | = | = | | | | FY19FY22 tranche opportunity (0%-200% of target) | FY20 tranche opportunity (0%-200% of target)Determined in FY23 | FY21FY24 tranche opportunity (0%-200% of target) | | | | Ú | | | | 3-year non-GAAP operating income average growthTSR relative to companies in S&P 500 IT Index, multiplier on FY19, FY20FY22, FY23 and FY21FY24 tranches |
____________________ Note: due to our Spin-Off on November 1, 2021, a provision related to significant corporate transactions determined that the performance conditions for the FY23 tranche of the FY21 Operating PSU Plan would be calculated at 1.0x target. Accordingly, per accounting rules, PSUs for the FY23 tranche of the FY21 Operating PSU Plan were deemed granted on November 1, 2021 instead of April 2022. See “Spin-Off Impact on Operating PSUs.” Spin-Off Impact on Operating PSUs Performance levels are subject to adjustment to exclude the impact of merger-, acquisition- and divestiture-related transactions above pre-determined threshold levels during each performance period. Achievement is measured following the end of each annual performance tranche, and achievement relative to the multi-year performance goal is measured following the end of FY19 in the case of the FY16 Operating PSU Plan, following the end of FY20 in the case of the FY18 Operating PSU Plan and following the end of FY21 in the case of the FY19 Operating PSU Plan.full performance period. Depending upon the level of achievement, the PSUs can convert into shares of common stock at ratios ranging from 0.3750.1125 shares to two shares for each PSU. (PSUsPSUs are capped at 2x target irrespective of actual performance.) If the minimum performance threshold is not met, then no shares will be issued. We believe that coupling annual
performance tranches with performance metrics over a three-year period in the case of the FY16, FY18FY20, FY21 and FY19FY22 Operating PSU Plans allows us to align our performance metrics to our strategic plan, while also promoting longer-term executive retention.
The Operating PSU Plans are intended to drive multi-year performance achievement by NEOs over factors within their control. Consistent with common practice, VMware’s Operating PSU Plans have historically included carveout provisions triggered by transformative corporate transactions such as a change-in-control, spin-off and roll-up transaction that can significantly impact pre-set goals in unpredictable ways. The objective of these provisions is to encourage executives to keep their focus on successful completion of the transformative transaction and acknowledge that such a material change to corporate structure could result in previously-established performance goals being no longer relevant to increases in stockholder value. In such cases, the objective of such carveouts is to retain a time-based retention incentive as well as a continuing incentive for the PSUs to increase in value via stock price appreciation.
Consistent with the design of VMware Operating PSU Plans since 2015, the FY20 and FY21 Operating PSU Plans provide that if a spin-off of VMware from its parent company occurs during an annual performance period, performance will be considered to be achieved at target for that annual performance period and for subsequent annual performance periods and that the multi-year multiplier will be considered to be achieved at target. On November 1, 2021, VMware executed a successful Spin-Off from Dell that constituted a material change in its capital and stockholder structure. Pursuant to terms of the FY20 and FY21 Operating PSUs, the FY22 tranche in both plans was considered to be achieved at target; the FY23 tranche of the FY21 Operating PSU Plan will be considered to be achieved at target once the performance period is completed; and the multi-year multiplier of both the FY20 and FY21 Operating PSU Plans will be considered to be at target once the multi-year performance periods are completed. The FY22 Operating PSU Plan did not include a spin-off provision because when it was adopted in April 2021, spin-off planning was already underway and any potential impact on performance metrics was considered reasonably foreseeable and reasonably within the control of the NEOs when the performance goals were established.
In March 2019,2022, the CCGCompensation Committee reviewed Company performance against metrics contained in the FY16, FY18FY20, FY21 and FY19FY22 Operating PSU plansPlans in connection with the FY19FY22 performance tranche. Performance goals, actual results and earned shares under the FY16, FY18 Operating PSUFY20, FY21 and FY19FY22 Operating PSU Plans are described in the following tables. Performance Achievement vs. Goal and Spin-Off Adjusted Payout | | | | | | | | | | | | | | | | | | | | | | | | | FY22 Performance Tranche Achievement | | Threshold
(50%) | Target
(100%) | Maximum
(200%) | Actual Result | Result | Funding Weight | Funding | | Subscription and SaaS Revenue $M | $3,231 | $3,401 | >=$3,605 | $3,205 | 0% | 70% | 0% | | Non-GAAP Operating Income $M | $3,209 | $3,556 | >=$4,470 | $3,918 | 133.9% | 30% | 40.2% | | Total FY22 Performance Tranche Funding | 40.2% |
The performance goals in the FY22 tranche of the FY20, FY21 and FY22 Operating PSU Plans were set higher than the performance goals in the FY21 tranche of the Operating PSU Plans with respect to threshold, target and maximum revenue and threshold operating income. The Compensation Committee selected goals reflecting expectations for revenue and operating income growth from the prior year. The FY22 non-GAAP operating income target was below our actual FY21 non-GAAP operating income achievement because the FY21 achievement was inflated due to unplanned underspend as a result of the COVID-19 pandemic. The FY22 target was intended to be challenging and provide a similar level of rigor as those established for past years, in order to provide a consistent incentive compensation opportunity.
| | | | | | | | | | FY19 Performance Tranche Achievement | | | Threshold (50%) | Target (100%) | Max (200%) | Actual Result | Result | Funding Weight | Funding | | Adjusted Revenue | $8,606 | $9,011 | >=$9,416 | $9,190 | 144.1% | 70% | 100.9% | | Non-GAAP Operating Margin | 31.7% | 33.3% | >=35.3% | 34.1% | 139.6% | 30% | 41.9% | | | | | | | | | | | Total FY19 Performance Tranche Funding | 142.8% |
| | | | | | | | | | | | | | | | | | | | | | | FY21 Tranche | | FY22 Tranche | | | Subscription and SaaS Revenue $M | Non-GAAP Operating Income $M | | Subscription and SaaS Revenue $M | Non-GAAP Operating Income $M | | Maximum | | $2,550.0 | $4,006.0 | | $3,605.0 | $4,470.0 | | Target | | $2,406.0 | $3,186.0 | | $3,401.0 | $3,556.0 | | Threshold | | $2,165.0 | $2,581.0 | | $3,231.0 | $3,209.0 | | Actual in Plan Calculation | | $2,587.0 | $3,789.0 | | $3,205.0 | $3,918.0 |
| | | | | | | | | | | | | | | | | | | FY20 Operating PSU Multi-Year Performance Modifier | | Minimum
(0.75x) | Target
(1.00x) | Maximum
(1.25x) | Actual Result | Result | | FY20 - FY22 Revenue Growth As Determined by FY22 Revenue $M | <= $13,069 | $13,444 | $13,819 | $12,851 | 0.75x |
The FY20 Operating PSU Plan includes a spin-off provision in which VMware’s Spin-Off from Dell during the performance period would result in a multi-year performance modifier of 1.0x target. On November 1, 2021, in connection with VMware’s issuance of a special dividend of $27.40 per share of Common Stock, VMware was spun-off from Dell, resulting in a 1.0x modifier for the FY20 Operating PSU.
| | | | | | | | FY16 PSU Plan Multi-Year Modifier | | | Min 0.75x | Target 1.0x | Max 1.25x | Actual Result | Result | | Non-GAAP Operating Income Average Growth Over Three Fiscal Years | <=4.0% | 5.0% | >=6.0% | 10.7% | 1.25x (maximum) |
PSU Conversion Based on Performance | | | | | | | | | FY19 Performance Tranche Achievement(1) | | | FY19 Tranche of PSU Plan: Target PSUs | FY19 | PSU Achievement in FY19 Tranche(2) | | Name | FY16 Operating PSU Plan | FY18 Operating PSU Plan | FY19 Operating PSU Plan | Tranche Modifier | FY16 Operating PSU Plan | FY18 Operating PSU Plan | FY19 Operating PSU Plan | | Patrick Gelsinger | 52,146 | 19,756 | 24,375 | 142.8% | 74,464 | 28,211 | 34,807 | | Zane Rowe | 30,085 | 13,171 | 11,375 | 142.8% | 42,961 | 18,808 | 16,243 | | Maurizio Carli | 8,023 | 10,976 | 8,937 | 142.8% | 11,456 | 15,673 | 12,762 | | Sanjay Poonen | 16,046 | 13,171 | 8,125 | 142.8% | 22,913 | 18,808 | 11,602 | | Rangarajan (Raghu) Raghuram | 14,039 | 13,171 | 11,375 | 142.8% | 20,047 | 18,808 | 16,243 |
| | | | | | | | | | | | | | | | | | | | | | FY22 Performance Tranche Achievement | | FY22 Tranche of PSU Plan: Target PSUs | PSU Achievement in FY22 Tranche(1) | | Name | FY20 Operating PSU Plan | FY21 Operating PSU Plan | FY22 Operating PSU Plan | FY20 Operating PSU Plan at 100% of Target per Spin-Off Provision | FY21 Operating PSU Plan at 100% of Target per Spin-Off Provision | FY22 Operating PSU Plan at 40.2% of Target per FY22 Results | | Raghu Raghuram | 8,400 | 33,848 | 17,902 | 8,400 | 33,848 | 7,196 | | Zane Rowe | 17,999 | 33,848 | 25,282 | 17,999 | 33,848 | 10,163 | Sumit Dhawan(2) | n/a | n/a | 13,356 | n/a | n/a | 5,369 | Jean-Pierre Brulard(2) | n/a | 9,308 | 8,419 | n/a | 9,308 | 3,384 | | Amy Fliegelman Olli | 5,401 | 7,616 | 7,015 | 5,401 | 7,616 | 2,820 | Patrick Gelsinger(3) | Not applicable | Not applicable | Not applicable | Not applicable | Not applicable | Not applicable | Sanjay Poonen(3) | Not applicable | Not applicable | Not applicable | Not applicable | Not applicable | Not applicable |
____________________ (1) Number of PSUs reflects the equitable adjustment ratio of 1.2038 in connection with the Company’s special cash dividend. (2) Achieved PSUs convert into shares depending upon annual revenue growth performance over the three-year period FY16FY20 through FY19FY22 (for the FY16 Operating PSU Plan), the three-year period FY18 through FY20 (for the FY18 Operating PSU Plan) and relative TSR compared to companies in the S&P 500 IT Index over the three-year period FY19FY21 through FY21FY23 (for the FY19FY21 Operating PSU Plan) and FY22 through FY24 (for the FY22 Operating PSU Plan). Achieved PSUs from the FY20 Operating PSU Plan converted into shares that vested on April 1, 2022. As indicated, the spin-off provision in the FY20 and FY21 Operating PSU Plans resulted in PSUs converting into shares at a ratio of 1.0x. The FY22 Operating PSU Plan did not include the spin-off provision. See discussion above.
(2) Messrs. Dhawan and Brulard did not participate in the FY20 Operating PSU Plan and Mr. Dhawan did not participate in the FY21 Operating PSU Plan.
FY16(3) Messrs. Gelsinger’s and Poonen’s PSU conversion ratios under the FY22 tranches of the Operating PSU Plans were not calculated or approved because they terminated employment on February 12, 2021 and August 6, 2021, respectively.
FY20 Operating PSU Plan Calculation of Shares Subject to Vest Based on Performance(1) | | | | | | | | | | | | | | Total Shares in FY16 Operating PSU Plan(1) | FY16 Operating PSU Plan Awards Banked Per Annual Tranche Modifiers | FY16 Operating PSU Plan Awards Banked Per Annual Tranche Modifiers | 3-Year Perfor-mance Modifier | Total Shares Earned in FY16 Operating PSU Plan(2) | | Name | FY16 Tranche Target | FY18 Tranche Target | FY19 Tranche Target | FY16 Tranche Target | FY18 Tranche Target | FY19 Tranche Target | # of Shares | % of Total Target Issued | | Patrick Gelsinger | 156,436 | 52,145 | 52,145 | 52,146 | 157.2% | 187.1% | 142.8% | 1.25x | 312,872 | 200% | Zane Rowe | 90,251 | 30,083 | 30,083 | 30,085 | 157.2% | 187.1% | 142.8% | 1.25x | 180,502 | 200% | | Maurizio Carli | 24,067 | 8,022 | 8,022 | 8,023 | 157.2% | 187.1% | 142.8% | 1.25x | 48,134 | 200% | | Sanjay Poonen | 48,134 | 16,044 | 16,044 | 16,046 | 157.2% | 187.1% | 142.8% | 1.25x | 96,268 | 200% | | Rangarajan (Raghu) Raghuram | 42,117 | 14,039 | 14,039 | 14,039 | 157.2% | 187.1% | 142.8% | 1.25x | 84,234 | 200% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total PSUs in FY20 Oper-ating PSU Plan | FY20 Operating PSU Plan Awards Banked Per Annual Tranche Modifiers | FY20 Operating PSU Plan Awards Banked Per Annual Tranche Modifiers | 3-Year Perfor-mance Modifier per Spin-Off Provi-sion | Total Shares Earned in FY20 Operating PSU Plan | | Name | FY20 Tranche Target | FY21 Tranche Target | FY22 Tranche Target | FY20 Tranche Modifier | FY21 Tranche Modifier | FY22 Tranche Modifier per Spin-Off Provi-sion | # of Shares | % of Total Target Issued | | Raghu Raghuram | 25,198 | 8,399 | 8,399 | 8,400 | 78.6% | 146.0% | 100.0% | 1.00x | 27,263 | 108.2% | | Zane Rowe | 53,997 | 17,999 | 17,999 | 17,999 | 78.6% | 146.0% | 100.0% | 1.00x | 58,424 | 108.2% | Sumit Dhawan(1) | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | Jean-Pierre Brulard(1) | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | | Amy Fliegelman Olli | 16,199 | 5,399 | 5,399 | 5,401 | 78.6% | 146.0% | 100.0% | 1.00x | 17,526 | 108.2% | Patrick Gelsinger(2) | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | Sanjay Poonen(2) | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a |
____________________ (1) Number of PSUs reflectsMessrs. Dhawan and Brulard did not participate in the equitable adjustment ratio of 1.2038 in connection with the Company’s special cash dividend.FY20 Operating PSU Plan. (2) Number of shares earned capped at 200% of target. As noted above, the maximum number of PSUs to vestMessrs. Gelsinger’s and Poonen’s PSU conversion ratios under the FY16FY22 tranches of the Operating PSU Plans were not calculated or approved because they terminated employment on February 12, 2021 and August 6, 2021, respectively.
The FY20 Operating PSU Plan was capped at 200% of target. As a result, even though the algorithmic calculation of shares to vest under the FY16 Operating PSU Plan was calculated to be 203%achieved 108.2% of target (resultingPSUs resulting from annual tranche performance ratios of 157.2%78.6%, 187.1%146.0% and 142.8%100% of target for FY16, FY18FY20, FY21 and FY19,FY22, respectively, and a multi-year performance multiplier of 1.251.00 applied to each annual tranche performance ratio),ratio due to application of the actual numberspin-off provision in the FY20 PSU Plan discussed above. Following performance certification by the Compensation Committee, shares underlying earned PSUs vested on April 1, 2022. If VMware had not completed its Spin-Off from Dell in FY22, the spin-off provision of shares vested from the FY16FY20 Operating PSU Plan was capped at 200%would not have applied. Presuming actual performance results above for the performance period from FY20 through FY22, participants in the FY20 Operating PSU Plan would have achieved 66.2% of target pursuantPSUs, reflecting vesting of 40,037 fewer PSUs in the aggregate, with respect to Plan terms and conditions.the executives set forth in the above table. Performance Stock Units—FY18 HCFY21 Operating PSU Plan
In FY19, NEOs wereAs discussed above, the FY21 Operating PSU Plan also includes a spin-off provision. Accordingly, VMware’s Spin-Off from Dell on November 1, 2021 will result in the FY22 and FY23 annual tranches as well as the three-year multi-year performance multiplier to be calculated at target. The FY21 Operating PSU Plan performance period will continue through the end of FY23 and will vest in May 2023 subject to continuing employment.
Approved Award Value vs. Accounting Grant Date Fair Value for Operating PSU Awards Grant date fair values for PSUs are not determined until performance metrics are established. Accordingly, the grant date fair values for the second and third tranches of three fiscal year performance periodsthe FY22 Operating PSUs discussed below are not reflected in the FY18 HC“SummaryCompensation Table” and the other tables in the “Compensation of Executive Officers” section of this proxy statement. Instead, one-third of the FY22 Operating PSU Plan. The FY18 HC PSU Plan includes threegrant date fair values is reflected in this proxy statement, one-third will be reflected in our 2023 proxy statement and one-third will be reflected in our 2024 proxy statement. With respect to the FY22 Operating PSUs, the performance goals for the FY22 annual performance periods based on hybrid cloud and SaaS financial objectives established annually for each period and a three-year multipliertranche were determined by the Company’s percentile rankCompensation Committee in three-year TSR relative to constituent companiesApril 2021. During FY22, the Compensation Committee also established performance metrics for the second tranche of the FY21 Operating PSUs that were awarded in FY21 and the third tranche of the FY20 Operating PSUs that were awarded in FY20. Accordingly, the grant date fair values for the second tranche of the FY21 Operating PSUs, the third tranche of the FY20 Operating PSUs are reflected in the S&P 500 IT Index at“Summary Compensation Table” and the timeother tables in the CCG Committee approved“Compensation of Executive Officers” section of this proxy statement. Additionally, as discussed below, the FY18 HCFY23 performance tranche of the FY21 Operating PSU Plan will be determined by the impact of VMware’s spin-off from Dell in April 2017. An illustrationNovember 2021 which, pursuant to the provisions of the staggered designFY21 Operating PSU Plan when it was adopted will result in FY23 performance yielding performance achievement at target. Accordingly, the performance metrics for both the second and third performance tranches of the FY18 HCFY21 Operating PSU Plan is below.are deemed to have occurred during FY22 and are reflected in the “Summary Compensation Table” and the other tables in the “Compensation of Executive Officers” section of this proxy statement.
The FY24 performance metrics applicable to the third of the three tranches of the FY22 Operating PSU Plan will be established in early FY24. Accordingly, grant date fair values for the third tranche of FY22 Operating PSU Plan will be determined in FY24 and will be reflected in the 2024 proxy statement. | | | | | | | | | | | | | | | | | | | | | PlanAward | FY18Year
Approved | FY19Grant Date Fair Value in 2020 Proxy | Grant Date Fair Value in 2021 Proxy | Grant Date Fair Value in 2022 Proxy | Grant Date Fair Value in 2023 Proxy | Grant Date Fair Value in 2024 Proxy | | FY20 Operating PSUs | FY20 | FY20 Tranche | FY21 Tranche | FY22 Tranche | - | - | FY18 HC PSU PlanFY20 RSUs | 33% of target PSU award:FY20 | 33% of target PSU award:Full Award | 33% of target PSU award:- | Vests April 1, 2020 subject to continued employment. Actual number of shares subject to vest equals PSUs achieved from each tranche multiplied by 3-year relative TSR multiplier (0.5x-1.0x) ; maximum number of shares capped at 100% of target shares- | - | - | FY21 Operating PSUs(1) | FY18 hybrid cloud and SaaS revenue growthFY21 | FY19 hybrid cloud and SaaS revenue growth- | [FY20 hybrid cloud and SaaS metric TBD]FY21 Tranche | FY22 Tranche
FY23 Tranche | - | - | | FY21 RSUs | =FY21 | =- | =Full Award | - | - | - | | FY22 Operating PSUs | FY18 tranche opportunity (0%-100% of target)FY22 | FY19 tranche opportunity (0%-100% of target)- | FY20 tranche opportunity (0%-100% of target)- | FY22 Tranche | FY23 Tranche | FY24 Tranche | | FY22 RSUs | ÚFY22 | - | - | Full Award | - | - | FY22 TSR PSU
(CEO and Pres. Only) | 3-year relative TSR multiplier on FY18, FY19 and FY20 tranchesFY22 | - | - | Full Award | - | - |
Achievement is measured following the end of each tranche in FY18, FY19 and FY20, as applicable, and achievement relative to the multi-year performance goal will be measured following the end of FY20. Depending upon the level of achievement, the PSUs can convert into shares of common stock at ratios ranging from 0.25 shares to one share for each PSU. If the minimum performance threshold is not met, then no shares will be issued.____________________
(1)In March 2019, the CCG Committee reviewed Company performance against the FY19 metric in connection with VMware’s Spin-Off, the FY19 performance tranche. Performance goals, actual results and achieved PSUs underFY23 Tranche of the FY18 HCFY21 Operating PSU Plan are described below. Results were adjustedwas deemed granted according to eliminate impact of acquisitions and divestitures. Performance Achievement vs. Goal
| | | | | | | | FY18 HC PSU Plan Performance in FY19 Tranche | | | Threshold 50% | Target 100% | Max 100% | Actual Result | Result | | Hybrid Cloud and SaaS Revenue Growth | 19.7% | 26.0% | >26.0% | 37% | 100% |
PSU Conversion Basedaccounting rules on Performance
| | | | | | Name | FY19 Tranche of HC PSU Plan: Target PSUs(1) | FY19 Tranche Modifier | HC PSU Achievement in FY19 Tranche(2) | | Patrick Gelsinger | 19,756 | 100% | 19,756 | | Zane Rowe | 8,780 | 100% | 8,780 | | Maurizio Carli | 8,780 | 100% | 8,780 | | Sanjay Poonen | 13,171 | 100% | 13,171 | | Rangarajan (Raghu) Raghuram | 13,171 | 100% | 13,171 |
____________________
(1) Number of PSUs reflects the equitable adjustment ratio of 1.2038 in connection with the Company’s special cash dividend.November 1, 2021.
(2) Achieved PSUs convert into shares depending uponThe difference of as much as two years between the date when the Compensation Committee approves PSU grants and the date when individual annual revenue growth performance overtranches are assigned a grant date fair value as well as the three-year period FY18 through FY20. See discussion above.
Performance Stock Units—FY18 Sales PSU Plan
FY19 was covered as a portionapplication of the multi-year performance period ofspin-off provision can result in significant deviations between the FY18 Sales PSU Plan, which was awarded to Mr. Carli. The FY18 Sales PSU Plan includes a single two-and-a-half-year performance period with two quantitative financial goals related to sales performance, each measured overselected grant value that the full performance period. Achievement will be measured following FY20.
Special Stockholder Return PSU Plan
In April 2019, the CCGCompensation Committee approved a special PSU award to our CEO with achievement based on total stockholder return (TSR) levels achieved over a four-year performance period commencing May 1, 2019. The special award is designed soand the grant value that our CEO will realize payouts toappears in the extent that our stock price appreciation yields significant sustained returns for our stockholders at levels comparable to or greater than other S&P technology companies over the same period. The CCG Committee selected a PSU value of $25 million. Each PSU will convert to one share of VMware stock at target, with a potential payout of 2x if the Company achieves stretch stock price goals that exceed the performance of selected S&P peer companies. The award is for 135,851 PSUs, with the number determined utilizing our 45-day trailing average stock price“Summary Compensation Table” for the period ending April 30, 2019 per our standard practice for PSU and RSU awards. The PSU award fundsyear in which the grant date fair value is assigned because the respective values are based on the degree to which our stock price appreciates from $204.13, the closing stock price on April 30, 2019, as set forth in the following table: | | | | | Stock Price Appreciation Threshold | Stock Price Appreciation from Grant | PSU Conversion Ratio | Shares issuable | | $306.20 | +50% | 0.4x of target PSUs | 54,340 | | $357.23 | +75% | 1.0x of target PSUs | 135,851 | | $408.26 | +100% | 2.0x of target PSUs | 271,702 |
A stock price appreciation threshold is considered to have been achieved if the 90-day volume weighted average price (“VWAP”) of VMware’s stock price reaches the threshold during the performance period. If the minimum stock price appreciation threshold is not achieved on or before April 30, 2023, then no PSUs under the Plan will vest.
The extent to which the award vests depends upon a comparison of VMware’s TSR to the TSR of companies in the S&P Software and Services Select Industry Index over the four-year performance period. VMware’s TSR and the TSR of the indexed companies will be compared utilizing the 90-day trailing VWAPs for VMware and the indexed companies on the last day of the performance period compared to the respective 90-day trailing VWAPs at the start of the period. Payouts will be scaled for TSR achievement between the 25th and 75th percentiles shown below. | | | VMware %ile Rank vs. Companies in S&P Software & Services Select Industry Index
| % of Funded Shares that will be Released Based on Relative TSR Performance | <25%ile | 0% | 25%ile | 25% | 50%ile | 62.5% | >=75%ile | 100% |
50% of the award will vest on June 1, 2023 and the remaining 50% of the award will vest on June 1, 2024, so long as Mr. Gelsinger remains employed and the 90-trailing trading day trailing VWAP for VMware’s stock measured on the second trading day preceding each vesting date equals or exceeds our stockCommon Stock price on the first day of the performance period. If the trailing VWAP does not achieve the threshold on each vesting date, then the shares eligible to vest on that vesting date will not vest. If no shares vest on the first vesting date, then all of the shares will still be eligible to vest on the second vesting date provided if the vesting conditions are met.
For the purposes of calculating stock price and relative TSR achievements, stock prices of VMware and the companies in the comparison group will be adjusted for the value of any dividends paid during the respective measurement periods.
The special PSU award is not eligible for acceleration under the Company’s Executive Severance Plan adopted in FY19 (“Severance Plan”). The award is eligible for acceleration under VMware’s Change-in-Control Retention Plan for executives adopted in 2015 (“CIC Plan”) in the event of a qualifying termination following a change-in-control. In the event of a change-in-control, the performance period would end and VMware’s stock price and TSR achievement would be based on the consideration per share paid for VMware’s Class A Stock. In the event of termination due to death or disability, VMware’s stock price and TSR performance will be measured as of the last day of Mr. Gelsinger’s service.applicable dates.
Section 7:6: Overview of the Compensation-Setting Process Our CCGCompensation Committee determines NEO compensation. The members of our CCGCompensation Committee possess significant experience in the review and oversight of executive compensation at global technology companies and at VMware. The CCGCompensation Committee makes its determinations of executive compensation based on this experience and in consultation with management.
The CCGCompensation Committee has engaged FW Cook as its independent consultant to advise it on an as-needed basis with respect to executive compensation decisions. FW Cook reports directly to the CCGCompensation Committee and does not provide services to VMware management. The CCGCompensation Committee has assessed the independence of FW Cook pursuant to SEC and NYSE Rules and concluded that the firm’s work does not raise any conflict of interest that prevents them from providing independent advisory services to the CCGCompensation Committee. FW Cook provides the CCGCompensation Committee analyses of our executive compensation program from time to time. FW Cook assists the CCGCompensation Committee’s review of our program’s effectiveness in supporting our business objectives and strategy, its relative reasonableness compared to competitive practice for companies in related businesses of similar size and market value and the changing business and regulatory environment. FW Cook recommends a peer group, which is reviewed and approved annually by the CCGCompensation Committee, for executive compensation comparisons. FW Cook compares our executive compensation structure and levels using data from proxy statements and other SEC filings by peer group companies, as well as additional data from Radford Consulting (“Radford”) on the peer group companies. The weightings between the peer group and the Radford survey data are based on FW Cook’s subjective assessment of the applicability and quality of each data source. VMware’s peer group for FY19FY22 consisted of the following companies: | | | | | | | VMware peer companies | Adobe Systems, Amazon.com, Autodesk, CA, Cisco Systems, Citrix Systems, Cognizant Technology Solutions, eBay, Electronic Arts, Intuit, Microsoft, NetApp, Oracle, Red Hat,Palo Alto Networks, PayPal, Salesforce.com, ServiceNow and Symantec Workday |
The CCGCompensation Committee determined that the peer group of peer companies was representativefor FY22 based on the following principles: •Remove legacy peers that are no longer viewed as competitors for business or human capital, or fail to disclose meaningful data to support the Committee’s deliberations; •Focus on SaaS companies when identifying potential additions given VMware’s evolving business model; •Avoid introducing artificial volatility into the market data by taking a measured approach to changes; and •Factor in degree of our executive talent poolalignment with companies that may be considered peers by stockholders and our product and market profile and appropriate from a size perspective. Ourproxy advisory services. Applying the principles above, the Compensation Committee made the following changes to the peer group for FY19 was unchanged from FY18 except for the removal of Yahoo, which was acquired in June 2017.FY22: In FY19, our CCG Committee also monitored•Removed Amazon: No longer comparable company size and pay practices;
•Removed Cognizant Technology Solutions: Not viewed as a group of reference peer companies, primarily to assist the CCG Committee in evaluating competitive long-term incentive program design elements. The reference companies included Facebook, Googletalent competitor; •Removed NortonLifeLock: No longer comparable company size and Twitter. We did not utilize data from the VMware reference companies to determine compensation levels, but we believe practices from these companies continue to be relevant to reviewviewed as a talent competitor; •Added Palo Alto Networks: Comparable company size and from time to time, we compete with these companies for executive talent due to the relative proximity of our headquarters on the West coastcompetitor; •Added PayPal: Comparable company size and overlaps in certain of our technologies.talent competitor. The CCGCompensation Committee made NEO compensation decisions in light of the FW Cook analysis, and with the objective of awarding compensation that is generally competitive with our peer group and the Radford survey data (which generally reflects pay practices from the same set of peers) and sufficient to recruit and retain qualified executives. The CCGCompensation Committee does not target or benchmark compensation to any particular percentile of compensation paid by other companies, but rather considers the market data as one factor in making its compensation decisions. Other factors include our performance, an individual’s contribution, experience, potential, compensation history, internal pay equity and retention needs. After taking these factors into account, the CCGCompensation Committee exercises its judgment in making compensation decisions. We believe that this approach gives us the flexibility to make compensation decisions based upon all of the relevant facts and circumstances.
Section 8:7: Benefits, Perquisites and Other Compensation Policies Benefits and Perquisites We provide only minimal and select executive-level benefits or perquisites to our NEOs targeted to assist in the recruitment of new executives and to meet market practices. During FY19,FY22, our NEOs were eligible to participate in a program for VMware to reimburse employees at the senior vice president level or above, including each NEO, for annual comprehensive physical examinations and medical screenings. We determined that offering such a benefit was in the best interests of VMware and our stockholders, given the critical role of our senior staff to the ongoing performance of our business. Our NEOs employed in the U.S. were also eligible to participate in a non-qualified deferred compensation plan (“NQDC Program”) that was open to VMware employees at the level of senior director and above. The NQDC Program allows a participant to voluntarily defer between 5% and 75% of his or her base salary, between 5% and 100% of his or her commissions (if any) and between 5% and 100% of his or her eligible bonusbonuses (if any), in each case on a pre-tax basis. VMware may, but does not currently intend to, make matching contributions. VMware’s facilities are utilized from time to time by local community organizations. During FY19, the allocated operating and rental costs for VMware facilities utilized for community events hosted by Mr. Gelsinger were less than $500.
From time-to-time we provide relocation benefits in connection with the recruitment or appointment of new executive officers. During the first quarter of FY19,In 2021, prior to his appointment as EVP, Worldwide Sales, Mr. Carli was employed on an expatriate assignment from the United KingdomBrulard relocated to the United States, pursuant to a long-term assignment entered into in May 2015 and amended in June 2016 inStates. In connection with Mr. Carli’s appointment as an executive officer of the Company. Pursuant to his expatriate assignment,relocation, we provided Mr. CarliBrulard with relocation and tax equalization benefits consistent with VMware’s Relocation Policy available to all employees, including officers. These perquisitesSome of these tax equalization benefits were provided to Mr. Brulard during FY22 and are included in the “All“All Other Compensation”Compensation” column in the “Summary Compensation Table.” Effective May 1, 2018, upon the expiration of Mr. Carli’s expatriate assignment agreement, we entered into a localization agreement with Mr. Carli that established him as a U.S. employee while terminating his employment in the United Kingdom. Accordingly, we will no longer be responsible for tax equalization payments for Mr. Carli commencing with the start of his service as a U.S. employee except Other than with respect to performance stock unit awards granted to Mr. Carli while he was on expatriate assignment. As those awards continue to vest,relocation benefits, we will continue to be responsible for tax equalization payments for the portion of the performance periods that elapsed while Mr. Carli was a United Kingdom employee on expatriate assignment. The localization agreement provides Mr. Carli with post-employment relocation assistance and tax services in connection with the preparation of multi-country tax returns for an initial period of approximately three years and in resolving tax-related disputes that may arise in connection with such initial period and the period of Mr. Carli’s expatriate assignment. We do not generally provide NEOs with tax gross-ups or reimbursements.reimbursements on compensation and perquisites.
Change-in-Control and Post-Termination Compensation CIC Plan Each NEO is eligible for change-in-control benefits pursuant to the CIC Plan, which is intended to encourage the retention of NEOs and reduce uncertainty regarding the personal consequences of a potential change in control. The CIC Plan provides severance benefits for NEOs who are involuntarily terminated without “cause,” or who terminate employment for “good reason,” within 12 months following a “change in control” of VMware (each such term as defined in the CIC Plan), with benefits designed to be competitive with similar plans at VMware’s peer companies. The November 2021 Spin-Off of VMware from Dell was not considered a change-in-control under the CIC Plan and, accordingly, does not give rise to any potential benefits under the CIC Plan. Upon a qualifying termination under the CIC Plan following a change in control, each NEO is eligible to receive: (1) a lump sum payment equal to a multiple of annual base salary, target annual bonus and monthly health insurance premiums; and (2) full accelerated vesting of outstanding equity awards. VMware’s CEO Mr. Gelsinger, is eligible to receive two times his annual base salary and target bonus and the value of 24 months of the health insurance premiums. Other NEOs are eligible to receive 1.5 times their annual base salary and target bonus and the value of 18 months of the health insurance premiums. The monthly health insurance premium amount equals 150% of the monthly cost required to obtain continuation coverage for the NEONEOs and his or hertheir covered dependents. NEOs would be required to execute a release in favor of VMware in
exchange for CIC Plan benefits. Performance-based equity awards will generally convert into shares at target amounts if a change in control occurs during a performance period, unless otherwise specified in the performance award agreement. The CIC Plan does not provide for any tax gross-ups. In the event the NEO would be subject to an excise tax under Section 4999 of the Code (imposed on individuals who receive compensation in connection with a change of control that exceeds certain specified limits), the benefits to the NEO will be reduced to the extent that such benefits do not trigger the excise tax unless the NEO would retain greater value (on an after-tax basis) by receiving all benefits and paying applicable excise, income and payroll taxes. In addition to the double-trigger acceleration provided under the CIC Plan, the PSU awards granted to NEOs provide that if a change in control occurs during a performance period, that performance period will terminate immediately prior to
consummation of the change in control and the PSUs will convert into time-based vesting awards that convert into Class ACommon Stock at the target level of achievement. The change-in-control provision in the FY22 TSR PSUs provides that in the event of a change-in-control of VMware, the consideration paid for each share of VMware will be utilized in place of the VMware 90-day trailing VWAP for determining the stock price appreciation measurement and the Relative TSR Modifier. Vesting is not accelerated and the TSR PSU vesting dates are not impacted by a change-in-control unless the executive is involuntarily terminated following the change-in-control. Any remaining post-vesting holding period would terminate on the effective date of a change-in-control. If Mr. Raghuram or Mr. Dhawan becomes eligible for benefits under the CIC Plan due to involuntary termination following a change-in-control, the FY22 TSR PSUs will be eligible to vest in accordance with the terms of the CIC Plan to the extent that PSUs have become funded by applying the stock price appreciation and relative TSR metrics as of the effective date of the change-in-control. Any PSUs that are not funded as of the effective date of the change-in-control will be forfeited. Severance Plan During FY19,Each NEO is also eligible for severance benefits pursuant to the CCG Committee approved theExecutive Severance Plan covering VMware executives, including each NEO.Plan. The Severance Plan provides severance benefits to NEOs in the event of an involuntary termination without “cause” or for “good reason.” The CCGCompensation Committee adopted the Severance Plan in 2018 following a survey of the practices of the Company’s peers, a number of which provide similar benefits to some or all of their executive officers. The Severance Plan benefits are comparable to those offered by such peers.Thepeers. The Severance Plan is intended to provide a consistent framework to administer terminations in the event of an involuntarily termination without “cause” or for “good reason” (each such term as defined in the Severance Plan).addressing covered terminations.
Upon a qualifying termination under the Severance Plan, each NEO is eligible to receive: (1) a lump sum payment equal to annual base salary, target annual bonus, as well as the value of 12 months of the health insurance premiums; (2) accelerated vesting of outstanding RSU and stock option awards that were otherwise scheduled to vest within and including the 12 months following termination; and (3) unless otherwise specified in the award agreement, accelerated vesting of outstanding PSU awards, to the extent that performance periods have been completed, as further detailed in the Severance Plan. The FY22 TSR PSUs awarded to Messrs. Raghuram and Dhawan are excluded from acceleration under the Severance Plan. On January 12, 2021, Mr. Gelsinger resigned his position as CEO of VMware effective February 12, 2021. Given that Mr. Gelsinger’s departure was voluntary, he did not receive any severance benefits under the Severance Plan. All of Mr. Gelsinger’s unvested equity awards were forfeited effective as of his termination date and no shares were issued. Mr. Gelsinger’s participation in the FY21 Executive Bonus Program terminated without a bonus being paid. On May 12, 2021, in connection with its leadership transition, VMware announced that Mr. Poonen would depart VMware on August 6, 2021. Mr. Poonen received benefits under the Severance Plan in connection with his departure pursuant to the “termination for good reason” provision in the Severance Plan as detailed above. Death and Disability Acceleration VMware equity awards for all employees, including those granted to NEOs, provide for full acceleration of vesting upon death or termination of employment due to disability. In such event, PSU awards would accelerate presuming that target performance had been achieved. Commencing with the FY21 Operating PSU Plan, the Compensation Committee amended the acceleration provision in PSU agreements so that vesting in such instances would accelerate instead on a pro rata basis based on actual performance prior to the termination date. The FY22 Operating PSU Plan and the FY22 TSR PSU Plan also provide for pro rata acceleration. The Compensation Committee determined that the PSU plan revision was consistent with the unique nature of performance-based awards which scale award payouts based upon the Company’s actual performance. Compensation Risk Assessment The Company conducts an annual compensation risk assessment covering all employees including the NEOs. We believe that the mix and design of the elements of our executive compensation plans are well balanced and do not encourage management to assume excessive risk. AsWith respect to NEOs, as detailed above, our pay mix is balanced among base salary, short-term performance cash bonus awards and long-term equity compensation. NEO compensation is heavily weighted towards long-term, equity-based incentive compensation, which we believe discourages excessive short-term risk taking and strongly aligns NEO interests with the creation of long-term increased stockholder value. In addition, we maintain policies againstprecluding the purchase of hedging instruments in order to help maintain the alignment of NEO interests with long-term changes in stockholder value by prohibiting NEOs from purchasing financial instruments that trade off the potential for upside gain in order to lock in the current market value of our securities. Similarly, we also maintain executive stock ownership requirements
for our CEO, President and CFO. Additionally, as discussed below, our executive compensation plans also include compensation recovery provisions that enable us to recover performance bonuses, as well as gains on equity awards, that were earned due to activity detrimental to the Company. Tax Deductibility
Prior to its amendment pursuant to 2017 Tax CutsHedging and Jobs Act (“Tax Act”), Section 162(m) of the Code, as amended, generally disallowed a tax deduction to public corporations for compensation greater than $1 million paid for any fiscal year to the corporation’s CEO and certain other executive officers. However, performance-based compensation was not subject to the $1 million deduction limit if certain requirements were met. Among other changes to Section 162(m), the Tax Act eliminated the exemption for performance-based compensation. The amendment to Section 162(m) is effective with respect to VMware for compensation paid in FY19 and in future years. The Tax Act includes a transition rule that allows the performance-based compensation exemption to continue for executive officers with a right to participate in a plan that is part of a written binding contract in effect on November 2, 2017 that is not modified in any material respect before the compensation is paid (“Transition Rule”).
During FY19, to extent that our NEOs participate in performance-based compensation plans that are likely to qualify for treatment as performance-based compensation under the Transition Rule, the CCG Committee avoided actions that would be considered a material modification to such plan or agreement in order to preserve their deductibility.
Hedging PolicyPledging Policies
We have adopted a policy prohibiting any of our directors or employees, including our NEOs, from “hedging” their ownership in shares of our Class ACommon Stock or other equity-based interests in us, including by engaging in short sales or trading in derivative securities relating tobased on VMware securities. In addition, our common stockpolicy discourages all directors and the sharesemployees from pledging VMware securities or holding VMware securities in margin accounts. Currently, none of Class V common stock issued by Dell.our executive officers and directors have pledged any VMware securities or held VMware securities in margin accounts. Compensation Recovery Policies Our Executive Bonus Program for our executive officers, including our NEOs, and the performance-based, long-term equity award program were both adopted under the Incentive Plan. The Incentive Plan includes a “clawback” provision to tie our ability to claw back outstanding equity awards to any restatements of VMware’s financial results and in case of termination for “cause,” as defined in the Incentive Plan. The Incentive Plan also includes provisions that the CCGCompensation Committee will review outstanding incentive awards held by executive officers or the value of such awards realized during or in the year following the restatement and, in its sole discretion, determine to cancel or claw back the value of such awards if the CCGCompensation Committee deems it appropriate. Additionally, if an employee, including a NEO, is terminated for “cause,” (as defined in the Incentive Plan), all unvested or unexercised awards will be forfeited and the CCGCompensation Committee may determine to require reimbursement of amounts realized after the event constituting cause has occurred. Executive Stock Ownership Guidelines In FY19, we implementedVMware’s C-level executive officers are subject to executive stock ownership guidelines that had been approved by the CCG Committee the previous year in orderare designed to further align the interests of our senior executive officers with the interests of our stockholders and to underscore our commitment to strong corporate governance practices. Under the guidelines, our C-level executive officers are required to own shares of our common stock valued at a multiple of their annual base salary (six times in the case of our CEO, three times with respect to our COOsPresident and two times in the case of our CFO). The guidelines include a holding requirement for executives until they achieve their respective ownership level. Any executive who holds less than the requisite level of ownership must hold at least 50% of the shares net of tax withholdings that are acquired upon vesting in their equity awards and, with respect to stock options, 50% of the shares net of exercise and tax withholdings. Only issued shares are counted toward satisfaction of the ownership requirement. Accordingly, unvested equity awards (including both time- and performance-based) and unexercised stock options, if any, do not count toward satisfying the executive stock ownership requirement. Requisite ownership levels for each senior executive will be reset annually. The executive stock ownership guidelines took effect on April 1, 2018.are adjusted annually to reflect changes during the previous year to base salaries and Common Stock price.
COMPENSATION OF EXECUTIVE OFFICERS Summary Compensation Table VMware revised its fiscal calendar effective January 1, 2017. VMware’s first fiscal year under its revised fiscal calendar began on February 4, 2017 and ended February 2, 2018. The period from January 1, 2017 through February 3, 2017 was recorded as a transition period (“Transition Period” or “Transition”).
The table below summarizes the compensation information for the fiscal years ended February 1, 2019January 28, 2022, January 29, 2021 and February 2, 2018, the Transition Period and the fiscalJanuary 31, 2020 for each year ended December 31, 2016 forthat our NEOs—our CEO, our CFO and the three other most highly compensated individuals who were serving as executive officers of VMware at the end of FY19 for each year that they FY22, as well as our former CEO, who served as a principal executive officer during FY22, and our former COO, Customer Operations, who would have qualified as one of the three other most highly compensated individuals had he remained at the Company through the end of FY22—served as an NEO. The amounts shown in the Stock Awards column do not reflect compensation actually received by the NEOs, but instead include the aggregate grant date fair value of awards computed in accordance with GAAP.GAAP, and as such, amounts shown in the Total column also do not reflect compensation actually received by the NEOs. | | | | | | | | | | Name and Principal Position | Fiscal Year | Salary ($) | Bonus ($) | Stock Awards(1) ($) | Non-Equity Incentive Plan Compensation(2) ($) | All Other Compensation(3) ($) | Total ($) | | Patrick Gelsinger | 2019 | 1,000,000 | — | 20,196,095 | 2,366,346 | 6,750 | 23,569,191 | | CEO | 2018 | 1,000,000 | — | 14,367,490 | 1,945,861 | 19,260 | 17,332,611 | | | Transition | 83,333 | — | — | 181,258 | 1,500 | 266,092 | | | 2016 | 1,000,000 | — | 12,052,249 | 1,783,125 | 6,000 | 14,841,374 | | Zane Rowe | 2019 | 750,000 | — | 10,414,622 | 956,250 | 6,750 | 12,127,622 | | CFO and Executive Vice President | 2018 | 750,000 | — | 7,261,621 | 954,227 | 6,000 | 8,971,848 |
| Transition | 62,500 | — | — | 88,887 | 1,500 | 152,887 | | | 2016 | 630,770 | — | 5,150,990 | 761,466 | 7,642 | 6,550,868 | Maurizio Carli(4) | 2019 | 823,213 | — | 6,762,559 | 1,033,911 | 2,974,326 | 11,594,009 | | Executive Vice President, Worldwide Sales and Services | 2018 | 714,798 | — | 16,469,509 | 991,902 | 553,782 | 18,729,991 | | Transition | 57,540 | — | — | 92,396 | — | 149,936 | | Sanjay Poonen | 2019 | 700,000 | — | 7,885,473 | 875,000 | 6,750 | 9,467,223 | | COO, Customer Operations | 2018 | 700,000 | — | 7,119,374 | 855,700 | 1,500 | 8,676,574 |
| Transition | 58,333 | — | — | 79,709 | — | 138,042 | | | 2016 | 621,250 | — | 10,840,103 | 637,826 | 3,142 | 12,102,321 | | Rangarajan (Raghu) Raghuram | 2019 | 700,000 | 75,000 | 9,109,305 | 857,500 | — | 10,741,805 | | COO, Products and Cloud Services | 2018 | 700,000 | — | 7,812,216 | 855,700 | — | 9,367,916 |
| Transition | 58,333 | — | — | 79,709 | — | 138,042 | | | 2016 | 621,250 | — | 10,592,707 | 731,294 | — | 11,945,251 |
| | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position | Fiscal
Year | Salary
($) | Bonus(1) ($) | Stock Awards(2) ($) | Non-Equity Incentive Plan Compensation(3) ($) | All Other Compensation(4) ($) | Total
($) | Raghu Raghuram(5) | 2022 | 899,451 | — | 30,243,585 | 1,201,071 | — | 32,344,106 | | CEO | 2021 | 651,875 | — | 12,545,927 | 787,980 | — | 13,985,782 | | 2020 | 700,000 | — | 12,732,973 | 582,750 | — | 14,015,723 | Zane Rowe(5) | 2022 | 1,166,484 | — | 23,138,352 | 1,373,149 | 9,000 | 25,686,985 | CFO and EVP
Former Interim CEO | 2021 | 698,438 | — | 13,776,553 | 844,264 | 4,500 | 15,323,755 | | 2020 | 750,000 | — | 17,780,998 | 680,625 | 248,712 | 19,460,335 | Sumit Dhawan(5) | 2022 | 732,692 | 75,412 | 16,419,214 | 807,774 | 9,000 | 18,044,092 | | President | | | | | | | | | Jean-Pierre Brulard | 2022 | 749,725 | — | 11,034,640 | 749,725 | 198,199 | 12,732,289 | | EVP, Worldwide Sales | | | | | | | | | Amy Fliegelman Olli | 2022 | 600,000 | — | 6,269,370 | 660,000 | 9,000 | 7,538,370 | | EVP, General Counsel and Secretary | 2021 | 579,167 | — | 9,649,269 | 705,080 | 4,500 | 10,938,016 | Patrick Gelsinger(5) | 2022 | 38,462 | — | — | — | — | 38,462 | | Former CEO | 2021 | 885,417 | — | 15,654,137 | — | 2,250 | 16,541,804 | | 2020 | 1,000,000 | — | 40,010,184 | 1,511,875 | 27,666 | 42,549,725 | Sanjay Poonen(6) | 2022 | 363,462 | — | 11,239,865 | — | 1,446,467 | 13,049,794 | | Former COO, Customer Operations | 2021 | 651,875 | — | 12,038,049 | 787,980 | 6,301 | 13,484,205 | | 2020 | 700,000 | — | 12,082,453 | 600,250 | 26,155 | 13,408,858 |
____________________ (1) Amount shown reflects the FY22 individual performance component of the cash bonus earned by Mr. Dhawan pursuant to VMware’s non-executive bonus plan for senior directors and above attributable to his service as SVP, Chief Customer Experience Officer through May 31, 2021 prior to his appointment as President. (2) Amounts shown represent the grant date fair values of stock awards granted in the fiscal year indicated, which were computed in accordance with the Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Options (“ASC Topic 718”), without taking into account estimated forfeitures. The amounts disclosed may never be realized. Assumptions used in calculating these amounts are included in the note titled “Stockholders’ Equity”“Stockholders’ Equity” to our audited financial statements included in our Annual Report on Form 10-K for the applicable year. Amounts include the value of the FY19FY22 performance tranches of the FY16 PSUs, FY18FY20 Operating PSUs, FY21 Operating PSUs, FY22 Operating PSUs (the “Operating PSUs”) and FY18 HCthe FY22 TSR PSUs, for which performance goals were set on the grant dates in the table below,below. Amounts in the table above and the FY19table below also include the value of the FY23 performance tranche of the FY21 Operating PSUs, for which performance goals were deemed awarded onto have been set at target upon VMware’s spin-off from Dell effective November 1, 2021 pursuant to the grant date set forth below.extraordinary corporate transaction provision of the FY21 Operating PSU awards. For more details on the FY16 PSUs, FY18 Operating PSUs, FY18 HC PSUs and FY19 Operating PSUsour PSU plans, see “Compensation Discussion and Analysis—Section 6:5: Long-Term Incentives,” and “—“Grants of Plan-Based Awards.Awards” and “Outstanding Equity Awards at Fiscal Year-End.” With respect to eachVesting of the FY16 PSUs FY18 Operating PSUs, FY18 HC PSUs and FY19 Operating PSUs, vesting is subject to the Company’s financialCompany performance. Accordingly, the “Stock Awards” column above includes the grant date fair value based on the probable outcome of the performance-based conditions as of the grant date in accordance with ASC Topic 718. Assuming the
maximum level of
performance is achieved, the aggregate grant date fair value of the portion of the FY16 PSUs, FY18 Operating PSUs FY18 HC PSUs and FY19 OperatingFY22 TSR PSUs awards deemed granted in FY19FY22 set forth in the table above would be as set forth in the table below. | | Name | | Name | Grant | Date of Grant | Maximum
Conversion Ratio | Assuming Highest Level
of Performance
Conditions Achieved ($) | | Raghu Raghuram | | Raghu Raghuram | FY20 Operating PSUs | 4/14/2021 | 2.00 | 2,142,963 | | | | FY21 Operating PSUs | 4/14/2021 | 2.00 | 8,634,360 | | | | | FY22 Operating PSUs | 4/14/2021 | 2.00 | 3,112,518 | | Name | Grant | Date of Grant | Maximum Conversion Ratio | Assuming Highest Level of Performance Conditions Achieved ($) | | | Patrick Gelsinger | FY16 PSU | 4/16/2018 | 2.00 | 11,068,360 | | | | FY18 Operating PSU | 4/16/2018 | 2.00 | 4,193,339 | | FY22 Operating PSUs | 5/12/2021 | 2.00 | 1,902,491 | | | FY18 HC PSU | 4/16/2018 | 1.00 | 1,789,127 | | FY22 TSR PSUs | 6/1/2021 | 1.00 | 11,248,221 | | | FY19 Operating PSU | 4/27/2018 | 2.00 | 5,387,993 | | FY21 Operating PSUs | 11/1/2021 | 1.00 | 4,232,817 | | Zane Rowe | FY16 PSU | 4/16/2018 | 2.00 | 6,385,700 | Zane Rowe | FY20 Operating PSUs | 4/14/2021 | 2.00 | 4,591,309 | | | FY18 Operating PSU | 4/16/2018 | 2.00 | 2,795,644 | | FY21 Operating PSUs | 4/14/2021 | 2.00 | 8,634,360 | | | FY18 HC PSU | 4/16/2018 | 1.00 | 795,192 | | FY22 Operating PSUs | 4/14/2021 | 2.00 | 3,307,241 | | | FY19 Operating PSU | 4/27/2018 | 2.00 | 2,514,379 | | FY22 Operating PSUs | 5/12/2021 | 2.00 | 3,561,318 | | Maurizio Carli | FY16 PSU | 4/16/2018 | 2.00 | 1,702,785 | | | | | FY21 Operating PSUs | 11/1/2021 | 1.00 | 4,232,817 | | Sumit Dhawan | | Sumit Dhawan | FY22 Operating PSUs | 5/12/2021 | 2.00 | 3,805,329 | | | | FY22 TSR PSUs | 6/1/2021 | 1.00 | 9,373,521 | | Jean-Pierre Brulard | | Jean-Pierre Brulard | FY21 Operating PSUs | 4/14/2021 | 2.00 | 2,374,332 | | | | FY22 Operating PSUs | 4/14/2021 | 2.00 | 2,334,304 | | | | FY21 Operating PSUs | 11/1/2021 | 1.00 | 1,164,090 | | Amy Fliegelman Olli | | Amy Fliegelman Olli | FY20 Operating PSUs | 4/14/2021 | 2.00 | 1,377,330 | | | FY18 Operating PSU | 4/16/2018 | 2.00 | 2,329,576 | | FY21 Operating PSUs | 4/14/2021 | 2.00 | 1,942,692 | | | FY18 HC PSU | 4/16/2018 | 1.00 | 795,192 | | FY22 Operating PSUs | 4/14/2021 | 2.00 | 1,945,197 | | | FY19 Operating PSU | 4/27/2018 | 2.00 | 1,975,526 | | FY21 Operating PSUs | 11/1/2021 | 1.00 | 952,381 | | Patrick Gelsinger | | Patrick Gelsinger | n/a | — | — | | Sanjay Poonen | FY16 PSU | 4/16/2018 | 2.00 | 3,405,826 | Sanjay Poonen | FY20 Operating PSUs | 4/14/2021 | 2.00 | 2,142,963 | | | FY18 Operating PSU | 4/16/2018 | 2.00 | 2,795,644 | | FY21 Operating PSUs | 4/14/2021 | 2.00 | 8,634,360 | | | FY18 HC PSU | 4/16/2018 | 1.00 | 1,192,788 | | FY22 Operating PSUs | 4/14/2021 | 2.00 | 3,112,518 | | | FY19 Operating PSU | 4/27/2018 | 2.00 | 1,795,909 | | | Rangarajan (Raghu) Raghuram | FY16 PSU | 4/16/2018 | 2.00 | 2,979,874 | | | | FY18 Operating PSU | 4/16/2018 | 2.00 | 2,795,644 | | | | FY18 HC PSU | 4/16/2018 | 1.00 | 1,192,788 | | | | FY19 Operating PSU | 4/27/2018 | 2.00 | 2,514,379 | |
____________________ (2)(3) Amounts shown represent cash incentive compensation earned for services renderedperformance in theeach respective fiscal yearsyear under our annual cash incentive bonus plan.Executive Bonus Program. For more details on the annual cash incentive bonus plan,Executive Bonus Program, see “Compensation Discussion and Analysis—Section 5:4: Annual Performance-Based Bonus” and “—Grants of Plan-Based Awards.” The amounts shown for Mr. Dhawan include the FY22 financial performance component of the cash bonus earned by Mr. Dhawan pursuant to VMware’s non-executive bonus plan for senior directors and above attributable to his service as SVP, Chief Customer Experience Officer through May 31, 2021 prior to his appointment as President.
(3)(4) Amounts shown in the “All Other Compensation” column for FY19FY22 represent: (i) matching contributions made under the VMware 401(k) plan of $6,750$9,792 for Mr. Brulard, $9,000 for each of Messrs. Gelsinger,Dhawan and Rowe and PoonenMs. Olli and $5,250$1,750 for Mr. Carli;Poonen; (ii) spousal travel to and attendance at a Company sales organization eventnet amount of $22,356 for Mr. Carli and a gift valued at $188 given to Mr. Carli at the event; (iii) the cost of an annual executive physical, available to all senior executives of VMware, of $1,232 for Mr. Carli; and (iv) expenses related to Mr. Carli’s expatriate assignment, including (a) tax preparation and financial planning expenses of $12,371; (b) U.K. TAA benefit (cash sum paid$184,441 in lieu of pension plan contributions) of $11,271; and (c) tax equalization payments made in FY22 pursuant to the Company’s tax equalization policy for employees on expatriate assignment. The amount shown includesemployee relocations related to Mr. Brulard’s relocation to California at the net totalend of FY21, attributable to approximately (a) $93,902 in U.S. federal taxes; (b) $83,180 in California state taxes; and (c) $7,359 in Medicare-related taxes; (iii) a tax equalization payments for Mr. Carli made andreimbursement of $3,966 in connection with relocation benefits received by the Company, or that became fixedMr. Brulard; and determinable, during the FY19 of approximately $2,921,658. This net amount is attributable(iv) a severance payment made to aggregated U.S. tax payments made by the Company of $5,441,921, offset by aggregated tax payments from Mr. Carli of $1,819,626, and tax refunds for Mr. Carli remitted to VMware of $700,637 (consisting of a $215,718 tax refund for U.K. tax year 2017/18, and a $484,919 tax refund for U.S. tax year 2017). Due to time lagsPoonen, as detailed in tax determinations, differences in taxable periods between jurisdictions, the availability of foreign tax credits or refunds and the potential receipt by the Company of credits or refunds in subsequent years, there may be significant differences in tax equalization payments from year to year. Mr. Carli was localized as a U.S. employee effective May 1, 2018. For further information on Mr. Carli’s localization arrangement, see “Compensation Discussion and Analysis—Section 8: Benefits, Perquisites and Other Compensation Policies.”footnote 6 below.
(4)(5) From the startIn January 2021, Mr. Gelsinger announced his resignation as CEO of FY19 until May 1, 2018, Mr. Carli was based in the Company’s headquarters in Palo Alto, California on an expatriate assignment fromVMware effective February 12, 2021, and our Board commenced a search for his home location in the United Kingdom. Mr. Carli’s salarysuccessor. Amounts shown in the “Salary” column for Mr. Gelsinger reflect his pro rata salary earned prior to his departure. During the CEO search, from February 13, 2021 until June 1, 2021, Mr. Rowe served as our Interim CEO in addition to his CFO role, for which he received additional incremental compensation. In May 2021, the Board announced its selection of Mr. Raghuram as CEO, a promotion from his role as VMware’s COO, Products and portionsCloud Services, and Mr. Dhawan as President, a promotion from his role as VMware’s SVP, Chief Customer Experience Officer, both effective June 1, 2021. See the CD&A for more information about VMware’s leadership transition and retention awards.
(6)Mr. Poonen resigned his position as COO, Customer Operations effective May 11, 2021 pursuant to the “good reason” provision of our Executive Severance Plan. Following a transition period, his last day of employment with VMware was August 6, 2021. His departure qualified as an “Involuntary Termination” pursuant to the Executive Severance Plan, and, as such, he received a related severance payment on
September 7, 2021. Amounts shown in the “Salary” column reflect Mr. Poonen’s pro rata salary earned prior to his departure. Amounts in the “Stock Awards” column reflect the fair values of stock awards granted to Mr. Poonen as of the payments appearingrespective grant dates and do not reflect the impact of his departure. Due to his termination, Mr. Poonen was not eligible to receive non-equity incentive plan compensation. In addition to the items listed in footnote 4 above, amounts in the “All Other Compensation” column were received in British Pounds forinclude the periodvalue of FY19 through April 30, 2018, and the balance was received in U.S. dollars for the remaininga portion of FY19. Amounts paid in GBP reflect a conversion from GBPMr. Poonen’s severance payment pursuant to USD converted using the respective foreign exchange rate forterms of the date on which payments were made. Additionally, upon conclusion of his expatriate assignment, Mr. Carli ceased accruing paid-time-off (“PTO”) in the U.K. and was paid out for his existing PTO accrualsSeverance Plan in the amount of approximately $28,158, which$1,444,717, reflecting: $700,000 related to salary; $700,000 related to bonus; and $44,717 related to benefits. The severance payment amount has beenin the “All Other Compensation” column does not reflect the acceleration of equity awards having an aggregate value of $13,219,126 included in the “Salary” columnhis severance. For more information about stock awards in which Mr. Poonen vested in FY22, including those related to accelerations upon severance, see “Option Exercises and Stock Vested.”
Grants of Plan-Based Awards The following table sets forth information concerning non-equity incentive plan grants to our NEOs under our Executive Bonus Program during FY19FY22 and stock awards granted to our NEOs during FY19FY22 under the Incentive Plan. For further information on our non-equity incentive plan grants, see “Compensation Discussion and Analysis—Section 5:4: Annual Performance-Based Bonus.” The actual amounts realizedearned in respect of the non-equity plan incentive awards during FY19FY22 are reported in the “—Summary Compensation Table” under the “Non-Equity Incentive Plan Compensation” column. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | Type | Grant
Date | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units(2) (#) | Grant Date Fair Value of Stock Awards(3) ($) | Threshold
($) | Target
($) | Maximum
($) | Threshold
(#) | Target
(#) | Maximum
(#) | | Raghu Raghuram | Bonus(4) | 04/14/21 | 307,967 | | 1,231,868 | | 2,771,703 | | — | | — | | — | | — | | — | | | RSU Grant | 04/14/21 | — | | — | | — | | — | | — | | — | | 27,622 | | 4,294,945 | | | RSU Grant | 05/12/21 | — | | — | | — | | — | | — | | — | | 16,433 | | 2,571,436 | | | FY20 Op. PSUs(5) | 04/14/21 | — | | — | | — | | 775 | | 6,891 | | 13,782 | | — | | 1,071,482 | | | FY21 Op. PSUs(6) | 04/14/21 | — | | — | | — | | 3,124 | | 27,765 | | 55,530 | | — | | 4,317,180 | | | FY22 Op. PSUs(7) | 04/14/21 | — | | — | | — | | 1,036 | | 9,207 | | 18,414 | | — | | 1,556,259 | | | FY22 Op. PSUs(7) | 05/12/21 | — | | — | | — | | 616 | | 5,477 | | 10,954 | | — | | 951,245 | | | FY22 TSR PSUs(8) | 06/01/21 | — | | — | | — | | 14,712 | | 235,386 | | 235,386 | | — | | 11,248,221 | | | FY21 Op. PSUs(9) | 11/01/21 | — | | — | | — | | 3,124 | | 27,765 | | 55,530 | | — | | 4,232,817 | | | Zane Rowe | Bonus(4) | 04/14/21 | 326,940 | | 1,307,761 | | 2,942,462 | | — | | — | | — | | — | | — | | | RSU Grant | 04/14/21 | — | | — | | — | | — | | — | | — | | 29,349 | | 4,563,476 | | | RSU Grant | 04/14/21 | — | | — | | — | | — | | — | | — | | 27,622 | | 4,294,945 | | | FY20 Op. PSUs(5) | 04/14/21 | — | | — | | — | | 1,661 | | 14,764 | | 29,528 | | — | | 2,295,654 | | | FY21 Op. PSUs(6) | 04/14/21 | — | | — | | — | | 3,124 | | 27,765 | | 55,530 | | — | | 4,317,180 | | | FY22 Op. PSUs(7) | 04/14/21 | — | | — | | — | | 1,101 | | 9,783 | | 19,566 | | — | | 1,653,620 | | | FY22 Op. PSUs(7) | 05/12/21 | — | | — | | — | | 1,232 | | 10,955 | | 21,910 | | — | | 1,780,659 | | | FY21 Op. PSUs(9) | 11/01/21 | — | | — | | — | | 3,124 | | 27,765 | | 55,530 | | — | | 4,232,817 | | | Sumit Dhawan | Bonus(4) | 04/14/21 | 197,545 | | 790,178 | | 1,777,901 | | — | | — | | — | | — | | — | | | RSU Grant | 05/12/21 | — | | — | | — | | — | | — | | — | | 32,867 | | 5,143,028 | | | FY22 Op. PSUs(7) | 05/12/21 | — | | — | | — | | 1,232 | | 10,955 | | 21,910 | | — | | 1,902,664 | | | FY22 TSR PSUs(8) | 06/01/21 | — | | — | | — | | 12,260 | | 196,155 | | 196,155 | | — | | 9,373,521 | | | Jean-Pierre Brulard | Bonus(4) | 04/14/21 | 187,431 | | 749,725 | | 1,686,882 | | — | | — | | — | | — | | — | | | RSU Grant | 04/14/21 | — | | — | | — | | — | | — | | — | | 20,717 | | 3,221,286 | | | RSU Grant | 04/14/21 | — | | — | | — | | — | | — | | — | | 27,622 | | 4,294,945 | | | FY21 Op. PSUs(6) | 04/14/21 | — | | — | | — | | 859 | | 7,635 | 15,270 | | — | | 1,187,166 | | | FY22 Op. PSUs(7) | 04/14/21 | — | | — | | — | | 777 | | 6,905 | 13,810 | | — | | 1,167,152 | | | FY21 Op. PSUs(9) | 11/01/21 | — | | — | | — | | 859 | | 7,636 | 15,272 | | — | | 1,164,090 | | | Amy Fliegelman Olli | Bonus(4) | 04/14/21 | 150,000 | | 600,000 | | 1,350,000 | | — | | — | | — | | — | | — | | | RSU Grant | 04/14/21 | — | | — | | — | | — | | — | | — | | 17,264 | | 2,684,379 | | | FY20 Op. PSUs(5) | 04/14/21 | — | | — | | — | | 498 | | 4,429 | 8,858 | | — | | 688,665 | | | FY21 Op. PSUs(6) | 04/14/21 | — | | — | | — | | 703 | | 6,247 | 12,494 | | — | | 971,346 | | | FY22 Op. PSUs(7) | 04/14/21 | — | | — | | — | | 647 | | 5,754 | 11,508 | | — | | 972,599 | | | FY21 Op. PSUs(9) | 11/01/21 | — | | — | | — | | 703 | | 6,247 | 12,494 | | — | | 952,381 | | Patrick Gelsinger(10) | n/a | n/a | — | | — | | — | | — | | — | | — | | — | | — | | Sanjay Poonen(11) | Bonus(4) | 04/14/21 | — | | — | | — | | — | | — | | — | | — | | — | | | RSU Grant | 04/14/21 | — | | — | | — | | — | | — | | — | | 27,622 | | 4,294,945 | | | FY20 Op. PSUs(5) | 04/14/21 | — | | — | | — | | 775 | | 6,891 | 13,782 | | — | | 1,071,482 | | | FY21 Op. PSUs(6) | 04/14/21 | — | | — | | — | | 3,124 | | 27,765 | 55,530 | | — | | 4,317,180 | | | FY22 Op. PSUs(7) | 04/14/21 | — | | — | | — | | 1,036 | | 9,207 | 18,414 | | — | | 1,556,259 | |
| | | | | | | | | | | | | | | | | | | | | Name | Type | Grant Date | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock Awards(3) ($) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | | Patrick Gelsinger | Bonus(4) | 04/16/18 | 431,013 |
| 1,690,247 |
| 4,056,593 |
| — |
| — |
| — |
| — |
| — |
| | | RSU Grant | 04/27/18 | — |
| — |
| — |
| — |
| — |
| — |
| 73,125 |
| 8,082,122 |
| | | FY16 PSU(5) | 04/16/18 | — |
| — |
| — |
| 19,555 |
| 52,146 |
| 104,292 |
| — |
| 5,534,180 |
| | | FY18 Op. PSU(6) | 04/16/18 | — |
| — |
| — |
| 7,409 |
| 19,756 |
| 39,512 |
| — |
| 2,096,669 |
| | | FY18 HC PSU(7) | 04/16/18 | — |
| — |
| — |
| 4,939 | 19,756 | 19,756 | — |
| 1,789,127 |
| | | FY19 Op. PSU(8) | 04/27/18 | — |
| — |
| — |
| 9,141 | 24,375 | 48,750 | — |
| 2,693,996 |
| | Zane Rowe | Bonus(4) | 04/16/18 | 191,250 |
| 750,000 |
| 1,800,000 |
| — |
| — |
| — |
| — |
| — |
| | | RSU Grant | 04/27/18 | — |
| — |
| — |
| — |
| — |
| — |
| 34,125 |
| 3,771,568 |
| | | FY16 PSU(5) | 04/16/18 | — |
| — |
| — |
| 11,282 |
| 30,085 |
| 60,170 |
| — |
| 3,192,850 |
| | | FY18 Op. PSU(6) | 04/16/18 | — |
| — |
| — |
| 4,939 |
| 13,171 |
| 26,342 |
| — |
| 1,397,822 |
| | | FY18 HC PSU(7) | 04/16/18 | — |
| — |
| — |
| 2,195 |
| 8,780 |
| 8,780 |
| — |
| 795,192 |
| | | FY19 Op. PSU(8) | 04/27/18 | — |
| — |
| — |
| 4,266 |
| 11,375 |
| 22,750 |
| — |
| 1,257,189 |
| | Maurizio Carli | Bonus(4)(9) | 04/16/18 | 202,806 |
| 795,316 |
| 1,908,758 |
| — |
| — |
| — |
| — |
| — |
| | | RSU Grant | 04/27/18 | — |
| — |
| — |
| — |
| — |
| — |
| 26,813 |
| 2,963,423 |
| | | FY16 PSU(5) | 04/16/18 | — |
| — |
| — |
| 3,009 |
| 8,023 |
| 16,046 |
| — |
| 851,393 |
| | | FY18 Op. PSU(6) | 04/16/18 | — |
| — |
| — |
| 4,116 |
| 10,976 |
| 21,952 |
| — |
| 1,164,788 |
| | | FY18 HC PSU(7) | 04/16/18 | — |
| — |
| — |
| 2,195 | 8,780 | 8,780 | — |
| 795,192 |
| | | FY19 Op. PSU(8) | 04/27/18 | — |
| — |
| — |
| 3,351 | 8,937 | 17,874 | — |
| 987,763 |
| | Sanjay Poonen | Bonus(4) | 04/16/18 | 178,500 |
| 700,000 |
| 1,680,000 |
| — |
| — |
| — |
| — |
| — |
| | | RSU Grant | 04/27/18 | — |
| — |
| — |
| — |
| — |
| — |
| 24,375 |
| 2,693,996 |
| | | FY16 PSU(5) | 04/16/18 | — |
| — |
| — |
| 6,017 |
| 16,046 |
| 32,092 |
| — |
| 1,702,913 |
| | | FY18 Op. PSU(6) | 04/16/18 | — |
| — |
| — |
| 4,939 |
| 13,171 |
| 26,342 |
| — |
| 1,397,822 |
| | | FY18 HC PSU(7) | 04/16/18 | — |
| — |
| — |
| 3,293 | 13,171 | 13,171 | — |
| 1,192,788 |
| | | FY19 Op. PSU(8) | 04/27/18 | — |
| — |
| — |
| 3,047 | 8,125 | 16,250 | — |
| 897,954 |
| | Rangarajan (Raghu) Raghuram | Bonus(4) | 04/16/18 | 178,500 |
| 700,000 |
| 1,680,000 |
| — |
| — |
| — |
| — |
| — |
| | RSU Grant | 04/27/18 | — |
| — |
| — |
| — |
| — |
| — |
| 34,125 |
| 3,771,568 |
| | | FY16 PSU(5) | 04/16/18 | — |
| — |
| — |
| 5,265 |
| 14,039 |
| 28,078 |
| — |
| 1,489,937 |
| | | FY18 Op. PSU(6) | 04/16/18 | — |
| — |
| — |
| 4,939 |
| 13,171 |
| 26,342 |
| — |
| 1,397,822 |
| | | FY18 HC PSU(7) | 04/16/18 | — |
| — |
| — |
| 3,293 | 13,171 | 13,171 | — |
| 1,192,788 |
| | | FY19 Op. PSU(8) | 04/27/18 | — |
| — |
| — |
| 4,266 | 11,375 | 22,750 | — |
| 1,257,189 |
|
____________________ (1) Amounts shown are possible payouts under the Executive Bonus Program. These amounts were based on the individual’s FY19FY22 base salary and position. The program included corporate and individual performance goals with 51%50% of each NEO’s target amount determined solely by corporate financial goals. Accordingly, thresholdThreshold bonus amounts were 26%25% of the target amounts for our NEOs. Maximum payments were capped at 240%225% of the target amounts. For more information on the Executive Bonus Program, see “Compensation Discussion and Analysis—Section 5:4: Annual Performance-Based Bonus.” (2)The number of PSUs and RSUs shown in the “Estimated Future Payouts Under Equity Incentive Plan Awards” and “All Other Stock Awards: Number of Shares of Stock or Units” columns do not reflect the subsequent value-neutral equitable adjustment applied to outstanding equity awards in connection with the special cash dividend paid by VMware on December 28, 2018. AccordingNovember 1, 2021. Pursuant to the terms of the equitable adjustment, the shares underlying all unvested equity awards held by VMware employees, including those held by the NEO awards listed in these columns,NEOs, were adjusted to reflect 1.20381.2191 times the number of units initially awarded. The following table details the application of the equitable adjustment to each equity award granted to our NEOs in FY22, reflecting the number of shares underlying all PSU grants at target performance and all RSU grants. Though not included in the following table, the pre-equitably adjusted threshold and maximum shares underlying the PSU awards shown in the above table were also multiplied by 1.2191 pursuant to the equitable adjustment. | | | | | | | | | | | | | | | | | | | | | | | | Estimated Future Payouts Under
Equity Incentive Plan Awards | All Other Stock awards: Number of Shares of Stock or Units (#) | | Name | Type | Grant Date | Pre-Equitable Adjustment
Target (#) | Post-Equitable Adjustment
Target (#) | Pre-Equitable Adjustment
(#) | Post-Equitable Adjustment
(#) | | Raghu Raghuram | RSU Grant | 04/14/21 | — | — | 27,622 | 33,674 | | RSU Grant | 05/12/21 | — | — | 16,433 | 20,034 | | FY20 Op. PSUs | 04/14/21 | 6,891 | 8,400 | — | — | | FY21 Op. PSUs | 04/14/21 | 27,765 | 33,848 | — | — | | FY22 Op. PSUs | 04/14/21 | 9,207 | 11,224 | — | — | | FY22 Op. PSUs | 05/12/21 | 5,477 | 6,678 | — | — | | FY22 TSR PSUs | 06/01/21 | 235,386 | 286,960 | — | — | | FY21 Op. PSUs | 11/01/21 | 27,765 | 33,849 | — | — | | Zane Rowe | RSU Grant | 04/14/21 | — | — | 29,349 | 35,780 | | RSU Grant | 04/14/21 | — | — | 27,622 | 33,674 | | FY20 Op. PSUs | 04/14/21 | 14,764 | 17,999 | — | — | | FY21 Op. PSUs | 04/14/21 | 27,765 | 33,848 | — | — | | FY22 Op. PSUs | 04/14/21 | 9,783 | 11,926 | — | — | | FY22 Op. PSUs | 05/12/21 | 10,955 | 13,356 | — | — | | FY21 Op. PSUs | 11/01/21 | 27,765 | 33,849 | — | — | | Sumit Dhawan | RSU Grant | 05/12/21 | — | — | 32,867 | 40,069 | | FY22 Op. PSUs | 05/12/21 | 10,955 | 13,356 | — | — | | FY22 TSR PSUs | 06/01/21 | 196,155 | 239,133 | — | — | | Jean-Pierre Brulard | RSU Grant | 04/14/21 | — | — | 20,717 | 25,257 | | RSU Grant | 04/14/21 | — | — | 27,622 | 33,674 | | FY21 Op. PSUs | 04/14/21 | 7,635 | 9,308 | — | — | | FY22 Op. PSUs | 04/14/21 | 6,905 | 8,419 | — | — | | FY21 Op. PSUs | 11/01/21 | 7,636 | 9,309 | — | — | | Amy Fliegelman Olli | RSU Grant | 04/14/21 | — | — | 17,264 | 21,047 | | FY20 Op. PSUs | 04/14/21 | 4,429 | 5,401 | — | — | | FY21 Op. PSUs | 04/14/21 | 6,247 | 7,616 | — | — | | FY22 Op. PSUs | 04/14/21 | 5,754 | 7,015 | — | — | | FY21 Op. PSUs | 11/01/21 | 6,247 | 7,616 | — | — | | Patrick Gelsinger | n/a | n/a | n/a | n/a | | | | Sanjay Poonen | RSU Grant | 04/14/21 | — | — | 27,622 | n/a | | FY20 Op. PSUs | 04/14/21 | 6,891 | n/a | — | — | | FY21 Op. PSUs | 04/14/21 | 27,765 | n/a | — | — | | FY22 Op. PSUs | 04/14/21 | 9,207 | n/a | — | — |
(3)Amounts shown represent the grant date fair values of each equity award computed in accordance with ASC Topic 718, without taking into account estimated forfeitures. The fair market values of these awards have been determined based on assumptions set forth in the note titled “Stockholders’ Equity” to our audited financial statements for the fiscal year ended February 1, 2019FY22 included in our Annual Report on Form
10-K filed with the SEC on March 29, 2019.24, 2022. With respect to the PSU awards, the estimate of the grant date fair value in accordance with ACS TopicASC 718 assumes vesting at target. For PSUs subject to post-vesting holding periods, as described in footnotes 7 and 8 to this table, the grant date fair value amounts shown also take into account illiquidity discounts applicable to the portion of net vested shares that are subject to post-vesting holding requirements. (4) “Bonus” in the above table refers to grants under the Executive Bonus Program for performance during FY19.FY22 and, with respect to Mr. Dhawan, also includes the FY22 financial performance component of the cash bonus earned by Mr. Dhawan pursuant to VMware’s non-executive bonus plan for senior directors and above attributable to his service as SVP, Chief Customer Experience Officer through May 31, 2021 prior to his appointment as President. (5)The FY16FY20 Operating PSUs were grantedawarded on April 25, 2019, and the performance targetstarget for the FY16 performance period and the three-year multiplier for the three fiscal years beginning with FY16 wereFY20 was approved in March 2016 (“First FY16 PSU Tranche”).on January 14, 2020. Performance targets for the separate FY18FY20 performance period (“Second FY16First FY20 Operating PSU Tranche”) were approved inon April 2017.25, 2019. Performance targets for the separate FY19FY21 performance period (“Third FY16Second FY20 Operating PSU Tranche”) were approved on May 29, 2020. Performance targets for the separate FY22 performance period (“Third FY20 Operating PSU Tranche”) were approved on April 14, 2021. Amounts in the “Estimated Future Payouts Under Equity Incentive Plan Awards” columns represent the range of shares of Common Stock subject to the Third FY20 Operating PSU Tranche that were eligible to vest on April 2018.1, 2022 to the extent VMware met the designated performance targets, assuming achievement at the threshold, target and maximum performance levels. The FY20 Operating PSUs were convertible into Common Stock at a ratio ranging from 0.1125 to 2.0 shares per PSU, depending upon the degree of performance, and no shares were issuable for actual performance below minimum threshold performance levels. For more information regarding the PSU awards, see “Compensation Discussion and Analysis—Section 5: Long-term Incentives.” (6) The FY21 Operating PSUs were awarded and the performance target for the three-year multiplier for the three fiscal years beginning with FY21 was approved on May 29, 2020. Performance targets for the FY21 performance period (“First FY21 Operating PSU Tranche”) were approved on May 29, 2020. Performance targets for the separate FY22 performance period (“Second FY21 Operating PSU Tranche”) were approved on April 14, 2021. Amounts in the “Estimated Future Payouts Under Equity Incentive Plan Awards” columns represent the range of shares of Common Stock subject to the Second FY21 Operating PSU Tranche that will become eligible to vest on April 1, 2023 if VMware meets the designated performance targets, assuming achievement at the threshold, target and maximum performance levels. Vesting in the FY21 Operating PSUs is subject to continued employment, and no shares will be issued if actual performance is below minimum threshold performance levels. The FY21 Operating PSUs were convertible into Common Stock at a ratio ranging from 0.1125 to 2.0 shares per PSU, depending upon the degree of performance. For more information regarding the PSU awards, see “Compensation Discussion and Analysis—Section 5: Long-term Incentives.” (7) The FY22 Operating PSUs were awarded and the performance target for the three-year multiplier for the three fiscal years beginning with FY22 was approved on April 14, 2021. Performance targets for the FY22 performance period (“First FY22 Operating PSU Tranche”) were approved on April 14, 2021. Performance targets for the separate FY23 performance period (“Second FY22 Operating PSU Tranche”) and the separate FY24 performance period (“Third FY22 Operating PSU Tranche”) were not established in FY22, and therefore the Second FY22 Operating PSU Tranche and the Third FY22 Operating PSU Tranche were not considered granted in FY22 and are not represented in the table. Amounts in the “Estimated Future Payouts Under Equity Incentive Plan Awards” columns represent the range of shares of Common Stock subject to the First FY22 Operating PSU Tranche that will become eligible to vest on April 1, 2024 (except with respect to the FY22 Operating PSUs awarded to Mr. Rowe on May 12, 2021) if VMware meets the designated performance targets, assuming achievement at the threshold, target and maximum performance levels. Stock subject to the FY22 Operating PSUs awarded to Mr. Rowe on May 12, 2021 will become eligible to vest as to 50% of the shares on June 1, 2024, 25% of the shares on June 1, 2025 and 25% of the shares on June 1, 2026, if VMware meets the designated FY22 Operating PSUs performance targets. Additionally, the FY22 Operating PSUs awarded to Mr. Rowe in May 2021 that are eligible to vest prior to June 1, 2026 are subject to a post-vesting holding requirement with respect to 50% of the net vested shares through June 1, 2026. Vesting in the FY22 Operating PSUs is subject to continued employment, and no shares will be issued if actual performance is below minimum threshold performance levels. The FY22 Operating PSUs will convert into Common Stock at a ratio ranging from 0.1125 to 2.0 shares per PSU, depending upon the degree of performance. For more information regarding the PSU awards, see “Compensation Discussion and Analysis—Section 5: Long-term Incentives.” (8) The FY22 TSR PSUs were awarded, and performance targets were approved on May 12, 2021. Amounts in the “Estimated Future Payouts Under Equity Incentive Plan Awards” columns represent the range of shares of Class A Stock subject to the Third FY16FY22 TSR PSUs that will become eligible to vest if VMware meets the designated TSR targets, assuming achievement at the threshold, target and maximum performance levels. Each FY22 TSR PSU Tranche that vestedwill convert into one share of Class A Stock on March 31, 2019. Shareseach vesting date, depending upon the degree of performance. Vesting in the FY22 TSR PSUs is subject to continued service, and no shares will be issued if actual performance is below minimum threshold performance levels. The FY22 TSR PSUs will fund progressively with respect to one-eighth of the First FY16 PSU Tranches were considered grantedtotal number of TSR PSUs as VMware’s 90-day trailing average stock price appreciation exceeds performance tranches set at 50%, 75%, 100%, 125%, 150%, 200%, 250% and 300% above the 15-day trailing average stock price of VMware Class A common stock as of June 1, 2021 (the “Base Date”). Dividend payments will be deemed to be re-invested for purposes of measuring achievement. Vesting will occur on the third-, fourth- and fifth-year anniversaries of the Base Date. On each vesting date, VMware’s TSR performance to date will be measured against the performance goals in FY16the FY22 TSR PSUs to determine achievement, and sharesVMware’s TSR relative to the TSR of the S&P 500 IT Index (the “Index”) will also be measured, with potential payouts subject to cutback if VMware does not equal or exceed the Second FY16 PSU Tranche were considered granted in FY18 and therefore thosemedian TSR performance of the Index. Additionally, the FY22 TSR PSUs that are eligible to vest prior to June 1, 2026 are subject to a post-vesting holding requirement with respect to 50% of the net vested shares are not represented in the table.through June 1, 2026. For more information regarding the TSR PSU awards, andsee the change in the Company’s fiscal year, see “Compensation Discussion and Analysis—Section 6: Long-term Incentives.”CD&A. (6)(9) The FY18 Operating PSUs were granted and the performance targets for the FY18 performance period were approved in April 2017 (“First FY18 Operating PSU Tranche”). Performance targets for the three-year multiplier for the three fiscal years beginning with FY18 were approved on November 15, 2017. Accordingly, the Grant Date for the First FY18FY21 Operating PSU Tranche is deemed to be November 15, 2017, as shown in the table above. Performance targets for the separate FY19PSUs FY23 performance period (“Second FY18Third FY21 Operating PSU Tranche”) were approved in April 2018. Performance targets fordeemed established pursuant to the separate FY20 performance period (“FY21 Operating PSUs Agreement’s extraordinary corporate transaction provision upon the spin-off of VMware
from Dell effective November 1, 2021, and therefore the Third FY18FY21 Operating PSU Tranche”) were not established was deemed granted in FY19.FY22. Amounts in the “Estimated Future Payouts Under Equity Incentive Plan Awards” columns represent the range of shares of Class ACommon Stock subject to the Second FY18Third FY21 Operating PSU Tranche that willwould become eligible to vest on April 1, 2020 if2023 had the extraordinary corporate transaction provision not been triggered and VMware meets the designated performance targets, assuming achievement at the threshold, target and maximum performance levels. Shares subject to the Third FY18 Operating Tranche were not considered granted in FY19 and are therefore not represented in the table. The FY18 Operating PSUs will convert into Class A Stock at a ratio ranging from 0.375 to 2.0 shares per PSU, depending upon the degree of performance. Vesting in the FY18FY21 Operating PSUs is subject to continued employment, and no shares will be issued if actual performance is below minimum threshold performance levels.employment. For more information regarding the PSU awards, and the change in the Company’s fiscal year, see “Compensation Discussion and Analysis—Section 6:5: Long-term Incentives.” (7)(10) Performance targets forMr. Gelsinger resigned from his position as CEO of VMware effective February 12, 2021, prior to being awarded any FY22 non-equity incentive plan grants under our Executive Bonus Program and stock award grants under the FY18 HC PSUs and the three-year multiplier for the three fiscal years beginning with FY18 were approved in April 2017 (“Incentive Plan.
(11)First FY18 HC PSU Tranche”) and the number of PSUs in each award was determined on Mr. Poonen resigned his position as COO, Customer Operations effective May 15, 2017. Performance targets for the separate FY19 performance period (“Second FY18 HC PSU Tranche”) were approved in April 2018. Performance targets for the separate FY20 performance period (“Third FY18 HC PSU Tranche”) were not established in FY19. Amounts in the “Estimated Future Payouts Under Equity Incentive Plan Awards” columns represent the range of shares of Class A Stock subject11, 2021 pursuant to the Second FY18 HC PSU Tranche that will become eligible to vest on April 1, 2020, if“good reason” provision of our Executive Severance Plan. Following a transition period, his last day of employment with VMware meets the designated performance targets, assuming achievement at the threshold, target and maximum performance levels. Shares subjectwas August 6, 2021. His departure qualified as an “Involuntary Termination” pursuant to the Third FY18 HC Tranche were not considered granted in FY19Executive Severance Plan, and are therefore not represented in the table. The FY18 HC PSUs will convert into Class A Stock athe received a ratio ranging from 0.25 to 1.0 shares per PSU, depending upon the degreerelated severance payment on September 7, 2021.
(8) The FY19 Operating PSUs were granted and the performance targets for the FY19 performance period and the three-year multiplier for the three fiscal years beginning with FY19 were approved in April 2018 (“First FY19 Operating PSU Tranche”). Performance targets for the separate FY20 performance period (“Second FY19 Operating PSU Tranche”) and the separate FY20 performance period (“Third FY19 Operating PSU Tranche”) were not established in FY19. Amounts in the “Estimated Future Payouts Under Equity Incentive Plan Awards” columns represent the range of shares of Class A Stock subject to the First FY19 Operating PSU Tranche that will become eligible to vest on April 1, 2021 if VMware meets the designated performance targets, assuming achievement at the threshold, target and maximum performance levels. Shares subject to the Second FY19 Operating PSU Tranche and the Third FY19 Operating PSU Tranche were not considered granted in FY19 and are therefore not represented in the table. The FY19 Operating PSUs will convert into Class A Stock at a ratio ranging from 0.375 to 2.0 shares per PSU, depending upon the degree of performance. Vesting in the FY19 Operating PSUs is subject to continued employment, and no shares will be issued if actual performance is below minimum threshold performance levels. For more information regarding the PSU awards and the change in the Company’s fiscal year, see “Compensation Discussion and Analysis—Section 6: Long-term Incentives.”
(9) From the start of FY19 until May 1, 2018, Mr. Carli was based in the Company’s headquarters in Palo Alto, California on an expatriate assignment from his home location in the United Kingdom. Mr. Carli’s non-equity incentive compensation was established in British Pounds from the start of FY19 through April 30, 2018 and in U.S. dollars for the remaining portion of FY19, which amounts are shown in the “Compensation Discussion and Analysis” section of this proxy statement.
Outstanding Equity Awards at Fiscal Year-End The following table sets forth information concerning stock options and stock awards held by our NEOs as of February 1, 2019.January 28, 2022. The market values for unvested stock awards are calculated based on a market value of $150.51$129.14 per share (the closing market price of VMware’s Class ACommon Stock on February 1, 2019)January 28, 2022) multiplied by the number of shares subject to the award. For awards which are subject to performance-based conditions as described inAdditionally, the footnotes to the table, the number of share reflects performance assuming achievement at target unless otherwise noted. | | | | | | | | | | | | | | | | | | | | | | | | Outstanding Option Awards(1) | Outstanding Stock Awards(2) | | | | | | | | | | | Time-Based Vesting Awards | Performance-Based Vesting Awards(3 | | Name | Type | Grant Date | Number of
Securities
Underlying
Unexercised
Options
Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price ($) | Option Expiration Date | Type | Grant Date | Number of Shares or Units of Stock Held That Have Not Vested (#) | Market Value of Shares or Units of Stock Held That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | Patrick Gelsinger | Option(4) | 07/25/13 | 21,086 |
| — |
| 69.81 |
| 07/25/20 |
| RSU(5) | 03/23/15 | 12,494 |
| 1,880,472 |
| — |
| — |
| Option(6) | 07/24/14 | 105,766 |
| — |
| 80.25 |
| 07/24/21 |
| PSU(7) | 03/17/16 | — |
| — |
| 104,290 |
| 15,696,688 |
| | | | | | | | | RSU(8) | 03/17/16 | 58,664 |
| 8,829,519 |
| — |
| — |
| | | | | | | | | PSU(9) | 04/03/17 | — |
| — |
| 104,290 |
| 15,696,688 |
| | | | | | | | | PSU(10) | 05/15/17 | — |
| — |
| 19,756 |
| 2,973,476 |
| | | | | | | | | RSU(11) | 05/15/17 | 37,045 |
| 5,575,643 |
| — |
| — |
| | | | | | | | | PSU(12) | 11/15/17 | — |
| — |
| 39,512 |
| 5,946,951 |
| | | | | | | | | PSU(13) | 04/16/18 | — |
| — |
| 104,292 |
| 15,696,989 |
| | | | | | | | | PSU(14) | 04/16/18 | — |
| — |
| 19,756 |
| 2,973,476 |
| | | | | | | | | PSU(15) | 04/16/18 | — |
| — |
| 39,512 |
| 5,946,951 |
| | | | | | | | | PSU(16) | 04/27/18 | — |
| — |
| 48,750 |
| 7,337,363 |
| | | | | | | | | RSU(17) | 04/27/18 | 73,125 |
| 11,006,044 |
| — |
| — |
| | Zane Rowe | | — | — |
| — |
| — |
| — |
| PSU(7) | 03/17/16 | — |
| — |
| 60,166 |
| 9,055,585 |
| | | | | | | | | RSU(8) | 03/17/16 | 33,845 |
| 5,094,011 |
| — |
| — |
| | | | | | | | | PSU(9) | 04/03/17 | — |
| — |
| 60,166 |
| 9,055,585 |
| | | | | | | | | PSU(10) | 05/15/17 | — |
| — |
| 8,780 |
| 1,321,478 |
| | | | | | | | | RSU(11) | 05/15/17 | 24,696 |
| 3,716,995 |
| — |
| — |
| | | | | | | | | PSU(12) | 11/15/17 | — |
| — |
| 26,342 |
| 3,964,734 |
| | | | | | | | | PSU(13) | 04/16/18 | — |
| — |
| 60,170 |
| 9,056,187 |
| | | | | | | | | PSU(14) | 04/16/18 | — |
| — |
| 8,780 |
| 1,321,478 |
| | | | | | | | | PSU(15) | 04/16/18 | — |
| — |
| 26,342 |
| 3,964,734 |
| | | | | | | | | PSU(16) | 04/27/18 | — |
| — |
| 22,750 |
| 3,424,103 |
| | | | | | | | | RSU(17) | 04/27/18 | 34,125 |
| 5,136,154 |
| — |
| — |
| | Maurizio Carli | Option(18) | 06/13/14 | 16,283 |
| — |
| 78.96 |
| 06/13/21 |
| RSU(19) | 05/13/15 | 4,463 |
| 671,726 |
| — |
| — |
| | | | | | | | | PSU(7) | 03/17/16 | — |
| — |
| 16,044 |
| 2,414,782 |
| | | | | | | | | RSU(8) | 03/17/16 | 27,076 |
| 4,075,209 |
| — |
| — |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PSU(9) | 04/03/17 | — |
| — |
| 16,044 |
| 2,414,782 |
| | | | | | | | | PSU(10) | 05/15/17 | — |
| — |
| 8,780 |
| 1,321,478 |
| | | | | | | | | RSU(11) | 05/15/17 | 20,581 |
| 3,097,646 |
| — |
| — |
| | | | | | | | | PSU(20) | 09/07/17 | — |
| — |
| 128,347 |
| 19,317,507 |
| | | | | | | | | PSU(12) | 11/15/17 | — |
| — |
| 21,952 |
| 3,303,996 |
| | | | | | | | | PSU(13) | 04/16/18 | — |
| — |
| 16,046 |
| 2,415,083 |
| | | | | | | | | PSU(14) | 04/16/18 | — |
| — |
| 8,780 |
| 1,321,478 |
| | | | | | | | | PSU(15) | 04/16/18 | — |
| — |
| 21,952 |
| 3,303,996 |
| | | | | | | | | PSU(16) | 04/27/18 | — |
| — |
| 17,874 |
| 2,690,216 |
| | | | | | | | | RSU(17) | 04/27/18 | 26,813 |
| 4,035,625 |
| — |
| — |
| | Sanjay Poonen | Option(21) | 09/13/13 | 186,981 |
| — |
| 72.79 |
| 09/13/20 |
| RSU(5) | 03/23/15 | 3,240 |
| 487,652 |
| — |
| — |
| | | Option(6) | 07/24/14 | 25,384 |
| — |
| 80.25 |
| 07/24/21 |
| PSU(7) | 03/17/16 | — |
| — |
| 32,088 |
| 4,829,565 |
| | | | | | | | | RSU(8) | 03/17/16 | 54,152 |
| 8,150,418 |
| — |
| — |
| | | | | | | | | RSU(22) | 11/16/16 | 49,013 |
| 7,376,947 |
| — |
| — |
| | | | | | | | | PSU(9) | 04/03/17 | — |
| — |
| 32,088 |
| 4,829,565 |
| | | | | | | | | PSU(10) | 05/15/17 | — |
| — |
| 13,171 |
| 1,982,367 |
| | | | | | | | | RSU(11) | 05/15/17 | 24,696 |
| 3,716,995 |
| — |
| — |
| | | | | | | | | PSU(12) | 11/15/17 | — |
| — |
| 26,342 |
| 3,964,734 |
| | | | | | | | PSU(13) | 04/16/18 | — |
| — |
| 32,092 |
| 4,830,167 |
| | | | | | | | | PSU(14) | 04/16/18 | — |
| — |
| 13,171 |
| 1,982,367 |
| | | | | | | | | PSU(15) | 04/16/18 | — |
| — |
| 26,342 |
| 3,964,734 |
| | | | | | | | | PSU(16) | 04/27/18 | — |
| — |
| 16,250 |
| 2,445,788 |
| | | | | | | | | RSU(17) | 04/27/18 | 24,375 |
| 3,668,681 |
| — |
| — |
| | Rangarajan (Raghu) Raghuram | Option(4) | 07/25/13 | 33,411 |
| — |
| 69.81 |
| 07/25/20 |
| RSU(5) | 03/23/15 | 7,404 |
| 1,114,376 |
| — |
| — |
| Option(6) | 07/24/14 | 33,845 |
| — |
| 80.25 |
| 07/24/21 |
| PSU(7) | 03/17/16 | — |
| — |
| 28,078 |
| 4,226,020 |
| | | | | | | | RSU(8) | 03/17/16 | 47,382 |
| 7,131,465 |
| — |
| — |
| | | | | | | | RSU(22) | 11/16/16 | 49,013 |
| 7,376,947 |
| — |
| — |
| | | | | | | | | PSU(9) | 04/03/17 | — |
| — |
| 28,078 |
| 4,226,020 |
| | | | | | | | | PSU(10) | 05/15/17 | — |
| — |
| 13,171 |
| 1,982,367 |
| | | | | | | | | RSU(11) | 05/15/17 | 24,696 |
| 3,716,995 |
| — |
| — |
| | | | | | | | PSU(12) | 11/15/17 | — |
| — |
| 26,342 |
| 3,964,734 |
| | | | | | | | PSU(13) | 04/16/18 | — |
| — |
| 28,078 |
| 4,226,020 |
| | | | | | | | | PSU(14) | 04/16/18 | — |
| — |
| 13,171 |
| 1,982,367 |
| | | | | | | | | PSU(15) | 04/16/18 | — |
| — |
| 26,342 |
| 3,964,734 |
| | | | | | | | | PSU(16) | 04/27/18 | — |
| — |
| 22,750 |
| 3,424,103 |
| | | | | | | | | RSU(17) | 04/27/18 | 34,125 |
| 5,136,154 |
| — |
| — |
|
____________________
(1) The number of securities underlying stock options and the option exercise pricesamounts shown in the table above reflect the value-neutral equitable adjustment applied to outstanding equity awards, in connection with the special cash dividend paid by VMware on December 28, 2018. According to the terms of the equitable adjustment, the number of shares underlying all unvested equity awards and unexercised stock options held by VMware employees, including the NEO awards listed above, were multiplied by a conversion factor of 1.2038, and the option exercise prices were multiplied by a conversion factor of 0.837.
(2) The number of PSUs and RSUs shown in the table above reflect the value-neutral equitable adjustment applied to outstanding equity awards in connection with the special cash dividend paid by VMware on December 28, 2018.November 1, 2021. According to the terms of the equitable adjustment, the number of shares underlying all unvested equity awards held by VMware employees, including the NEO awards listed above,below, were multiplied by a conversion factor of 1.2038.1.2191. Also, for awards which are subject to performance-based conditions as described in the footnotes to the table, the number of shares reflects performance assuming achievement at target unless otherwise noted.
| | | | | | | | | | | | | | | | | | | | | | | | | Time-Based Vesting
Awards | Performance-Based Vesting Awards(1) | | Name | Type | Grant Date | Number of
Shares or
Units of
Stock Held
That Have
Not Vested
(#) | Market
Value
of Shares
or Units
of Stock
Held That
Have Not
Vested
($) | Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units
or Other
Rights That
Have Not
Vested
(#) | Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
($) | | Raghu Raghuram | RSU(2) | 04/27/18 | 5,201 | 671,657 | — | | — | | RSU(2) | 04/25/19 | 9,450 | 1,220,373 | — | | — | | | PSU(3) | 01/14/20 | — | | — | | 6,601 | | 852,453 | | | PSU(4) | 05/29/20 | — | | — | | 12,262 | | 1,583,515 | | | PSU(5) | 05/29/20 | — | | — | | 67,696 | | 8,742,261 | | | RSU(2) | 12/10/20 | 31,751 | 4,100,324 | — | | — | | | RSU(2) | 04/14/21 | 33,674 | 4,348,660 | — | | — | | | PSU(6) | 04/14/21 | — | | — | | 8,400 | | 1,084,776 | | | PSU(7) | 04/14/21 | — | | — | | 33,848 | | 4,371,131 | | | PSU(8) | 04/14/21 | — | | — | | 11,224 | | 1,449,467 | | | RSU(2) | 05/12/21 | 20,034 | 2,587,191 | | — | | — | | | PSU(8) | 05/12/21 | — | | — | | 6,678 | | 862,397 | | | PSU(9) | 06/01/21 | — | | — | | 286,960 | | 37,058,014 | | | PSU(10)(11) | 11/01/21 | — | | — | | 33,849 | | 4,371,260 | | | Zane Rowe | RSU(2) | 04/27/18 | 5,201 | | 671,657 | | — | | — | | | RSU(2) | 04/25/19 | 20,250 | | 2,615,085 | | — | | — | | | PSU(3) | 01/14/20 | — | | — | | 14,147 | | 1,826,944 | | | PSU(4) | 05/29/20 | — | | — | | 26,278 | | 3,393,541 | | | PSU(5) | 05/29/20 | — | | — | | 67,696 | | 8,742,261 | | | RSU(2) | 12/10/20 | 31,751 | | 4,100,324 | | — | | — | | | RSU(2) | 04/14/21 | 35,780 | | 4,620,629 | | — | | — | | | RSU(2) | 04/14/21 | 33,674 | | 4,348,660 | | — | | — | | | PSU(6) | 04/14/21 | — | | — | | 17,999 | | 2,324,391 | | | PSU(7) | 04/14/21 | — | | — | | 33,848 | | 4,371,131 | | | PSU(8) | 04/14/21 | — | | — | | 11,926 | | 1,540,124 | | | PSU(8)(12) | 05/12/21 | — | | — | | 13,356 | | 1,724,794 | | | PSU(10)(11) | 11/01/21 | — | | — | | 33,849 | | 4,371,260 | | | Sumit Dhawan | RSU(2) | 03/16/20 | 30,088 | | 3,885,564 | | — | | — | | | RSU(2) | 05/29/20 | 6,346 | | 819,522 | | — | | — | | | RSU(2) | 05/12/21 | 40,069 | | 5,174,511 | | — | | — | | | PSU(8) | 05/12/21 | — | | — | | 13,356 | | 1,724,794 | | | PSU(9) | 06/01/21 | — | | — | | 239,133 | | 30,881,636 | | | Jean-Pierre Brulard | RSU(2) | 06/15/18 | 1,737 | | 224,316 | | — | | — | | | RSU(2) | 06/14/19 | 7,071 | | 913,149 | | — | | — | | | RSU(2) | 05/29/20 | 17,454 | | 2,254,010 | | — | | — | | | PSU(5) | 05/29/20 | — | | — | | 18,616 | | 2,404,070 | | | RSU(2) | 04/14/21 | 25,257 | | 3,261,689 | | — | | — | |
| | | | | | | | | | | | | | | | | | | | | | RSU(2) | 04/14/21 | 33,674 | | 4,348,660 | | — | | — | | | PSU(7) | 04/14/21 | — | | — | | 9,308 | | 1,202,035 | | | PSU(8) | 04/14/21 | — | | — | | 8,419 | | 1,087,230 | | | PSU(10)(11) | 11/01/21 | — | | — | | 9,309 | | 1,202,164 | | | Amy Fliegelman Olli | RSU(2) | 04/27/18 | 2,973 | | 383,933 | | — | | — | | | RSU(2) | 04/25/19 | 6,075 | | 784,526 | | — | | — | | | PSU(3) | 01/14/20 | — | | — | | 4,243 | | 547,941 | | | PSU(4) | 05/29/20 | — | | — | | 7,882 | | 1,017,881 | | | PSU(5) | 05/29/20 | — | | — | | 15,232 | | 1,967,060 | | | RSU(2) | 05/29/20 | 14,280 | | 1,844,119 | | — | | — | | | RSU(2) | 12/10/20 | 25,401 | | 3,280,285 | | — | | — | | | RSU(2) | 04/14/21 | 21,047 | | 2,718,010 | | — | | — | | | PSU(6) | 04/14/21 | — | | — | | 5,401 | | 697,485 | | | PSU(7) | 04/14/21 | — | | — | | 7,616 | | 983,530 | | | PSU(8) | 04/14/21 | — | | — | | 7,015 | | 905,917 | | | PSU(10)(11) | 11/01/21 | — | | — | | 7,616 | | 983,530 | | Patrick Gelsinger(14) | n/a | | | | | | Sanjay Poonen(14) | n/a | | | | | |
____________________ (3)(1) Five sets of PSU awards to NEOs remained outstanding as of February 1, 2019. The FY16 PSUs were awardedJanuary 28, 2022 are as follows in March 2016, the FY18 HC PSUs were awarded in May 2017, the FY18 Operating PSUs were awarded in May 2017, the FY18 Sales PSUs were awarded in September 2017 and the FY19 Operating PSUs were awarded in April 2018. Performance targets for the FY16 performance period of the FY16 PSUstable below (“First FY16 PSU TrancheDetails Table”) and the FY16-FY19 three-year multiplier applicable to the FY16 PSUs were approved in March 2016. In February 2017, achievement for the First FY16 PSU Tranche was certified at a level of 157.2%. Performance targets for the FY18 performance periods of the FY16 PSUs (“Second FY16 PSU Tranche”), the FY18 HC PSUs (“First FY18 HC PSU Tranche”), the FY18-FY20 three-year multiplier applicable to the FY18 HC PSUs and the FY18 Operating PSUs (“First FY18 Operating PSU Tranche”) were approved in April 2017. The FY18 Sales PSUs were awarded and the 3-year performance target was approved in September 2017. In November 2017, the performance target for the 3-year multiplier for the FY18 Operating PSUs was approved. In March 2018, achievement for the Second FY16 PSU Tranche and the First FY18 Operating PSU Tranche was certified at a level of 187.1%, and achievement for the First FY18 HC PSU Tranche was certified at a level of 100%. Performance targets for the FY19 performance periods of the FY16 PSUs (“Third FY16 PSU Tranche”), the FY18 HC PSUs (“Second FY18 HC PSU Tranche”), the FY18 Operating PSUs (“Second FY18 Operating PSU Tranche”), the FY19 Operating PSUs (“First FY19 Operating PSU Tranche”) and the FY19-FY21 three-year multiplier applicable to the FY19 Operating PSUs were approved in April 2018. In March 2019, achievement for the Third FY16 PSU Tranche, the Second FY18 Operating PSU Tranche and the First FY19 Operating PSU Tranche was certified at a level of 142.8%, achievement for the Second FY18 HC PSU Tranche was certified at a level of 100%, achievement of the FY16-FY19 3-year multiplier applicable to the FY16 PSUs was certified at a level of 125% and the final conversion ratio for the FY16 PSUs was calculated as 200%. The final percentage calculation of“Date Awarded” column reflects the First FY18 HCdate that the PSU Tranchegrant was awarded by the Compensation Committee. The “Date All Performance Targets Approved” column reflects the deemed grant date per ASC 718 and First FY18 Operating PSU Tranche remain subject tois the determination ofgrant date reflected in the FY18-FY20 3-year multipliers following the completion of FY20 and the final percentage calculation of the First FY19 Operating PSU Tranche remains subject to the determination of the FY19-FY21 3-year multiplier following the completion of FY21.table. Based on guidance provided by the SEC, the maximum“Table Reflects Shares Issuable (at Threshold, Target, Maximum or Actual)” column reflects the number of shares issuable under the First FY16 PSU Tranche, Second FY16 PSU Tranche, Third FY16 PSU Tranche, the First FY18 Operating PSU Tranche, the Second FY18 Operating PSU Tranche and the First FY19 Operating PSU Tranche is represented in the table. The target number of shares issuable under the First FY18 HC PSU Tranche, the Second FY18 HC PSU Tranche and the FY18 Sales PSUs is identical to the maximum number of shares issuable, which number of shares is represented in the table. The FY16 PSUs vested on March 31, 2019. Subject to achievement of threshold performance objectives and continued employment, the FY18 HC PSUs and the FY18 Operating PSUs will vest on April 1, 2020, the FY18 Sales PSUs will vest on May 1, 2020 and the FY19 Operating PSUs will vest on April 1, 2021.that may be issued. For more information regarding the PSU awards, see “Compensation Discussion and Analysis—Section 6:5: Long-Term Incentives.”
| | | | | | | | | | | | | | | | | | | Date Awarded | Date All Performance Targets Approved | Date Achievement Certified & Associated Conversion Ratio | Vesting Schedule | Table Reflects Shares Issuable
(at Threshold, Target, Maximum or Actual) | | FY20 Operating PSU Plan | April 2019 | | | Vested April 1, 2022 | | (3)FY20 Tranche | | April 2019 | March 2020 @ 78.6% | Actual | (4)FY21 Tranche | | May 2020 | March 2021 @ 146% | Actual | (6)FY22 Tranche | | April 2021 | March 2022 @ 100% | Actual | | FY20-FY22 3-year multiplier | | January 2020 | March 2022 @ 1.00 | | | Overall conversion ratio | | | 1 PSU to 1.082 shares Common Stock | | | FY21 Operating PSU Plan | May 2020 | | | To vest April 1, 2023, subject to achievement of threshold performance objectives and continued employment | | (5)FY21 Tranche | | May 2020 | March 2021 @ 146% | Maximum | (7)FY22 Tranche | | April 2021 | March 2022 @ 100% | Target | (10)FY23 Tranche | | November 2021(11) | TBD | Target | | FY21-FY23 3-year multiplier | | January 2020 | TBD | | | Overall conversion ratio | | | TBD after FY23 | | | FY22 Operating PSU Plan | April 2021 | | | To vest April 1, 2024, subject to achievement of threshold performance objectives and continued employment(12) | | (8)FY22 Tranche | | April 2021 | March 2022 @ 40.2% | Target | | FY23 Tranche | | TBD | TBD | n/a | | FY24 Tranche | | TBD | TBD | n/a | | FY22-FY24 3-year multiplier | | TBD | TBD | | | Overall conversion ratio | | | TBD after FY24 | | (9)FY22 TSR PSU Plan | May 2021 | May 2021 | n/a | See footnote 13 | Target | | Overall conversion ratio | | | n/a | |
(4) Options vested over four years, with 25% vested on June 1, 2014 and the remaining shares vested ratably each month thereafter.
(5)(2) RSUs vest over four years, with 25% vesting on March 1, 2016 and the remaining vesting ratably every six months thereafter, subject to continued employment.
(6) Options vested over four years, with 25% vested on May 1, 2015 and the remaining shares vesting ratably every month thereafter.
(7) Represents the maximum number of shares that may be issued under the First FY16 PSU Tranche.
(8) RSUs vest over four years, with 25% vesting on March 1, 2017 and the remaining vesting ratably every six months thereafter, subject to continued employment.
(9) Represents the maximum number of shares that may be issued under the Second FY16 PSU Tranche.
(10) Represents the maximum number of shares that may be issued under the First FY18 HC PSU Tranche.
(11) RSUs vest over four years, with 25% vesting on May 1, 2018 and the remaining vesting ratably every six months thereafter, subject to continued employment.
(12) Represents the maximum number of shares that may be issued under the First FY18 Operating PSU Tranche.
(13) Represents the maximum number of shares that may be issued under the Third FY16 PSU Tranche.
(14) Represents the target number of shares that may be issued under the Second FY18 HC PSU Tranche, which is identical to the maximum.
(15) Represents the maximum number of shares that may be issued under the Second FY18 Operating PSU Tranche.
(16) Represents the maximum number of shares that may be issued under the First FY19 Operating PSU Tranche.
(17) RSUs vest over four years, with 25% vested on April 1, 2019 and the remaining shares vesting ratably every six months thereafter, subject to continued employment.
(18) Options vest over four years, with 25% vested on May 1, 2015 and the remaining shares vesting ratably every month thereafter, subject to continued employment.
(19) RSUs vest over four years, with 25% vested on May 1, 2016 and the remaining shares vesting ratably every six months thereafter, subject to continued employment.
(20) Represents the target number of shares that may be issued under the FY18 Sales PSU, which is identical to the maximum.
(21) Options vested over four years, with 25% vested on the first anniversary of the first day of the month the option wasRSUs were granted and the remaining shares vestedvesting ratably each month thereafter.
(22) RSUs vest in full on November 1, 2019,every six months thereafter, subject to continued employment.
(3) - (10) See the footnote references in the PSU Details Table set forth above.
(11) The FY23 Tranche of the FY21 Operating PSU Plan was deemed granted in FY22 because the related performance targets were deemed established pursuant to the FY21 Operating PSUs Agreement’s extraordinary corporate transaction provision upon the spin-off of VMware from Dell effective November 1, 2021. For more information regarding the PSU awards, see “Compensation Discussion and Analysis—Section 5: Long-term Incentives.” (12) Stock subject to the FY22 Operating PSUs awarded to Mr. Rowe on May 12, 2021 will become eligible to vest, subject to achievement of threshold performance objectives and continued employment, as to 50% of the shares on June 1, 2024, 25% of the shares on June 1, 2025 and 25% of the shares on June 1, 2026, if VMware meets the designated FY22 Operating PSUs performance targets. Additionally, the FY22 Operating PSUs awarded to Mr. Rowe in May 2021 that are eligible to vest prior to June 1, 2026 are subject to a post-vesting holding requirement with respect to 50% of the net vested shares through June 1, 2026.
(13) Vesting in the FY22 TSR PSUs is subject to continued service, and no shares will be issued if actual performance is below minimum threshold performance levels. The FY22 TSR PSUs will fund progressively with respect to one-eighth of the total number of TSR PSUs as VMware’s 90-day trailing average stock price appreciation exceeds performance tranches set at 50%, 75%, 100%, 125%, 150%, 200%, 250% and 300% above the 15-day trailing average stock price of VMware Class A common stock as of the June 1, 2021 Base Date. Vesting will occur on the third-, fourth- and fifth-year anniversaries of the Base Date. On each vesting date, VMware’s TSR performance to date will be measured against the performance goals in the FY22 TSR PSUs to determine achievement, and VMware’s TSR relative to the TSR of the Index will also be measured, with potential payouts subject to cutback if VMware does not equal or exceed the median TSR performance of the Index. Additionally, the FY22 TSR PSUs that are eligible to vest prior to June 1, 2026 are subject to a post-vesting holding requirement with respect to 50% of the net vested shares through June 1, 2026. (14) Neither of Messrs. Gelsinger and Poonen had outstanding equity awards as of the end of FY22.
Option Exercises and Stock Vested The following table sets forth information regarding stock options exercised and stock awards vested for our NEOs during the fiscal year ended February 1, 2019. FY22. | | | | Option Awards | Stock Awards | | Option Awards | Stock Awards | | Name | Number of Shares Acquired on Exercise (#) | Value Realized On Exercise(1) ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting(2) ($) | Name | Number of Shares
Acquired on Exercise (#) | Value Realized On Exercise(1) ($) | Number of
Shares Acquired
on Vesting (#) | Value Realized on Vesting(2) ($) | | Raghu Raghuram | | Raghu Raghuram | — | 81,467 | 12,047,471 | | Zane Rowe | | Zane Rowe | — | 87,372 | 12,945,947 | | Sumit Dhawan | | Sumit Dhawan | — | 18,160 | 2,603,585 | | Jean-Pierre Brulard | | Jean-Pierre Brulard | — | 18,052 | 2,578,654 | | Amy Fliegelman Olli | | Amy Fliegelman Olli | — | 59,406 | 8,638,395 | | Patrick Gelsinger | 80,095 |
| 5,667,659 |
| 195,335 |
| 26,197,324 |
| Patrick Gelsinger | 65,766 | 5,273,652 | — | — | | Zane Rowe | — |
| — |
| 31,051 |
| 4,281,669 |
| | | Maurizio Carli | — |
| — |
| 64,304 |
| 8,895,177 |
| | | Sanjay Poonen | 5,000 |
| 362,600 |
| 79,634 |
| 10,795,775 |
| | | Rangarajan (Raghu) Raghuram | — |
| — |
| 122,760 |
| 16,499,486 |
| | Sanjay Poonen(3) | | Sanjay Poonen(3) | 13,384 | 1,068,445 | 138,660 | 20,558,902 |
____________________ (1) Amounts represent the difference between the exercise price and the fair market value of Class ACommon Stock on the date of exercise for each option multiplied by the number of options exercised on each such date. Fair market value has been determined based on the closing price of Class ACommon Stock on the NYSE on the exercise date. (2) Amounts represent the fair market value of the Class ACommon Stock, on the applicable vesting date, multiplied by the number of shares of PSUs and RSUs vested on each such date. Fair market value is determined based on the closing price of Class ACommon Stock on the NYSE on the vesting date. Fordate, except for vesting dates that do not fall on a trading day, for which fair market value is determined based on the closing price on the trading day immediately preceding the vesting date. Amounts shown do not represent proceeds from sales of shares acquired on vesting of stock awards and do not indicate that shares were actually sold. (3) Mr. Poonen resigned his position as COO, Customer Operations effective May 11, 2021 pursuant to the “good reason” provision of our Executive Severance Plan. Following a transition period, his last day of employment with VMware was August 6, 2021. His departure qualified as an “Involuntary Termination” pursuant to the Severance Plan, and, as such, he received a related severance payment on September 7, 2021. Mr. Poonen’s severance included the acceleration of 31,187 RSUs and 59,585 PSUs with an aggregate value of $13,219,126 based on the Common Stock closing price on September 7, 2021 ($145.63), which is reflected in the Stock Awards columns of the table.
Nonqualified Deferred Compensation In 2013, we adopted the NQDC Program, which became effective January 1, 2014. The NQDC Program is open to our employees at the level of senior director and above, including our NEOs. The NQDC Program allows a participant to voluntarily defer between 5% and 75% of his or her base salary, between 5% and 100% of his or her commissions (if any), and between 5% and 100% of his or her eligible bonus (if any), in each case on a pre-tax basis. We may, but do not currently intend to, make matching contributions. A participant can elect for his or hertheir deferrals to be treated as if invested in one or more mutual funds, which approximate those of our 401(k) plan. Amounts deferred by each participant under the program are added to their ongoing balance and adjusted based on the performance of the participant’s investment elections. We do not provide a guaranteed rate of return on these funds. The NQDC Program is “unfunded,” and all deferrals are general assets of VMware. Participants are generally eligible to receive payment of his or hertheir contributions and related earnings at the end of an elected deferral period or six months after a separation of service from VMware on the first business day of the next quarter. A participant can elect to receive his or her payments in a lump sum or annual installments. Individual contributions and related earnings vest completely upon a participant’s disability or death. Participants may make hardship withdrawals under specific circumstances.
The following table shows the executive contributions, earnings and account balances for the NEOs in the NQDC Program as of February 1, 2019.January 28, 2022. | | | Name | Executive Contributions in Last Fiscal Year(1) ($) | Aggregate Earnings (Losses) in Last Fiscal Year(2) ($) | Aggregate Balance at Last Fiscal Year-End(3) ($) | Name | Executive Contributions in Last Fiscal Year(1) ($) | Aggregate Earnings in Last Fiscal Year(2) ($) | Aggregate Withdrawals/Distributions ($) | Aggregate Balance at Last Fiscal Year-End(3) ($) | | Raghu Raghuram | | Raghu Raghuram | — | 184,036 | — | 1,731,202 | | Zane Rowe | | Zane Rowe | — | — | | Sumit Dhawan | | Sumit Dhawan | — | 17,662 | 43,990 | 161,596 | | Jean-Pierre Brulard | | Jean-Pierre Brulard | — | — | | Amy Fliegelman Olli | | Amy Fliegelman Olli | — | — | | Patrick Gelsinger | 984,904 |
| (37,100 | ) | 3,561,463 |
| Patrick Gelsinger | 6,250 | 499,471 | 2,611,624 | 2,877,660 | | Zane Rowe | — |
| — |
| — |
| | | Maurizio Carli | — |
| — |
| — |
| | | Sanjay Poonen | 5,833 |
| 129 |
| 5,963 |
| Sanjay Poonen | — | 19,794 | — | 322,895 | | Rangarajan (Raghu) Raghuram | 471,333 |
| (3,661 | ) | 1,041,331 |
| |
____________________ (1) Represents executive contribution amounts that are also reported as compensation in the “Summary Compensation Table” during FY19.FY22. (2) Earnings (Losses) shown are not included in the “Summary Compensation Table” because they are not preferential or above market. (3) Includes the following amounts reported in the summary compensation table of our proxy statements for prior years (FY14-18): $2,207,669FY14-21 of $3,337,885 for Mr. Gelsinger and $397,592$868,925 for Mr. Raghuram.Raghuram and for prior years FY19-21 of $220,063 for Mr. Poonen. Potential Payments upon Termination or Change in Control Potential Payments Table
The following table shows the potential payments and benefits that would have been provided to our NEOs upon termination under each of the scenarios discussed aboveset forth if such termination had occurred on February 1, 2019. TheJanuary 28, 2022, with the exception of Messrs. Gelsinger and Poonen, for whom the actual payments and benefits received upon their termination is shown. For each then-current executive officer, the actual amounts to be paid can only be determined at the time of the termination of employment. Excluded are benefitsemployment, and estimated amounts may materially differ from any actual amounts ultimately paid. Benefits of equal value provided to all employees, such as payments upon an employee’s death.death, are excluded. | | | | | | | | | | | | | | | | | | | | | | | | | | Termination Due to
Death or
Disability ($) | Without Cause /
Resignation for Good Reason ($) | Change in Control: Qualifying Termination(1) ($) | | Name | Acceleration of RSUs & PSUs(2) | Acceleration of RSUs & PSUs(3) | Cash Severance Payment(4) | Total | Acceleration of RSUs & PSUs(5) | Cash Severance Payment(6) | Total | | Raghu Raghuram | 29,247,110 | 22,037,999 | 2,533,879 | 24,571,878 | 38,509,032 | 5,067,757 | 43,576,789 | | Zane Rowe | 37,347,417 | 28,707,435 | 1,946,379 | 30,653,814 | 48,820,605 | 2,919,568 | 51,740,173 | | Sumit Dhawan | 11,604,391 | 5,546,821 | 1,912,500 | 7,459,321 | 15,054,108 | 1,762,578 | 16,816,686 | | Jean-Pierre Brulard | 15,045,972 | 8,632,234 | 1,622,998 | 10,255,232 | 18,422,596 | 2,434,497 | 20,857,093 | | Amy Fliegelman Olli | 14,428,167 | 9,345,862 | 1,230,392 | 10,576,254 | 17,395,157 | 1,845,588 | 19,240,745 | Patrick Gelsinger(7) | — | — | — | — | — | — | — | Sanjay Poonen(8) | — | 13,219,126 | 1,444,717 | 14,663,843 | — | — | — |
| | | | | | | | | | | | | | | | | Termination Due to Death or Disability ($) | Without Cause/Resignation for Good Reason ($) | Change in Control: Qualifying Termination(1) ($) | | | Acceleration of RSUs & PSUs(2) | Acceleration of RSUs & PSUs(3) | Cash Severance Payment(4) | Total | Acceleration of RSUs & PSUs(5) | Cash Severance Payment(6) | Total | | Patrick Gelsinger | 79,684,359 |
| 19,687,310 | 2,761,984 |
| 22,449,294 |
| 93,599,159 |
| 5,535,952 |
| 99,135,111 |
| | Zane Rowe | 42,578,828 |
| 10,517,337 | 1,516,977 |
| 12,034,315 |
| 50,838,815 |
| 2,288,199 |
| 53,127,014 |
| | Maurizio Carli | 47,776,389 |
| 9,231,380 | 1,616,977 |
| 10,848,358 |
| 50,957,420 |
| 2,438,199 |
| 53,395,619 |
| | Sanjay Poonen | 46,208,226 |
| 19,869,427 | 1,417,499 |
| 21,286,926 |
| 51,419,182 |
| 2,139,372 |
| 53,558,554 |
| | Rangarajan (Raghu) Raghuram | 47,845,323 |
| 20,367,013 | 1,416,977 |
| 21,783,991 |
| 45,065,652 |
| — |
| 45,065,652 |
|
____________________ (1) The CIC Plan does not provide for any tax gross-ups. In the event a NEO would be subject to an excise tax under Section 4999 of the Code (imposed on individuals who receive compensation in connection with a change of control that exceeds certain specified limits), the benefits to the NEO will be reduced to the extent that such benefits do not trigger the excise tax, unless the NEO would retain greater value (on an after-tax basis) by receiving all benefits and paying applicable excise, income and payroll taxes. Amounts shown are based on preliminary calculations that indicate that, with the exception of Mr. Raghuram,Dhawan, each NEO would retain greater value (on an after-tax basis) by receiving all benefits and paying the applicable excise and other taxes. With respect to Mr. Raghruam,Dhawan, the total payout amount shown reflects that his cash payment would be reduced by an estimated amount of $9,693,249 and his payment with respect to the acceleration of RSUs and PSUs would be reduced by $7,555,017,$1,106,172 in accordance with the parachute payment provision provisions of the CIC Plan. Estimated amounts may materially differ from any actual amounts ultimately paid.
(2) RepresentsAmounts represent the aggregate value of the acceleration of vesting of the executive’s unvested RSUs and PSUs, based on the closing price of the Class ACommon Stock ($150.51)129.14) on the NYSE on February 1, 2019.January 28, 2022. In the event of death or disability prior to any change of control, amounts attributable to (a) the FY20 Operating PSUs assumeaccelerate vesting in full and are paid based on target performance.performance, (b) the FY21 Operating PSUs and FY22 Operating PSUs accelerate vesting so that (i) individual performance tranches for which final performance has been certified are paid based on actual performance and (ii) individual performance tranches that have been completed but for which final performance has not been certified are paid based on target performance, and (c) the FY22 TSR PSUs continue vesting and a pro rata amount based on the proportion of the performance period that elapsed as of the date of the termination of employment is payable on each vesting date based upon actual achievement measured on each such vesting date. PSUs may also be subject to more specific treatment as may be required by the specific PSU award agreement. (3) Under the Severance Plan, amounts attributable to the aggregate value of the acceleration of vesting on the executive’s RSUs that would vest within one year are based on the closing price of the Class ACommon Stock ($150.51)129.14) on the NYSE on February 1, 2019.January 28, 2022. Under the Severance Plan, amounts attributable to PSUs are based on the closing price of the Class ACommon Stock ($150.51)129.14) and assume vesting acceleration of (i) individual performance tranches for which final performance had been certified which would beare paid based on actual performance and (ii) PSUsindividual performance tranches that would vest within a year of termination,have been completed but for which final performance would be paid at target with respect to tranches that hadhas not been certified.certified are paid based on target performance. PSUs may also be subject to more specific treatment as may be required by the specific PSU award agreement. PSUs that are eligible for tax deductibility under the transition rules of Section 162(m) of the Code are not subject to acceleration. (4) Amounts shown represent a lump severance payment equaling the sum of annual cash compensation (of annual(annual base salary and target bonus) and estimated monthly health insurance premiums (of 100%(150% of the monthly cost for 12 months) assuming a termination occurred on February 1, 2019.January 28, 2022. (5) Represents the aggregate value of the acceleration of vesting of the executive’s unvested RSUs and PSUs, based on the closing price of the Class ACommon Stock ($150.51)129.14) on the NYSE on February 1, 2019.January 28, 2022. Under the CIC Plan, amounts attributable to PSUs assume either target or actual performance, subject to more specific treatment as may be required by the specific PSU award agreement. With respect to treatment of the FY22 TSR PSUs, in the event of a change-in-control as defined in the CIC Plan, the following would apply: (a) the stock price appreciation measurement and the Relative TSR Modifier would be determined as of the effective date of the change-in-control using the consideration paid for each share of Common Stock in place of the VMware 90-day trailing VWAP, (b) vesting would not be accelerated and vesting dates would not be impacted unless the executive is involuntarily terminated following the change-in-control, and (c) any remaining post-vesting holding period would terminate on the effective date of a change-in-control. If either of Messrs. Raghuram or Dhawan becomes eligible for benefits under the CIC Plan due to involuntary termination following a change-in-control, the FY22 TSR PSUs would accelerate to the extent that PSUs have become funded (by applying the stock price appreciation and relative TSR metrics as of the effective date of the change-in-control) or, if not funded as of the effective date of the change-in-control, would be forfeited. As of January 28, 2022, the amount shown does not include any payout related to the FY22 TSR PSUs under the CIC Plan to Messrs. Dhawan and Raghuram because the threshold Common Stock price for a payout to occur would not have been achieved. (6) Amounts shown represent a lump severance payment equaling the sum of a multiplier of annual cash compensation (of two(two times annual base salary and target bonus for the CEO and 1.5 times annual base salary and target bonus for the other NEOs) and estimated monthly health insurance premiums (of 150%(150% of the monthly cost for 24 months for the CEO and for 18 months for the other NEOs) assuming termination following a change in control occurred on February 1, 2019.January 28, 2022. (7) Mr. Gelsinger voluntarily resigned from his position as CEO of VMware effective February 12, 2021 and did not receive any payments in connection with his termination of employment. (8) Mr. Poonen resigned his position as COO, Customer Operations effective May 11, 2021 pursuant to the “good reason” provision of our Severance Plan. Following a transition period, his last day of employment with VMware was August 6, 2021. His departure qualified as an “Involuntary Termination” pursuant to the Severance Plan, and he received a related severance payment on September 7, 2021, which is reflected in the table above. Mr. Poonen was not eligible for any other payments in connection with his termination of employment. Pay Ratio In accordance with Item 402(u) of Regulation S-K, promulgated under the Dodd Frank Act, we determined the ratio of: (1) the annual total compensation of our CEO, to (2) the median of the annual total compensation of all of our employees, except for our CEO, both calculated in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K. Calculation of Ratio For FY19,FY22, •the median of the annual total compensation of all of our employees, other than our CEO, was $131,144;$136,971;
•the annual total compensation of our CEO during FY22, Mr. Raghuram, as reported in the “Summary Compensation Table” of this proxy statement, was $23,569,191;$32,344,106; and •based on this information, the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees is 180236 to 1. Identification of Median Employee We selected December 31, 20182021 as the date on which to determine our median employee. As permitted by SEC rules, in order to identify our median employee, we elected to use total target direct compensation, which we calculated as salary and target bonus as of December 31, 20182021 and the target value of equity awards issued during the previous twelve months. For purposes of this disclosure, we converted employee compensation from local currency to U.S. dollars using average monthly foreign exchange rates for FY19.FY22. To identify our median compensated employee, we then calculated the target total direct compensation for our global employee population and excluded employees at the median who had anomalous compensation characteristics. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. Consequently, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates, and assumptions in calculating their own pay ratios. Additionally, due to our emphasis on pay-for-performancepay for performance and the structure of our performance-based compensation for our CEO, his total direct compensation can be highly variable. Accordingly, During FY22, in yearsconnection with our leadership transition and in order to directly align the achievement of such as FY19 during whichgoals to appreciation in stockholder returns, we exceeded target objectives forawarded a special FY22 TSR PSU award to our performance-based compensation programs and experienced an increasedCEO that requires stock price appreciation to at least $200.51 per share (reflecting a 50% total stockholder return from the grant date and reinvestment of the $27.40 per share special dividend on November 1, 2021) during the five-year period from the grant date in order for there to be any payout. The grant date fair value of the FY22 TSR PSU of $11,248,221 was included in our CEO’s total compensation and is the main factor in the increase in the CEO pay ratio from FY21. In addition, the assignment of an accounting grant date fair value to the FY23 tranche of the FY21 Operating PSU Plan due to the spin-off of VMware from Dell resulted in a grant date fair value of $4,232,817. Removing the impact of these two grants, our CEO’s total compensation would have been $16,863,068, resulting in a CEO pay ratio of our CEO’s123 to 1. The FY22 TSR PSU provides substantial value that can only be realized if VMware’s stockholders achieved meaningful returns on their investment in VMware over a significant time frame. In light of the significant value of the FY22 TSR PSU, the Compensation Committee incorporated safeguards into the award design so that the CEO will only realize value if VMware’s TSR performance is significant, sustained and market-competitive. Accordingly, although the CEO pay ratio increased significantly during FY22, the increase was driven primarily by the FY22 TSR PSU award, the realizable value of which is tied to our median employee is likely to be higher thanVMware’s stockholders’ realizing a significant return on their investment in other periods.VMware common stock.
Indemnification Agreements and Director and Officer Insurance Our certificate of incorporation and bylaws generally provide for mandatory indemnification of directors and officers to the fullest extent permitted by law. We have also entered into indemnification agreements with our directors and executive officers that will generally provide for mandatory indemnification to the fullest extent permitted by law. In addition, our executive officers and directors are insured under a liability insurance policy for our officers and directors. COMPENSATION AND CORPORATE GOVERNANCE COMMITTEE REPORT The information contained in this report shall not be deemed to be “soliciting material,” to be “filed” with the SEC or be subject to Regulation 14A or Regulation 14C (other than as provided in Item 407 of Regulation S-K) or to the liabilities of Section 18 of the Exchange Act, and shall not be deemed to be incorporated by reference in future filings with the SEC except to the extent that VMware specifically incorporates it by reference into a document filed under the Securities Act or the Exchange Act. The CCGCompensation Committee of VMware has reviewed and discussed the CD&A as required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the CCGCompensation Committee recommended to the Board that the CD&A be included in this proxy statement.
Compensation and Corporate Governance Committee Paul Sagan, Chair Anthony Bates Marianne Brown Michael Brown
DIRECTOR COMPENSATION The CCGCompensation Committee evaluates the appropriate level and form of compensation for outside directors (non-employee directors who receive compensation) at least annually and recommends changes to the Board when appropriate. We do not provide compensation to Mr. Dell due to his significant ownership interest in the Company or to Mr. Durban due to his service as the Board nominee of the SLP Stockholders, which have a significant interest in the Company. Additionally, we did not provide compensation to Messrs Gelsinger and Raghuram for their respective Board service because they served as executive officers during FY22. For more information about executive officer compensation details for Messrs. Gelsinger and Raghuram see “Compensation of Executive Officers.” Ms. Anasenes joined the Board in April 2022 and, as such, is omitted from the FY22 director compensation tables in this proxy statement. Mr. Carty is not standing for re-election, and his Board service will end on the date of the Annual Meeting. In June 2018,September 2021, the CCGCompensation Committee reviewed a market analysis by FW Cook regarding outside director compensation. Following that review, the CCG Committeecompensation and recommended to the Board that certain increases be made in order to align director compensation with market practice. In July 2018,recognize anticipated increases in workload and provide uniform pay for committee service. Later in September 2021, the Board approved increases in compensation for service on and as Chair of the Audit Committee, Compensation Committee and CCG Committees.M&A Committee, effective upon the completion of the Spin-Off. During FY19,FY22, outside directors were eligible for compensation at the following compensation:base rates: •an annual retainer fee of $60,000; •additional annual compensation for service as chair of a standing committeethe NGRPT Committee of $50,000 and as follows: $50,000 for the RPT Committee; $25,000 forchair of each of the Audit, Compensation and CCGM&A Committees (each of which$40,000 (which was increased in July 2018November 2021 to $40,000)$50,000); and $25,000 for the M&A Committee; •additional annual compensation for services as a member of the NGRPT Committee of $30,000 and as a standing committee as follows: $30,000 for the RPT Committee; $15,000 formember of each of the Audit, Compensation and CCGM&A Committees (each of which$25,000 (which was increased in July 2018November 2021 to $25,000)$30,000); and $15,000 for the M&A Committee; and •additional annual compensation of $100,000 for our Lead Independent Director. Outside directors may also receive compensation for service on ad hoc committees to the extent determined by the Board. For example, in FY19July 2020 Dell announced it was exploring potential alternatives with respect to its ownership interest in VMware, including a potential spin-off of its ownership interest to Dell stockholders that could include the Board establishedpayment of a special cash dividend by VMware, and in connection with which we formed an ad hoc special committee. The special committee consistingmet 13 times in FY22, with the mandate to evaluate and engage in discussions and negotiations with Dell with respect to any proposal that may be made by Dell with respect to a spin-off. The special committee consisted of DirectorKaren Dykstra as Chair and DirectorMarianne Brown, Michael Brown and Paul Sagan as a member,members. In light of the significant additional responsibilities and provided additional monthly compensation oftime commitment entailed, the special committee Chair received $25,000 and members received $20,000 respectively, pro ratedin compensation per month, pro-rated to reflect the portion of the months in which the special committee served. We also reimburse our directors for reasonable expenses in connection with performing their duties as directors, such as attendance at Board and committee meetings. In addition, during FY19,FY22, outside directors were eligible to receive an annual RSU grant equal to a grant value of $260,000, calculated using a 45-day trailing average, vesting in quarterly installments over one year. Subject to the discretion of the Board, outside directors who are elected to the Board during the year are eligible to receive RSU grants that may be pro-rated to reflect the portion of the year that they serve on the Board. The CCGCompensation Committee has adopted stock ownership guidelines for our outside directors. Under the guidelines, each outside director who receives VMware equity grants from us is required to hold 5,000 shares of Class ACommon Stock. If a new director does not yet
meet the holding requirement, the director must hold an amount of shares equal to 50% of the net shares acquired from us as compensation for service as a director. Messrs. Dell and Durban are not provided compensation for their services and, accordingly, are not subject to the stock ownership guidelines established for our outside directors. As of the date of this proxy statement, the holdings of each outside director subject to the stock ownership policy are sufficient to comply with this policy. We do not provide compensation to Messrs. Dell and Durban for their service on the Board because Mr. Dell is an officer of Dell and Mr. Durban can be deemed to have an ownership interest in Dell. Accordingly, Messrs. Dell and Durban are not subject to the stock ownership guidelines established for our outside directors.
Outside directors may elect to defer the receipt of shares that have vested pursuant to RSU awards to a future tax year. An outside director may elect to defer settlement of his or her vested RSUs for up to ten years from the date of grant. Deferrals are subject to early settlement upon termination of board service.
The following table below summarizes the compensation earned by our outside directors for the fiscal year ended February 1, 2019:January 28, 2022. | | | Name | Fees Earned(1) ($) | Restricted Stock Unit Awards(2)(3) ($) | All Other Compensation ($) | Total ($) | Name | Fees Earned(1) ($) | RSU Awards(2)(3) ($) | Total(4) ($) | | Anthony Bates | 135,440 |
| 277,248 |
| — |
| 412,688 |
| Anthony Bates | 128,668 | 256,511 | 385,178 | | Marianne Brown | | Marianne Brown | 198,889 | 256,511 | 455,400 | | Michael Brown | 123,159 |
| 277,248 |
| — |
| 400,407 |
| Michael Brown | 236,444 | 256,511 | 492,955 | Donald Carty | 80,440 |
| 277,248 |
| — |
| 357,688 |
| 86,223 | 256,511 | 342,733 | Michael Dell | — |
| — |
| — |
| — |
| — | | Egon Durban | — |
| — |
| — |
| — |
| | Karen Dykstra(4) | 328,020 |
| 277,248 |
| 36,671 |
| 641,939 |
| | | Kenneth Denman | | Kenneth Denman | 116,223 | 256,511 | 372,733 | Egon Durban(6) | | Egon Durban(6) | — | | Karen Dykstra | | Karen Dykstra | 244,446 | 256,511 | 500,957 | Patrick Gelsinger(7) | | Patrick Gelsinger(7) | — | | Paul Sagan | 371,663 |
| 277,248 |
| — |
| 648,911 |
| Paul Sagan | 311,334 | 256,511 | 567,845 |
____________________ (1) Includes annual retainer for service on the Board and additional amounts, as applicable, for service as a standing committee member or chair, special committee member or chair and Lead Independent Director for FY19.FY22. (2) Amounts shown represent the grant date fair values computed in accordance with ASC Topic 718 of the RSU grants in this table, rather than an amount paid to or realized by the director. The fair market values of these awards have been determined based on assumptions set forth in the note titled “Stockholders’ Equity” to our audited financial statements for the fiscal year ended February 1, 2019,FY22, included in our Annual Report on Form 10-K filed with the SEC on March 29, 2019.24, 2022. (3) On July 19, 2018,23, 2021, each of DirectorsAnthony Bates, Marianne Brown, Michael Brown, Kenneth Denman, Karen Dykstra, Donald Carty and Paul Sagan was granted an award of 1,8241,620 RSUs, with a grant date fair value of $277,248$158.34 in each case, computed in accordance with ASC Topic 718, as described in footnote 2 to this table. On December 28, 2018,November 1, 2021, in connection with the special cash dividend paid by VMware, the unvested equity awards held by VMware’s outside directors were equitably adjusted to equal 1.20381.2191 times the number of units initially awarded. (4) Amount shown in “All Other Compensation” represents reimbursement of tax advisory fees, tax penaltiesTotals may not sum due to rounding. (5) Director Donald Carty will not stand for re-election, and taxeshis Board service will end on the amount reimbursed owed by Ms. Dykstra arisingdate of the Annual Meeting. (6) Directors Michael Dell and Egon Durban do not receive any cash or equity compensation for their respective service on the Board. (7) Mr. Gelsinger resigned from an administrative error byhis position as CEO of VMware effective February 12, 2021, and he resigned from the Company in processing a deferral electionVMware Board effective April 21, 2021. He did not receive any cash or equity compensation for his service on the receipt of shares issuable in 2017 upon the vesting of her annual outside director RSU grant.Board.
The table below shows the aggregate numbers of unvested VMware stock awards outstanding for each outside director as of February 1, 2019. | | | | | | | Name | Unvested Restricted Stock
Unit RSU Awards(1)
| | Anthony Bates | 1,098988 | | Marianne Brown | 988 | | Michael Brown | 1,098988 | Donald Carty(2) | 1,098988 | Michael Dell(2)(3) | — | | Kenneth Denman | 988 | Egon Durban(2)(3) | — | | Karen Dykstra | 1,098988 | Patrick Gelsinger(4) | — | | Paul Sagan | 1,098988 |
____________________ (1) Reflects equitable adjustment in connection with VMware’s special dividend paid on December 28, 2018.November 1, 2021. Pursuant to the adjustment, the number of unvested RSUs was multiplied by 1.2038.1.2191.
(2) Director Donald Carty will not stand for re-election, and his Board service will end on the date of the Annual Meeting. (2)(3) Directors Michael Dell and Egon Durban do not receive any cash or equity compensation for their respective service on the Board.
REVIEW AND APPROVAL OF TRANSACTIONS WITH RELATED PERSONS
From time to time, we enter into transactions in which “related persons” (as defined in Item 404 of Regulation S-K adopted by the SEC under the federal securities laws) could be deemed to have a direct or indirect material interest. Related persons include our directors and executive officers, their immediate family members and stockholders beneficially owning more than five percent of either class of our common stock, including our controlling stockholder, Dell, through shares owned by EMC, an indirect, wholly owned subsidiary of Dell. We enter into these transactions in the ordinary course of business in connection with the design, development, marketing, sales and distribution of our products and in the administration and oversight of our business operations. From time to time, we have engaged in transactions with our controlling stockholder to effect the sale or transfer of business assets, and we have also invested alongside our controlling stockholder in certain private company equity financing and joint ventures. Additionally,(4) Mr. Gelsinger resigned from time to time, we repurchase a portion of the shares of Class A Stock held by Dell directly from Dell.
We have adopted a written policy and procedures for the review, approval and ratification of transactions involving related persons. We recognize that transactions with related persons may present potential or actual conflicts of interest or an appearance of impropriety. Additionally, these transactions must be fair to us in accordance with applicable Delaware corporate law. Accordingly, as a general matter, it is our policy to closely assess and evaluate transactions with related persons. Transactions with related persons are reviewed by the RPT Committee. From time to time, the Board may also appoint a special committee of independent directors who are disinterested with respect to Dell and its affiliates to review significant potential transactions with Dell.
The policy covers all transactions, arrangements or relationships (or any series of similar transactions, arrangements or relationships), in which we or any of our subsidiaries is or will be a participant, in which the amount involved exceeds $120,000 and in which any related person has or may have a direct or indirect material interest. An investor may obtain a written copy of this policy by sending a request to: VMware, Inc., Legal Department, 3401 Hillview Avenue, Palo Alto, California, 94304.
Additionally, ownership interests of our directors or officers in the common stock of Dell, or service as both a director of Dell and VMware, or as a director of VMware and an officer or employee of Dell, could create, or appear to create, potential conflicts of interest when directors and officers are faced with decisions that could have different implications for us and Dell. Since VMware’s IPO, in order to address potential conflicts of interest between us and EMC with respect to corporate opportunities, our certificate of incorporation has contained provisions regulating and defining the conduct of our affairs as they may involve EMC and its officers and directors, and our powers, rights, duties and liabilities and those of our officers, directors and stockholders in connection with our relationship with EMC. Our certificate of incorporation also contains provisions limiting the liability of our directors or officers who are also directors or officers of EMC in the event they learn of a transaction that may be a corporate opportunity for both VMware and EMC, provided they comply with the provisions set forth in our certificate of incorporation. These provisions are applicable to Mr. Dell, who serveshis position as CEO of EMC. Additionally, pursuant to resolutions adopted by our RPT Committee, we have renouncedVMware effective February 12, 2021, and he resigned from the VMware Board effective April 21, 2021. He did not receive any expectancycash or interestequity compensation for his service on the part of the Company being offered an opportunity to participate in certain corporate opportunities presented to Directors Dell, Durban and Sagan outside of their roles as directors of VMware. For more information, see the “Board of Directors, Independence and Committees—Board Independence” section of this proxy.Board.
TRANSACTIONS WITH RELATED PERSONS From time to time, we enter into transactions in which “related persons” (as defined in Item 404 of Regulation S-K adopted by the SEC under the federal securities laws) could be deemed to have a direct or indirect material interest. Related persons include our directors and executive officers, their immediate family members and stockholders beneficially owning more than five percent of our Common Stock. Related Persons Transactions Policy We have adopted a written policy for the review, approval and ratification of transactions involving related persons. We recognize that transactions with related persons may present potential or actual conflicts of interest or an appearance of impropriety. Additionally, these transactions must be fair to us in accordance with applicable Delaware corporate law. Accordingly, as a general matter, it is our policy to closely assess and evaluate transactions with related persons. Transactions with related persons are reviewed by the Governance Committee. From time to time, the Board has appointed a special committee of independent directors who are disinterested with respect to Dell and its affiliates to review significant potential transactions with Dell, including the Spin-Off. The policy covers all transactions, arrangements or relationships (or any series of similar transactions, arrangements or relationships), in which VMware or any of our subsidiaries is or will be a participant, in which the amount involved exceeds $120,000 and in which any related person has or may have a direct or indirect material interest. An investor may obtain a written copy of this policy by sending a request to: VMware, Inc., Legal Department, 3401 Hillview Avenue, Palo Alto, California, 94304. Our Relationship with Dell, Technologies Inc.the MSD Stockholders and the SLP Stockholders We incorporated in Delaware in 1998 and were acquired by EMC Corporation Prior to our IPO (“EMC”) in 2004. In August 2007, we operated as a wholly owned subsidiaryconducted an initial public offering of EMC.our Class A common stock, but remained majority-owned by EMC, the sole stockholder of our Class B common stock. In September 2016, Dell completed the Dell Acquisition,acquired EMC and EMCwe became a wholly owned indirectmajority-owned subsidiary of Dell. EMC continues to be our majority stockholder, and we are considered a “controlled company” under the NYSE Rules. Dell, through its ownership of EMC, has the power, acting alone, to approve any action requiring a vote of the majority of our voting shares and to elect all our directors.
In addition, until the first date on which EMC or its successor-in-interest ceases to beneficially own 20% or more of the aggregate number of outstanding shares of our Class A Stock and Class B Stock, the prior affirmative vote or written consent of EMC as the holder of our Class B Stock or its successor-in-interest will be required in order to authorize a number of significant actions.
As of the close of business on the Record Date, EMC directly or indirectly owned approximately 80.6% of our common stock (approximately 27.8% of the Class A Stock and 100% of the Class B Stock). Accordingly, Dell controlled approximately 97.4% of the combined voting power of our common stock. For as long as EMC or its successor-in-interest continues to control more than 50% of the combined voting power of our common stock, EMC or its successor-in-interest will be able to direct the election of all the members of the Board and exercise control over our business and affairs, including any determinations with respect to mergers or other business combinations involving us, the acquisition or disposition of assets, the incurrence of indebtedness, the issuance of any additional common stock or other equity securities, and the payment of dividends with respect to our common stock.
As described in “Our Board of Directors and Nominees,” the Chairman of our Board, Michael Dell, is the Chairman and CEO of Dell and the CEO of EMC. Unless otherwise indicated, all references to Dell in this “—Transactions with Related Persons” section are to Dell and its consolidated subsidiaries, (including EMCincluding EMC. On July 15, 2020, Dell announced it was exploring potential alternatives with respect to its ownership interest in VMware. The Board formed a fully empowered special committee of independent and Pivotal)disinterested directors, consisting of Marianne Brown, Michael Brown, Karen Dykstra and Paul Sagan, authorized to, among other things, evaluate and engage in discussions and negotiations with Dell relating to a potential spin-off of Dell’s ownership interests to its stockholders (the “Spin-Off”) and VMware’s payment of a special dividend in connection therewith (the “Special Dividend”). On April 14, 2021, we and Dell entered into a separation and distribution agreement, pursuant to which, on November 1, 2021, the Spin-Off was completed, each share of Class B common stock converted into one fully paid and non-assessable share of Class A common stock and we became a standalone company. In connection with the Spin-Off, we paid the Special Dividend of $11.5 billion in cash, pro rata, to each of the holders of our Class A common stock and Class B common stock as of the close of business on October 29, 2021.
Our
As a result of the Spin-Off, MSD Stockholders, including Michael Dell, who serves as VMware’s Chairman of the Board and chairman and chief executive officer of Dell, and the SLP Stockholders, of which Egon Durban, a VMware director, is a Co-CEO, became owners of direct interests in VMware. Transactions with Dell continue to be considered related persons transactions following the Spin-Off due to Mr. Dell’s and the SLP Stockholders’ direct ownership in both VMware and Dell, as well as Mr. Dell’s executive position with Dell, as described in “Board of Directors.” Following the Spin-Off, our results of operations and financial position are no longer consolidated with Dell’s financial statements.
Agreements and Transactions with Dell We continue to receive various administrative services from Dell, we have entered into the following agreements regarding Dell’s and our respective intellectual property and real estate,engaged in the following transactions with Dell: •Commercial Framework Agreement (“CFA”). The CFA provides a framework under which we and Dell sell goodscontinue our strategic commercial relationship, particularly with respect to projects mutually agreed by the parties as having the potential to accelerate the growth of an industry, product, service or platform that may provide the parties with a
strategic market opportunity. The CFA has an initial term of five years (expiring November 1, 2026), with automatic one-year renewals occurring annually thereafter. VMware may terminate various obligations under the CFA and servicesstatements of work entered into with Dell in the event that Dell fails to achieve certain bookings targets (as further described in the CFA), and either of the parties may terminate the CFA in the event of a material breach by the other party. •Tax Matters Agreement. In April 2021, we entered into a tax matters agreement governing our and Dell’s respective rights, responsibilities and obligations with respect to tax liabilities (including taxes, if any, incurred as vendorsa result of any failure of the Spin-Off to one anotherqualify for tax-free treatment for U.S. federal income tax purposes) and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings, cooperation and other matters regarding taxes. In connection with entering into the tax matters agreement, we and Dell resells our products and servicesagreed to third-party customers. Our current relationship with Dell includesterminate the aspects listed below. Dell, through its ownership of EMC, is our controlling stockholder and, as such, has certain rights under our charter documents.
A master transaction agreement, together with ancillary agreements, that governs many aspects of our business relationship with Dell.
Our obligations as a member of the U.S. federal consolidated tax group of which Dell is the parent and EMC and VMware are members, and in certain consolidated, combined or unitary groups that include Dell or certain of its subsidiaries, or both, for state and local income tax purposes, are governed by aexisting tax sharing agreement, as amended December 30, 2019. Our tax liability for amounts pursuant to Section 965 of the Code is solely governed by the Section 965 letter agreement between VMware, Dell and EMC dated April 1, 2019. Information on specific amounts paid between VMware and Dell related to tax matters are provided in our FY22 Annual Report on Form 10-K filed with the SEC on March 24, 2022.
•Governance Letter Agreement. We and Dell are parties to a letter agreement (the “Governance Letter Agreement”) that provides for a continuation of strong independent governance for us and our stockholders, including the following: –A provision requiring that any future request from Dell or any of its affiliates (in each case in its capacity as a stockholder) that we amendedissue a special dividend to holders of our common stock shall be subject to review by, and a recommendation in connection withfavor thereof from, a special committee of our Board comprised solely of independent directors. –A provision providing that Dell and its affiliates shall not directly or indirectly purchase or otherwise acquire any shares of our common stock if such transaction would result in our common stock no longer being publicly traded on a U.S. securities exchange or we no longer being required to file reports under Sections 13 and 15(d) of the Exchange Act, unless such transaction has been approved in advance by a special committee of our Board comprised solely of independent and disinterested directors. The Governance Letter Agreement will terminate upon the earlier of (i) November 1, 2031 and (ii) the date that the MSD Stockholders and the SLP Stockholders no longer hold shares of Common Stock. •Covenant Not to Sue and Release. The covenant not to sue and release includes covenants from each of Dell Acquisitionand VMware on behalf of itself and its controlled affiliates not to include Dell. In FY19, we paid $243 million in income taxessue the other party or its controlled affiliates, customers, resellers, channel partners or distributors for infringement of such party’s patents that exist as of the date of the closing of the Spin-Off as they relate to Dell for our portion of Dell’s consolidated federal income taxes, pursuant to our tax sharing agreement with Dell. Dell continues to hold one note payable by us that we amended most recently with EMC in 2014. The note has a principal amount of $270 million and is due December 1, 2022. The note bears interest, payable quarterly in arrears,products available at the annual ratetime of 1.75%the closing of the Spin-Off transactions (and future versions of such products). VMware may repayThe term of the note, without penaltycovenant not to sue and release commenced at the closing of the Spin-Off and will remain in effect until the later of (a) three years from such date and (b) the termination or premium, at any time.expiration of the CFA, unless otherwise agreed.
We contract for certain services from Dell subsidiaries in geographic regions where we do not have legal entities established.
•Go-to-Market Arrangements. Pursuant to ongoing original equipment manufacturer and reseller arrangements with Dell, Dell integrates or bundles our products and services with Dell’s products and sells them to end users. Dell also acts as a distributor, purchasing our standalone products and services for resale to end-user customers through VMware-authorized resellers. In addition, we provide professional services to end users based upon contractual agreements with Dell. Dell sales channels in aggregate comprise the largest route-to-market for our sales. During FY19, we recognized $2,180 million inFY22, revenue from Dell, including purchases of products and hadservices directly from us, as well as through our channel partners, accounted for 38% of our consolidated revenue. These purchases included Dell selling joint solutions as an unearnedOEM, which accounted for 13% of revenue balancefrom Dell, or 5% of $2,375 millionour consolidated revenue. The remaining revenue from Dell consisted of Dell acting as of February 1, 2019 from transactions through thesea distributor to other non-Dell resellers, reselling products and services as a reseller arrangements.or purchasing products and services for its own internal use. •Customer Financing. Dell Financial Services, an affiliate of Dell, provides financing to certain of our end customers based on the customer’s discretion. From•Technology Collaboration. We transact ongoing business with Dell to collaborate on technology projects, and, from time to time, we enter into various licensing, technology and marketing agreements with Dell relating primarily to furthering the interoperability of our respective technologies and coordinating certain sales, marketing and branding efforts. These arrangements provide for deployment of internal resources of both companies.
•Strategic Investments. We transact ongoing businesscontract with Dell to collaborate on technology projects. From time to time, we engage in transactions with Dell to effect the sale or transfer of business assets,for certain advisory services regarding strategic and weprivate company investments. We have also invested alongside Dell in certain private company equity and debt financing and joint ventures.transactions.
We have entered into arrangements to share certain information technology infrastructure and costs in order to realize cost-saving synergies. From January 2017 through August 2018, we utilized a single chief information officer for
Additionally, during 2018, Dell announced that it was reviewing its strategic opportunities including a possible business combination with us, a review that led to Dell’s exchange of its Class V common stock designed to track our financial performance for its Class C common stock (“•Dell Share ExchangeTransition Services”). In connection with Dell’s review, our Board appointedthe Spin-Off, we entered into a special committee of independent and disinterested directors consisting of Mr. Sagan and Ms. Dykstra to review potential transactions by Delltransition services agreement that could involve us (“Special Committee”). On July 1, 2018, the Special Committee recommended, and our Board declared, a conditional special dividend of $11 billion payable pro-rata to our stockholders asprovides that each of the record date. During December 2018,parties will provide the conditionsother with certain services following the Spin-Off. Under the transition services agreement, each of VMware and Dell will pay fees to the special dividend, including Dell’s satisfaction of the conditions necessary to consummate the Dell Share Exchange, were met. The special dividend was paid on December 28, 2018 to stockholders of recordapplicable service provider as of the close of business on December 27, 2018set forth in the schedules appended to the transition services agreement as well as documented, pre-approved out-of-pocket expenses. Under this agreement, we continue to contract for certain services from Dell subsidiaries in geographic regions where we do not have legal entities established.
•Promissory Note Repayment. In fiscal 2022, Dell held one note payable by us that we amended most recently with EMC in 2014. The note had a principal amount of $26.81 per outstanding share$270 million and was due December 1, 2022. The note bore interest, payable quarterly in arrears, at the annual rate of our common stock. Dell was paid approximately $9 billion in cash as a result of its financial1.75%. We repaid the note and all accrued interest in our common stock asfull during the third quarter of the record date which it utilized as part of the consideration it paid in the Dell Share Exchange. FY22. •IP Termination Agreement. In connection with the declarationSpin-Off, we and Dell entered into an IP termination Agreement (the “IP Termination Agreement”) that terminated the intellectual property agreement, dated as of August 13, 2007 originally entered into with EMC (the “IP Agreement”). The IP Termination Agreement terminated all licenses and rights set forth in the special dividend, the Special Committee recommended that the Company enter into a letter agreement with Dell that provided for a continuation of strong independent governance for us and our stockholders. In addition to provisionsIP Agreement relating to the paymentparties’ patents, while certain other rights and licenses relating to existing source code, trade secrets and products existing as of November 1, 2021 will continue for time periods set forth in the special dividend,IP Termination Agreement. •Termination of Other Agreements. On November 1, 2021, in connection with the agreement included the following: A provision requiring that any future request fromSpin-Off, VMware and Dell or any of itstheir respective affiliates (in each caseterminated (i) the Amended and Restated Real Estate License Agreement, dated September 21, 2015, between EMC and VMware and all underlying documents executed in its capacity as a stockholder) that we issue a special dividend to holders of our common stock shall beconnection therewith and (ii) the Amended and Restated Master Transaction Agreement, dated January 9, 2018, subject to reviewthe survival of certain provisions thereof. Additionally, pursuant to its terms, the Amended and Restated Insurance Matters Agreement, dated as of January 9, 2018, by and a recommendation in favor thereof from, a special committee of our Board comprised solely of independent directors.
A provision providing thatbetween VMware, Dell and EMC, terminated effective December 16, 2021 in accordance with its affiliates shall not directly or indirectly purchase or otherwise acquire any shares of our common stock if such transaction would result in our common stock no longer being publicly traded on a U.S. securities exchange or we no longer being required to file reports under Sections 13 and 15(d) of the Securities Exchange Act of 1934, as amended, unless (i) such transaction has been approved in advance by a special committee of our Board comprised solely of independent and disinterested directors or (ii) such acquisition of our common stock is by Dell or its subsidiaries and is required in order for us to be a member of the affiliated group of corporations filing a consolidated tax return with Dell.terms.
Information onabout the impact of our transactions with Dell on our financial condition and our results of operations is provided in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Our Relationship with Dell” section of our FY19FY22 Annual Report on Form 10-K filed with the SEC on March 29, 2019.24, 2022. The material agreements that govern our relationship with Dell are included as exhibits to our Form 10-K. Agreements with the MSD Stockholders and the SLP Stockholders We have entered into the following agreements and engaged in the following transactions with the MSD Stockholders and the SLP Stockholders:. •Stockholders Agreement. The Stockholders Agreement was entered into with the MSD Stockholders and the SLP Stockholders: –Board Designations: ▪For so long as the MSD Stockholders collectively beneficially own a number of shares of Common Stock equal to (i) at least 47% of the MSD Stockholders’ Initial Stake (as defined in the Stockholders Agreement) (or, if less, at least 20% of all outstanding shares of Common Stock), the MSD Stockholders will be entitled to nominate two directors for election to the Board, and (ii) at least 18% but less than 47% of the MSD Stockholders’ Initial Stake (or, if less, at least 7.5% but less than 20% of all outstanding shares of Common Stock), the MSD Stockholders will be entitled to nominate one director for election to the Board. ▪For so long as the SLP Stockholders collectively beneficially own a number of shares of the Common Stock equal to at least 67% of the SLP Stockholders’ Initial Stake (as defined in the Stockholders Agreement) (or, if less, at least 7.5% of all outstanding shares of Common Stock) the SLP Stockholders will be entitled to nominate one director for election to the Board. –Chairman: For so long as the MSD Stockholders have the right to nominate a director as set forth above and Mr. Dell is a member of the Board, and as otherwise set forth in the stockholders agreement, Michael Dell will be the Chairman. –Standstill and Voting Obligations: ▪During the period as the Governance Committee or the Board continues to nominate the director nominees of the MSD Stockholders or the SLP Stockholders, respectively (and unless the MSD Stockholders or the SLP Stockholders irrevocably renounce their rights to nominate their respective
director nominees or all such director nominees have resigned from the Board), the MSD Stockholders and SLP Stockholders will agree that (i) no MSD Stockholder or SLP Stockholder, respectively, shall otherwise act to seek to propose to VMware or any of our stockholders to nominate or support any person as a director who is not a director nominee of the MSD Stockholders or SLP Stockholders, as applicable, or otherwise nominated by the Governance Committee or the Board and (ii) at our annual meeting of stockholders (and at any other meeting of our stockholders ), the MSD Stockholders and the SLP Stockholders, will, to the extent that their respective shares of Common Stock are entitled to vote thereon (or in any other circumstance in which the vote, consent or other approval of the stockholders of VMware is sought), (A) appear at each such meeting or otherwise cause all of the Common Stock beneficially owned by the MSD Stockholders and the SLP Stockholders, respectively (and for which the MSD Stockholders or the SLP Stockholders, respectively, have the right to vote), as of the applicable record date, to be counted as present thereat for purposes of calculating a quorum and (B) vote (or cause to be voted), in person or by proxy, all of the MSD Stockholders’ or the SLP Stockholder’s Common Stock as of the applicable record date for each person nominated to the Board by the MSD Stockholders or the SLP Stockholders, respectively, and each other individual nominated for election to the Board by the Governance Committee or the Board; and ▪The MSD Stockholders and the SLP Stockholders agreed to certain limitations on the acquisition of VMware securities (including an agreement not to acquire Common Stock in a manner that would increase their initial respective ownership percentages by over 1% of the total outstanding shares of Common Stock), as well as certain standstill and voting commitments. ▪These obligations will expire upon the earliest of (i) the date on which the MSD Stockholders’ or the SLP Stockholders’, as the case may be, respective ownership of Common Stock is less than 7.5% of all outstanding shares of Common Stock, (ii) the later of (A) three years following the Spin-Off and (B) the 12-month anniversary of the date on which the MSD Stockholders or the SLP Stockholders, respectively, cease to have a right to designate a director nominee on the Board, or (iii) the expiration of the initial term (or earlier termination) of the CFA, which is five years. –Additional Voting Obligation: In the event the MSD Stockholders’ director designee (if such designee is Mr. Dell or an immediate family member) or the SLP Stockholders’ director designee (if such designee is Mr. Durban or a managing director of Silver Lake Partners) has voted as a director in favor of a transaction relating to mergers, acquisitions or other business combinations or extraordinary transactions involving VMware (other than a sale of VMware), or the issuance of securities in connection therewith, and subject to certain other conditions, the MSD Stockholders and SLP Stockholders, respectively, must vote in favor of any such transaction that is recommended by the Board; •Registration Rights Agreement. The registration rights agreement provides the MSD Stockholders and SLP Stockholders with certain demand and piggyback registration rights with respect to the shares of Common Stock they hold. In addition, upon request, we are required to use reasonable best efforts to file a shelf registration statement for shares of Common Stock beneficially owned by the requesting holder(s). The registration rights agreement also requires us to pay registration fees relating to such registrations and indemnify the stockholders for certain liabilities under federal and state securities laws. Corporate Opportunities Ownership interests of our directors or officers in the common stock of another entity, or service as both a director of another entity and VMware, or as a director of VMware and an officer or employee of another, could create, or appear to create, potential conflicts of interest when directors and officers are faced with decisions that could have different implications for us and such other entity. Michael Dell is a director, executive officer and significant stockholder of Dell, Egon Durban is a director of Dell and the co-CEO of Silver Lake, a significant stockholder of Dell, and Ken Denman and Paul Sagan hold positions with venture capital firms that invest in technology companies. Pursuant to resolutions adopted by our Governance Committee, we have renounced any expectancy or interest on the part of VMware being offered an opportunity to participate in certain corporate opportunities presented to Directors Dell, Denman, Durban and Sagan outside of their roles as directors of VMware. Other Transactions with Related Persons ADuring FY22, a brother of Sanjay Poonen, VMware’s former COO, Customer Operations, iswas employed by VMware in its cloud security and service management business. During FY19,FY22, Mr. Poonen’s brother received a base salary of $233,906$168,299 and an annual bonus
an equity award for RSUs, with a value of $136,467. The award vestsscheduled to vest ratably over four years in accordance with VMware’s standard equity grant vesting schedule.schedule, with a value of $209,683. Mr. Poonen’s brother ceased to be employed by VMware in September 2021 and, upon his departure, his unvested equity awards were forfeited. AUDIT COMMITTEE REPORT The information contained in this report shall not be deemed to be “soliciting material,” to be “filed” with the SEC or be subject to Regulation 14A or Regulation 14C (other than as provided in Item 407 of Regulation S-K) or to the liabilities of Section 18 of the Exchange Act, and shall not be deemed to be incorporated by reference in future filings with the SEC except to the extent that VMware specifically incorporates it by reference into a document filed under the Securities Act or the Exchange Act.
The Audit Committee has reviewed and discussed with VMware’s management and PwC the audited consolidated financial statements of VMware contained in VMware’s Annual Report on Form 10-K for fiscal year 2019.2022. The Audit Committee has also discussed with PwC the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC.
The Audit Committee has received and reviewed the written disclosures and the letter from PwC required by applicable requirements of the PCAOB regarding PwC’s communications with the Audit Committee concerning independence, and has discussed with PwC its independence from VMware. Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the audited consolidated financial statements be included in VMware’s Annual Report on Form 10-K for its fiscal year 20192022 for filing with the SEC. Submitted by the Audit Committee Michael Brown,Karen Dykstra, Chair
Marianne Brown Michael Brown Donald Carty Karen Dykstra
Paul SaganDELINQUENT SECTION 16(A) REPORTS
Section 16(a) of the Exchange Act requires VMware’s executive officers and directors, and persons who own more than 10% of the common stock, to file reports of ownership and changes in ownership with the SEC and the NYSE. Executive officers, directors and greater than 10% stockholders are required by SEC regulations to furnish us with all copies of Section 16(a) forms they file.
Based solely on our review of these forms and written representations from the officers and directors received by us, we believe that during FY22 all filing requirements were complied with in a timely fashion, except with respect to one filing regarding a gift transaction not timely reported by Raghu Raghuram. LEGAL NOTICES VMware, Tanzu, VMware Cloud, Pivotal, vSphere, NSX, VMware vSAN, Anywhere Workspace, Carbon Black, Workspace ONE and Horizon are registered trademarks or trademarks of VMware, Inc. or its subsidiaries in the United States and other jurisdictions. This proxy statement contains forward-looking statements including, among other things, statements about the plans and goals included in VMware’s ESG programs, including VMware’s 2030 Agenda and its DEI programs and future reporting on such programs, VMware’s strategic partnership with Dell and the proposed acquisition of VMware by Broadcom. These forward-looking statements are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including but not limited to: (1) the impact of the COVID-19 pandemic on VMware’s operations, financial condition, VMware’s customers, the business environment and the global and regional economies; (2) adverse changes in general economic or market conditions; (3) our ability to compete successfully for key talent; (4) changes in VMware’s financial condition; (5) unexpected delays in the development or limitations on the availability of technology and resources we expect to utilize to achieve our ESG goals; (6) unexpected geopolitical, social and environmental events that could impact our ability to achieve our 2030 Agenda; (7) regulatory developments related to ESG; (8) the effect of the proposed acquisition on VMware’s ability to maintain relationships with customers and partners, operating results and business; (9) business disruption following the announcement of the proposed transaction, including disruption of current plans and operations; (10) difficulties in retaining and hiring key personnel and employees due to the proposed acquisition and business combination; (11) the satisfaction of the conditions precedent to consummation of the proposed acquisition; (12) outcome of any legal proceedings related to the proposed transaction; (13) the ability to consummate the proposed acquisition on a timely basis or at all; (14) the ability to implement plans, forecasts and other expectations with respect to the business after the completion of the proposed transaction and realize synergies; and (15) the risks discussed in the “Risk Factors” sections of the Company’s periodic and current reports filed with the SEC. These forward-looking statements are made as of the date of this proxy statement, are based on current
expectations and are subject to uncertainties and changes in condition, significance, value and effect as well as other risks detailed in documents filed with the Securities and Exchange Commission, including VMware’s most recent reports on Form 10-K and Form 10-Q and current reports on Form 8- K that VMware may file from time to time, which could cause actual results to vary from expectations. VMware assumes no obligation to, and does not currently intend to, update any such forward-looking statements after the date of this release. INFORMATION ABOUT THE ANNUAL MEETING Why am I receiving these materials? Our stockholders are invited to participate in our 20192022 Annual Meeting and are requested to vote on the proposals described in this proxy statement. We have made these materials available to you on the Internet or, upon your request, have delivered printed versions of these materials to you by mail, in connection with the Board’s solicitation of proxies for use at the Annual Meeting,Meeting. The Annual Meeting will take place on Tuesday, June 25, 2019July 12, 2022 at 8:30 a.m. Pacific time via live audio webcast at www.virtualshareholdermeeting.com/VMW2019virtualshareholdermeeting.com/VMW2022. You will need the 16-digit control number provided on the Proxy Notice or your proxy card in order to participate in the meeting at that website. We will also offer a webcast of the Annual Meeting on the Investor Relations page of our website at http://ir.vmware.com that will allow you to listen to the Annual Meeting but will not provide the opportunity to participate. We are making this proxy statement available on the Internet and mailing the Proxy Notice to our stockholders on or about May 13, 2019.27, 2022. What is included in these materials? These materials include: •our proxy statement for the Annual Meeting; and •our Annual Report on Form 10-K for the fiscal year ended February 1, 2019,January 28, 2022, which includes our audited consolidated financial statements. If you requested printed versions of these materials by mail, these materials also include the proxy card for the Annual Meeting. How can I participate in the Annual Meeting? This year’s Annual Meeting will be a completely virtual meeting of stockholders conducted via live, audio webcast. You are entitled to participate in the Annual Meeting only if you were a VMware stockholder as of the close of business on May 3, 2019,16, 2022, the Record Date, or if you hold a valid proxy for the Annual Meeting. You will be able to participate in the Annual Meeting, submit your questions and vote electronically during the Annual Meeting by visiting www.virtualshareholdermeeting.com/VMW2019virtualshareholdermeeting.com/VMW2022 and entering the 16-digit control number included on your Proxy Notice, on your proxy card or on the instructions that accompanied your proxy materials. The Annual Meeting will begin promptly at 8:30 a.m. Pacific time. We encourage you to access the meeting prior to the start time. Online access will be available beginning at 8:15 a.m. Pacific time.
Why is this Annual Meeting only virtual? We are excited to continue to embrace the latest technology to provide global ease of access for and real-time communication with our stockholders and the Company. You will be able to participate in the Annual Meeting, submit your questions and vote during the meeting by visiting www.virtualshareholdermeeting.com/VMW2019virtualshareholdermeeting.com/VMW2022 and entering the 16-digit control number included on your Proxy Notice, on your proxy card or on the instructions that accompanied your proxy materials. What if I have technical difficulties or trouble accessing the virtual meeting? We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting. If you encounter any difficulties accessing the virtual meeting or during the meeting time, please call: Toll Free (800) 586-1548; or International Toll (303) 562-9288.navigate to virtualshareholdermeeting.com/VMW2022 where a phone number for IT support will be posted.
Why did I receive a one-page notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials? As permitted by the SEC rules, we are furnishing proxy materials to our stockholders via the Internet, rather than mailing printed copies of those materials to each stockholder. If you received a Proxy Notice by mail, you will not receive a printed copy of the proxy materials unless you request one by following the instructions included in the Proxy Notice. Instead of the printed copy, the Proxy Notice provides instructions as to how you may access the proxy materials and your proxy card to vote via the Internet. We are making this proxy statement available via the Internet and by mailing the Proxy Notice to our stockholders on or about May 13, 2019.27, 2022. Why didn’t I receive a notice in the mail regarding the Internet availability of the proxy materials? We are providing some of our stockholders, including stockholders who have previously requested to receive paper copies of the proxy materials and some of our stockholders who are living outside of the United States, with paper copies of the proxy materials instead of a Proxy Notice. In addition, we are providing notice of the availability of the proxy materials by e-mail to those stockholders who have previously elected delivery of the proxy materials electronically. Those stockholders should have received an e-mail containing a link to the website where the proxy materials are available and a link to the proxy voting website. How can I access the proxy materials over the Internet? Your Proxy Notice, proxy card or voting instruction card contains instructions on how to: •view our proxy materials for the Annual Meeting via the Internet; and •instruct us to send our future proxy materials to you electronically by e-mail. Our proxy materials are also available on the Investor Relations page of our website at http://ir.vmware.com and at www.proxyvote.comproxyvote.com where you will also need to enter your 16-digit control number (included on your Proxy Notice, on your proxy card or on the instructions that accompanied your proxy materials). How can I obtain a separate set of voting materials? If you and other residents with the same last name at your mailing address own shares of common stock in street name, your broker or bank may have sent you a notice explaining that your household will receive only one annual report and proxy statement for each company in which you hold stock through that broker or bank. This practice of sending only one copy of proxy materials is known as “householding.” If you received a householding communication, your broker will send one copy of VMware’s 20192022 proxy statement to your address, unless contrary instructions were given by any stockholder at that address. If you received multiple copies of the proxy materials this year and you wish to reduce the number of reports you receive in the future and save VMware the cost of printing and mailing these reports, your broker will discontinue the mailing of reports on the accounts you select if you follow the related instructions provided when you vote via the Internet.
You may revoke your consent to householding at any time by contacting Broadridge Financial Solutions, Inc., either by calling toll free at (866) 540-7095 or by writing to: Broadridge Financial Solutions, Inc., Householding Department, 51 Mercedes Way, Edgewood, New York 11717. The revocation of your consent to householding will be effective 30 days following its receipt. In any event, if your household received a single set of proxy materials for this year, but you would prefer to receive your own copy, we will promptly send a copy to you if you (1) go to www.proxyvote.comproxyvote.com and request a copy, (2) call us at 650-427-2892,email IR@vmware.com and request a copy, or (3) address your written request to: Investor Relations at VMware, Inc., 3401 Hillview Avenue, Palo Alto, California, 94304.
How many votes must be present to hold the Annual Meeting? In order to conduct any business at the Annual Meeting, a quorum must be present in person or represented by valid proxies. Except with respect to the election of our Class III, Group I directors, holdersHolders of shares representing a majority of the total outstanding shares of our common stock on the Record Date entitled to vote at the Annual Meeting, represented in person or by proxy, constitute a quorum. For the election of the Class III, Group I director nominees, holders of a majority of the outstanding shares of Class B Stock, represented in person or by proxy, constitute a quorum. Abstentions are considered present for purposes of determining the presence of a quorum. Broker non-votes, as defined below, are also considered present for purposes of determining the presence of a quorum so long as the shares represented by a broker or other nominee who holds shares for a beneficial owner, where the beneficial owner has not given the respective broker specific voting instructions, can be voted for, against or in abstention for at least one proposal presented at the Annual Meeting. Since there is one routine proposal presented at the Annual Meeting (Proposal 5)3) on which brokers and other nominees have such discretionary voting power, broker non-votes will be counted for quorum purposes at the Annual Meeting. Your shares will be counted for purposes of determining if there is a quorum, whether representing votes for, against or abstained, if you (1) participate in and vote during the Annual Meeting, or (2) have voted via the Internet, by telephone or by properly submitting a proxy card or voting instruction form by mail. Who may vote at the Annual Meeting? If you owned VMware’s Class A Stock or Class BCommon Stock at the close of business on the Record Date, then you may participate in and vote at the meeting. We have two classes of authorized common stock: Class A Stock and Class B Stock. As of the close of business on the Record Date, VMware had 410,266,640421,395,350 shares of common stock outstanding and entitled to vote, of which 110,266,640 shares are Class A Stock and 300,000,000 shares are Class B Stock.vote. AStockholders may request an appointment to inspect a complete list of stockholders entitled to vote at the Annual Meeting will be available for inspection by any stockholder for any purpose germane to the Annual Meeting for ten days prior to the Annual Meeting during ordinary business hours at our headquarters located at 3401 Hillview Avenue, Palo Alto, California, 94304.during ordinary business hours within ten days prior to the Annual Meeting by sending an email request to IR@vmware.com.
What is the difference between holding shares as a stockholder of record and as a beneficial owner of shares held in street name? Stockholder of Record. If, as of the Record Date, your shares were registered directly in your name with our transfer agent, American Stock Transfer and Trust Company, LLC, you are considered the stockholder of record with respect to those shares, and the Proxy Notice was sent directly to you by VMware. Beneficial Owner of Shares Held in Street Name. If, as of the Record Date, your shares were held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name,” and the Proxy Notice was forwarded to you by that organization. The organization holding your account is considered the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct that organization on how to vote the shares held in your account. What items will be voted on at the Annual Meeting? There are fivethree items that are scheduled to be voted on at the Annual Meeting: •election of twothree members nominated by us to our Board to serve as Class III Group I directors, to be elected by our sole Class B common stockholder,Common Stockholders, each for a three-year term expiring at the 20222025 Annual Meeting; •an advisory vote to approve named executive officer compensation; and
approval of an amendment to the Amended and Restated 2007 Equity and Incentive Plan;
approval of an amendment to the Amended and Restated 2007 Employee Stock Purchase Plan; and
•ratification of the selection by the Audit Committee of the Board of PwC as our independent auditor for the fiscal year ending January 31, 2020.February 3, 2023. We are not aware of any matters to be presented at the Annual Meeting other than those described in this proxy statement. If any matters not described in the proxy statement are properly presented at the meeting, the proxy holders will use their discretion to determine how to vote your shares. What are the Board of Directors’ voting recommendations? The Board recommends that our stockholders vote: •FOR Proposal 1, the election of the Class III Group I directors to(to be elected by our sole Class B common stockholder,Common Stockholders) as listed under “Election of Directors,,” to serve until their successors are elected and qualified;
•FOR Proposal 2, the approval, on an advisory basis, of the compensation of our named executive officers as disclosed in “Compensation Discussion and Analysis,” the “Summary Compensation Table” and other related tables and disclosures contained in this proxy statement; and •FOR Proposal 3, the approval of an amendment to the Amended and Restated 2007 Equity and Incentive Plan; FOR Proposal 4, the approval of an amendment to the Amended and Restated 2007 Employee Stock Purchase Plan; and
FOR Proposal 5, the ratification of the selection by the Audit Committee of the Board of PwC as VMware’s independent auditor for the fiscal year ending January 31, 2020.February 3, 2023.
The Board expects Dell, the sole holder of our Class B Stock, to vote in accordance with the recommendations made by the Board for each of the five proposals. Dell has the voting power to approve all proposals to be voted on at the Annual Meeting. Based on its ownership as of the Record Date, Dell holds approximately 80.6% of the outstanding shares of VMware’s common stock, representing approximately 97.4% of the combined voting power of our common stock.
Is any other business scheduled to be presented for consideration at the Annual Meeting? As of the date of this proxy statement, VMware has no knowledge of any business to be presented for consideration at the Annual Meeting other than the proposals described in the Proxy Notice. Under our bylaws, no business may be brought before the Annual Meeting except pursuant to our notice of meeting, by or at the direction of the Board, or by a stockholder who was a stockholder of record as of the Record Date and who complies with the applicable notice provisions set forth in our bylaws. The deadline under VMware’s bylaws for Class A common stockholdersCommon Stockholders to notify VMware of any director nominations or proposals to be presented at the Annual Meeting passed on April 20, 2019. However, Dell is entitled to propose business to be considered at any meeting of stockholders without compliance with the notice requirements and procedures of our bylaws.24, 2022. If any other business should properly come before the Annual Meeting, the persons appointed by the enclosed form of proxy shall have discretionary authority to vote all such proxies as they shall decide. The enclosed form of proxy gives each of Mr. Rowe, our CFO and Executive Vice President,EVP, and Amy FliegelmanMs. Olli, our Senior Vice President,EVP, General Counsel and Secretary, discretionary authority to vote your shares in accordance with his or her best judgment with respect to all additional matters that might come before the Annual Meeting, provided that the enclosed form of proxy is properly authorized by you. How much voting power does Delldo the MSD Stockholders and the SLP Stockholders have in VMware, and how does it affect the proposals being voted on at the Annual Meeting? AsBased on their respective ownership interests as of the Record Date, Dell, our parent companythe MSD Stockholders hold 40.2% of the outstanding shares of VMware’s common stock and controlling stockholder, controlsthe SLP Stockholders hold 10.0% of the outstanding shares of VMware’s common stock. Under the Stockholders Agreement with VMware described in this proxy statement, each of the MSD Stockholders and the SLP Stockholders are obligated to vote all of the outstanding Class B Stock and 30,678,605 shares or approximately 27.8%,they own as of the outstanding Class A Stock, representing approximately 97.4%Record Date FOR each of the combined voting power of our common stock. As such, Dell is entitled to ten votes per share, exceptdirector nominees in relation to the election of the Class I, Group II director, in which it is entitled to one vote per share. The election of the Class III, Group I
directors nominated for election at the Annual Meeting will be voted on solely by Dell, as the sole stockholder of Class B Stock.
EMC is an indirect, wholly owned subsidiary of Dell. Two members of the Board—Michael Dell and Egon Durban—also serve as members of the board of directors of Dell. Mr. Dell, the Chairman of the Board, is also the Chairman and CEO of Dell and the CEO of EMC.Proposal 1.
How can I vote my shares during the Annual Meeting? This year’s Annual Meeting will be held entirely online to allow greater access. Stockholders may participate in and vote during the Annual Meeting by visiting www.virtualshareholdermeeting.com/VMW2019virtualshareholdermeeting.com/VMW2022 and entering the 16-digit control number included on your Proxy Notice, on your proxy card or on the instructions that accompanied your proxy materials. Even if you plan to participate in the Annual Meeting online, we recommend that you also vote by proxy as described below so that your vote will be counted if you later decide not to participate in the Annual Meeting. How can I vote my shares prior to or without participating in the Annual Meeting? All Class A common stockholdersCommon Stockholders as of the Record Date have three options for submitting their votes prior to the Annual Meeting: •via the Internet prior to the meeting at www.proxyvote.comproxyvote.com (please see your proxy card or Proxy Notice for instructions); •by phone (please see your proxy card for instructions); or •by requesting, completing and mailing in a paper proxy card, as outlined in the Proxy Notice. If you submit your vote via the Internet, you may also elect to receive future proxy and other materials electronically by following the relevant instructions when you vote. You may vote using the Internet without participating in the Annual Meeting and telephone voting facilities until 11:59 p.m., Eastern time on June 24, 2019.July 11, 2022. For a discussion of how to vote using the Internet during the meeting, see “—How can I vote my shares during the Annual Meeting?” We encourage you to vote via the Internet. If you vote via the Internet, you should be aware that you may incur costs to access the Internet, such as usage charges from telephone companies or Internet service providers, and that these costs must be borne by you. If you vote via the Internet or telephone, then you do not need to return a proxy card by mail. If your shares are held by a bank, broker or other agent, please refer to the instructions they provide for voting your shares.
What happens if I do not give specific voting instructions? Stockholders of Record. If you are a stockholder of record and you: •indicate when voting via the Internet or by telephone that you wish to vote as recommended by the Board; or •sign and return a proxy card without giving specific voting instructions, then the proxy holders will vote your shares in the manner recommended by the Board on all matters presented in this proxy statement and as the proxy holders may determine, in their discretion, with respect to any other matters properly presented for a vote at the meeting. If you are a stockholder of record and you do not (1) vote via the Internet or by telephone, (2) return a proxy card, or (3) vote during the Annual Meeting, then your shares will not be voted and will not be considered present for the purpose of establishing a quorum. Beneficial Owners of Shares Held in Street Name. If you are a beneficial owner of shares held in street name and do not give the organization that holds your shares specific voting instructions, under the rules of various national and regional securities exchanges, that organization may generally vote your shares on routine proposals but not on non-routine proposals. If the organization that holds your shares does not receive instructions from you on how to vote your shares on a non-routine proposal, that organization will indicate that it does not have the authority to vote your shares on that non-
routinenon-routine proposal and this is called a “broker non-vote.” For a discussion of broker non-votes, see “—What are broker non-votes, and how will they affect the vote on a proposal?” We encourage you to give voting instructions to the organization that holds your shares by carefully following the instructions provided in the Proxy Notice.
What are broker non-votes, and how will they affect the vote on a proposal? What is the voting requirement to approve each of the proposals? How are abstentions treated? A “broker non-vote” occurs when (1) a broker or other nominee holds shares for a beneficial owner, (2) the beneficial owner has not given the respective broker specific voting instructions, (3) the matter is non-routine in nature and (4) there is at least one routine proposal presented at the meeting (such as Proposal 53 at this Annual Meeting). Under applicable rules, a broker or other nominee has discretionary voting power only with respect to proposals that are considered “routine,” but not with respect to “non-routine” proposals. A broker or other nominee cannot vote on non-routine proposals without having received instructions on how to vote from the beneficial owner. The voting requirements to approve and the effect of abstentions and broker non-votes on each proposal scheduled to be voted on at the Annual Meeting are summarized in the table below: | | | | | | | | | | | | | | | | | | | | | | Proposal | Nature of
proposal
| Votes required to pass(1) | Effect of
abstention
on vote
| Possibility of
broker non-votes
on the
proposal | Effect of
broker
non-
votes non-votes on
proposal outcome | 1 | Election of Class III Group I Directors | Non-routine | Majority of Class B votes cast are cast “FOR” eachthe nominee | No effect | No(2)
Yes | Not ApplicableNo effect | | 2 | Advisory vote to approve NEO Compensation | Non-routine | Majority of Class Avotes present and Class B votes castentitled to vote are cast “FOR” | NoSame effect as vote “AGAINST” | Yes | No effect | | 3 | Approval of the Amended and Restated 2007 Equity Incentive Plan | Non-routine | Majority of Class A and Class B votes cast “FOR” | As a vote “AGAINST”(3)
| Yes | No effect | 4 | Approval of the Amended and Restated 2007 Employee Purchase Plan | Non-routine | Majority of Class A and Class B votes cast “FOR” | As a vote “AGAINST”(3)
| Yes | No effect | 5 | Ratification of selection of Independent Auditor | Routine | Majority of Class Avotes present and Class B votes castentitled to vote are cast “FOR” | NoSame effect as vote “AGAINST” | No | Not
Applicable
|
(1) Except in cases where Class B Stock has a separate vote, the Class A Stock and Class B Stock vote together as a single class.Table of Contents(2) Election of Class III, Group I directors may only be voted on by EMC, as the holder of all of our outstanding shares of Class B Stock. EMC is the stockholder of record of our Class B Stock, and no shares of our Class B Stock are held in street name. Therefore, broker non-votes are not applicable to the election of Class III, Group I directors.
(3) Under NYSE Rules, for the purposes of stockholder approval of an equity plan, an abstention is considered a vote cast on the proposal.
Can I change or revoke my proxy after I have voted? You have the right to revoke your proxy at any time before it is voted at the Annual Meeting by: •participating in and voting during the Annual Meeting; •signing and delivering a new proxy relating to the same shares and bearing a later date than the original proxy; or •sending a signed, written notice of revocation, which is dated later than the date of the proxy and states that the proxy is revoked, to: Attention: Secretary, VMware, Inc. Legal Department, 3401 Hillview Avenue, Palo Alto, California, 94304. Please note, as mentioned above, shares held in your name as the stockholder of record may be voted electronically during the Annual Meeting. Shares for which you are the beneficial owner but not the stockholder of record also may be voted electronically during the Annual Meeting.
Is my vote confidential? Proxy instructions, ballots and voting tabulations that identify individual stockholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed either within VMware or to third parties, except: •as necessary to meet applicable legal requirements; •to allow for the tabulation and certification of votes; and •to facilitate a successful proxy solicitation. Occasionally, stockholders provide written comments on their proxy cards, which may be forwarded to management and the Board. Who will count the votes? Votes will be counted by the inspector of election appointed for the Annual Meeting by the Board. The inspector of elections will separately count “FOR” and “AGAINST” votes, abstentions and broker non-votes. Where can I find the voting results of the Annual Meeting? The final voting results will be reported in a Form 8-K that we expect to file with the SEC within four business days of the Annual Meeting. Once filed, that Form 8-K will be available on the Investor Relations page of our website. We also expect to announce preliminary voting results at the Annual Meeting, which will be webcast on the Investor Relations page of our website. Who is paying for the cost of this proxy solicitation? The expenses of preparing, printing and assembling the materials used in the solicitation of proxies on behalf of the Board are borne by VMware. In addition to the solicitation of proxies by mail, VMware may use the services of certain of its employees (for no additional compensation) to solicit proxies personally and by mail, telephone and electronic means from brokerage firms and other stockholders. Where are VMware’s principal executive offices located, and what is VMware’s main telephone number? VMware’s principal executive offices are located at 3401 Hillview Avenue, Palo Alto, California, 94304. VMware’s main telephone number is (650) 427-5000. How do I contact VMware’s Board of Directors? The Board provides a process for VMware stockholders and other interested parties to send communications to the Board, including to non-management directors. Any person who desires to contact the non-management directors or the entire Board may do so by sending an e-mail to ContactTheBoard@vmware.com. Under a process approved by the CCGGovernance Committee, VMware’s Secretary is responsible for the review of all communications received by VMware and addressed to the Board, including the non-management members, and each quarter prepares for the CCGGovernance Committee’s review a summary
report of all communications and copies of all communications, other than spam, junk mail, mass mailings, product complaints or inquiries, job inquiries, surveys, business solicitations or advertisements, or patently offensive or otherwise inappropriate material. Communications deemed by the Secretary to be of an urgent nature are reported promptly to the Chair of the CCGGovernance Committee. Directors may at any time review a log of all correspondence received by VMware that is addressed to members of the Board and request copies of any correspondence. Our Audit Committee also provides a process to send communications directly to the committee about VMware’s accounting, internal accounting controls or audit-related matters. Any person who desires to contact the Audit Committee regarding such matters may do so by sending an e-mail to AuditCommitteeChair@vmware.com.
What is the deadline to make a stockholder proposal eligible for inclusion in next year’s proxy statement? To be eligible for inclusion in VMware’s proxy statement for the 20202023 Annual Meeting, stockholder proposals must be received at VMware’s principal executive offices no later than January 14, 2020.27, 2023. Stockholder proposals should be addressed to: VMware, Inc. Legal Department, 3401 Hillview Avenue, Palo Alto, California, 94304. What is the deadline to propose actions for consideration at the 20202023 Annual Meeting or to nominate individuals to serve as directors? Under our bylaws, director nominations may be made only by the Board, a nominating committee of the Board, a person appointed by the Board or by a stockholder entitled to vote who has delivered notice to the attention of the Secretary, Legal Department at the principal executive offices of VMware (containing certain information specified in the bylaws) (1) not less than 90 days nor more than 120 days prior to the anniversary date of the preceding year’s Annual Meeting, or (2) if the Annual Meeting is called for a date more than 30 days before or after such anniversary date, not earlier than the close of business on 120 days prior to such Annual Meeting and not later than the close of business on the later of (a) 90 days prior to such Annual Meeting and (b) the tenth day following the date of public announcement of such meeting is first made by VMware. The bylaws also provide that no business may be brought before an annual meeting except as specified in the notice of the Annual Meeting or as otherwise brought before the Annual Meeting by or at the direction of the Board, the presiding officer or by a stockholder entitled to vote at such Annual Meeting who has delivered notice to the Secretary at the principal executive offices of VMware (containing certain information specified in our bylaws) within the periods prior to the meeting specified in the preceding sentence. In each case, stockholders must also comply with the procedural requirements in our bylaws. Any holder of our Class ACommon Stock who wishes to bring a proposal or nominate a person for election to the Board at VMware’s 20202023 Annual Meeting must provide written notice of the proposal or nomination to the attention of VMware’s Secretary, Legal Department, at our address specified above, on or after February 26, 2020March 14, 2023 and no later than March 27, 2020.April 13, 2023. OurIn addition to satisfying the foregoing requirements under our bylaws, also provide that until such time that Dell ceases to hold at least a majority of the voting power of our Class A Stock and Class B Stock voting together as a single class, Dell is entitled to propose business to be considered at any meeting of stockholders and to nominate persons for election to the Board without compliancecomply with the universal proxy rules under the Exchange Act, stockholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice procedure described inthat sets forth the two preceding paragraphs.information required by Rule 14a-19 under the Exchange Act no later than May 15, 2023.
These requirements are separate and apart from the requirements that a stockholder must meet in order to have a stockholder proposal included in VMware’s proxy statement under Rule 14a-8 of the Exchange Act as described above. A copy of the full text of the bylaw provisions discussed above may be obtained from the Governance subsection of the Investor Relations page of our website at http://ir.vmware.com. Our bylaws are also on file with the SEC and are available through its website at http://www.sec.govsec.gov. How does the Agreement and Plan of Merger with Broadcom impact the Annual Meeting? On May 26, 2022, VMware entered into an Agreement and Plan of Merger with Broadcom Inc. (“Broadcom”) providing for the acquisition of VMware by Broadcom (“Merger Agreement”). Under the terms of the Merger Agreement, each VMware stockholder will be entitled to elect to receive, per VMware Class A Common Stock share, either $142.50 in cash or 0.25200 of a share of Broadcom common stock, subject to proration. In total, 50% of VMware stock will be converted into the cash election option and 50% into the stock election option. The Annual Meeting does not relate to the pending transaction with Broadcom. We will be holding a separate special meeting of stockholders to vote on the proposed transaction. However, until the transaction is completed, we will continue to function as an independent public company and therefore we are filing this Notice of Annual Meeting and Proxy Statement in the ordinary course.
10-K REPORT A copy of VMware’s Annual Report on Form 10-K, including the financial statements and schedules thereto, required to be filed with the SEC for VMware’s most recently completed fiscal year, may be found on the Investor Relations page of our website at http://ir.vmware.com. In addition, VMware will provide each beneficial owner of its securities with a copy of the Annual Report on Form 10-K without charge, upon the written request of any such person. Such requests should be sent to Investor Relations, VMware, Inc., 3401 Hillview Avenue, Palo Alto, California, 94304. | | | | | | | By order of the Board of Directors | | | | | | AMY FLIEGELMAN OLLI | | SeniorExecutive Vice President, General Counsel and Secretary |
Palo Alto, California May 13, 201927, 2022
Appendix A RECONCILIATION OF GAAP TO NON-GAAP OPERATING MARGIN AND NON-GAAP OPERATING INCOME For the Twelve Months Ended February 1, 2019January 28, 2022 (amounts in millions, except per share amounts, and shares in thousands)millions) (unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | GAAP | | Stock-Based
Compensation | | Employer
Payroll Taxes
on Employee
Stock Transactions | | Intangible
Amortization | | Realignment Charges | | Acquisition, Disposition
and Other
Items | | Non-GAAP,
as adjusted(1) | | Operating expenses: | | | | | | | | | | | | | | | Cost of license revenue | $ | 152 | | | (1) | | | — | | | (39) | | | — | | | — | | | $ | 112 | | | Cost of subscription and SaaS revenue | $ | 690 | | | (21) | | | — | | | (171) | | | — | | | — | | | $ | 498 | | | Cost of services revenue | $ | 1,429 | | | (92) | | | (1) | | | — | | | — | | | — | | | $ | 1,334 | | | Research and development | $ | 3,057 | | | (528) | | | (2) | | | (8) | | | — | | | — | | | $ | 2,519 | | | Sales and marketing | $ | 4,067 | | | (302) | | | (7) | | | (85) | | | — | | | — | | | $ | 3,676 | | | General and administrative | $ | 1,068 | | | (131) | | | (1) | | | — | | | — | | | (142) | | | $ | 794 | | | Realignment | $ | 1 | | | — | | | — | | | — | | | (1) | | | — | | | $ | — | | | Operating income | $ | 2,387 | | | 1,075 | | | 11 | | | 303 | | | 1 | | | 142 | | | $ | 3,918 | | Operating margin(1) | 18.6 | % | | 8.4 | % | | 0.1 | % | | 2.4 | % | | — | % | | 1.1 | % | | 30.5 | % |
| | | | | | | | | | | | | | | | | | GAAP | Stock-Based
Compensation | Employer
Payroll Taxes
on Employee
Stock Transactions | Intangible
Amortization | Acquisition, Disposition
and Other
Items | Non-GAAP,
as adjusted(1) | | Operating expenses: | | | | | | | | Cost of license revenue | $ | 191 |
| (1 | ) | — |
| (120 | ) | — |
| $ | 70 |
| | Cost of services revenue | $ | 1,067 |
| (51 | ) | (1 | ) | (3 | ) | (2 | ) | $ | 1,011 |
| | Research and development | $ | 1,975 |
| (371 | ) | (1 | ) | — |
| (3 | ) | $ | 1,600 |
| | Sales and marketing | $ | 2,918 |
| (203 | ) | (4 | ) | (33 | ) | (1 | ) | $ | 2,675 |
| | General and administrative | $ | 764 |
| (105 | ) | (1 | ) | — |
| (82 | ) | $ | 577 |
| | Realignment and loss on disposition | $ | 9 |
| — |
| — |
| — |
| (9 | ) | $ | — |
| | Operating income | $ | 2,050 |
| 731 |
| 7 |
| 156 |
| 97 |
| $ | 3,041 |
| Operating margin(1) | 22.8 | % | 8.1 | % | 0.1 | % | 1.7 | % | 1.1 | % | 33.9 | % |
RECONCILIATION OF GAAP TO NON-GAAP OPERATING MARGIN AND NON-GAAP OPERATING INCOME For the Twelve Months Ended January 29, 2021 (amounts in millions) (unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | GAAP | | Stock-Based
Compensation | | Employer
Payroll Taxes
on Employee
Stock Transactions | | Intangible
Amortization | | Realignment Charges | | Acquisition, Disposition
and Other
Items | | Certain Litigation and Other Contingencies(2) | | Non-GAAP,
as adjusted(1) | | Operating expenses: | | | | | | | | | | | | | | | | | Cost of license revenue | $ | 163 | | | (1) | | | — | | | (44) | | | — | | | — | | | — | | | $ | 118 | | | Cost of subscription and SaaS revenue | $ | 588 | | | (19) | | | — | | | (186) | | | — | | | — | | | — | | | $ | 383 | | | Cost of services revenue | $ | 1,292 | | | (99) | | | (1) | | | (1) | | | — | | | — | | | — | | | $ | 1,190 | | | Research and development | $ | 2,816 | | | (524) | | | (1) | | | (3) | | | — | | | (1) | | | — | | | $ | 2,286 | | | Sales and marketing | $ | 3,711 | | | (322) | | | (8) | | | (94) | | | — | | | (2) | | | — | | | $ | 3,288 | | | General and administrative | $ | 767 | | | (157) | | | (1) | | | — | | | — | | | (132) | | | 237 | | | $ | 713 | | | Realignment | $ | 42 | | | — | | | — | | | — | | | (42) | | | — | | | — | | | $ | — | | | Operating income | $ | 2,388 | | | 1,122 | | | 11 | | | 328 | | | 42 | | | 135 | | | (237) | | | $ | 3,789 | | Operating margin(1) | 20.3 | % | | 9.5 | % | | 0.1 | % | | 2.8 | % | | 0.4 | % | | 1.1 | % | | (2.0) | % | | 32.2 | % |
____________________ (1) Totals may not sum, due to rounding. Operating margin is calculated based upon the respective underlying, non-rounded data. RECONCILIATION OF GAAP TO NON-GAAP OPERATING MARGIN AND
NON-GAAP OPERATING INCOME
For(2) Reflects derecognition of a $237 million previously accrued litigation loss as a result of a jury verdict in January 2020 against VMware in a patent litigation matter brought by plaintiffs Cirba Inc and Cirba, IP. Inc. On December 21, 2020, the Twelve Months Ended February 2, 2018
(amounts in millions, except per share amounts,United States District Court of the District of Delaware set aside the jury verdict and shares in thousands)
| | | | | | | | | | | | | | | | | | GAAP(1) | Stock-Based Compensation | Employer Payroll Taxes on Employee Stock Transactions | Intangible Amortization | Acquisition, Disposition and Other Related Items(1) | Non-GAAP, as adjusted(1)(2) | | Operating expenses: | | | | | | | | Cost of license revenue | $ | 157 |
| (2 | ) | — |
| (107 | ) | — |
| $ | 48 |
| | Cost of services revenue | $ | 984 |
| (50 | ) | (1 | ) | (2 | ) | — |
| $ | 930 |
| | Research and development | $ | 1,755 |
| (355 | ) | (1 | ) | — |
| (5 | ) | $ | 1,395 |
| | Sales and marketing | $ | 2,506 |
| (197 | ) | (3 | ) | (23 | ) | (2 | ) | $ | 2,281 |
| | General and administrative | $ | 654 |
| (79 | ) | (1 | ) | — |
| (23 | ) | $ | 551 |
| | Realignment and loss on disposition | $ | 104 |
| — |
| — |
| — |
| (104 | ) | $ | — |
| | Operating income | $ | 1,702 |
| 683 |
| 6 |
| 132 |
| 134 |
| $ | 2,657 |
| Operating margin(2) | 21.6 | % | 8.7 | % | 0.1 | % | 1.7 | % | 1.7 | % | 33.8 | % |
____________________
(1) Adjusted to reflect the adoption of ASC 606.
(2) Totals may not sum, due to rounding. Operating margin is calculated based upon the respective underlying, non-rounded data.ordered a new trial.
About Non-GAAP Financial Measures To provide investors and others with additional information regarding VMware’s results, VMware has disclosed in this filing the following non-GAAP financial measures FY18measures: FY21 and FY19FY22 non-GAAP operating income and non-GAAP operating
margin. VMware has provided a reconciliation of each non-GAAP financial measure used in this disclosure to the most directly comparable GAAP financial measure. These non-GAAP financial measures differ from GAAP in that they exclude stock-based compensation, employer payroll taxtaxes on employee stock transactions, amortization of acquired intangible assets, realignment charges, acquisition, disposition and other-relatedother items, and certain litigation and other contingencies, each as discussed below.
VMware’s management uses these non-GAAP financial measures to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short- and long-term operating plans, to calculate bonus payments and to evaluate VMware’s financial performance, the performance of its individual functional groups and the ability of operations to generate cash. Management believes these non-GAAP financial measures reflect VMware’s ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in VMware’s business, as they exclude charges and gains that are not reflective of ongoing operating results. Management also believes that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating VMware’s operating results and future prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies. Management believes these non-GAAP financial measures are useful to investors and others in assessing VMware’s operating performance due to the following factors: •Stock-based compensation. Stock-based compensation is generally fixed at the time the stock-based instrument is granted and amortized over a period of several years. Although stock-based compensation is an important aspect of the compensation of VMware’s employees and executives, the expense for the fair value of the stock-based instruments VMware utilizes may bear little resemblance to the actual value realized upon the vesting or future exercise of the related stock-based awards. Management believes it is useful to exclude stock-based compensation in order to better understand the long-term performance of VMware’s core business. •Employer payroll taxtaxes on employee stock transactions. The amount of employer payroll taxes on stock-based compensation is dependent on VMware’s stock price and other factors that are beyond VMware’s control and do not correlate to the operation of the business. •Amortization of acquired intangible assets. A portion of the purchase price of VMware’s acquisitions is generally allocated to intangible assets, such as intellectual property, and is subject to amortization. However, VMware does not acquire businesses on a predictable cycle. Additionally, the amount of an acquisition’s purchase price allocated to intangible assets and the term of its related amortization can vary significantly and are unique to each acquisition. Therefore, VMware believes that the presentation of non-GAAP financial measures that adjust for the amortization of intangible assets provides investors and others with a consistent basis for comparison across accounting periods. •Realignment charges. Realignment charges include workforce reductions, asset impairments, losses on asset disposals and costs to exit facilities. VMware’s management believes it is useful to exclude these items, when significant, as they are not reflective of VMware’s core business and operating results. •Acquisition, disposition and other-relatedother items. As VMware does not acquire or dispose of businesses on a predictable cycle and the terms of each transaction can vary significantly and are unique to each transaction, VMware believes it is useful to exclude acquisition, disposition and other-relatedother items when looking for a consistent basis for comparison across accounting periods. These items include: –Direct costs of acquisitions and dispositions, such as transaction and advisory fees. –Costs associated with integrating acquired businesses. –Accruals for the portion of merger consideration payable in installments that may be paid in cash or VMware stock, at the option of VMware. –Gains or losses on investments in equity securities, whether realized or unrealized. –Charges recognized for non-recoverable strategic investments or gains recognized on the disposition of strategic investments. –Gains or losses on sale or disposal of distinct lines of business or product offerings, or transactions with features similar to discontinued operations, including recoveries or charges recognized to adjust the fair value of assets that qualify as “held for sale.” –Certain costs incurred related to Dell’s acquisition of VMware’sVMware's spin-off from its former parent company, EMC Corporation. Certain costs incurred by VMware in connection with its special dividend paidDell Technologies Inc., completed on December 28, 2018.November 1, 2021, such as legal and advisory fees.
•Certain litigation and other contingencies. VMware, from time to time, may incur charges or benefits that are outside of the ordinary course of VMware’s business related to litigation and other contingencies. VMware believes it is useful to exclude such charges or benefits because it does not consider such amounts to be part of the ongoing operation of VMware’s business and because of the singular nature of the claims underlying such matters. The use of non-GAAP financial measures has certain limitations because they do not reflect all items of income and expense that affect VMware’s operations. Specifically, in the case of stock-based compensation, if VMware did not pay out a portion of its compensation in the form of stock-based compensation and related employer payroll taxes, the cash salary expense included in operating expenses would be higher, which would affect VMware’s cash position. VMware compensates for these limitations by reconciling the non-GAAP financial measures to the most comparable GAAP financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, measures prepared in accordance with GAAP and should not be considered measures of VMware’s liquidity. Further, these non-GAAP
measures may differ from the non-GAAP information used by other companies, including peer companies, and therefore comparability may be limited. Management encourages investors and others to review VMware’s financial information in its entirety and not rely on a single financial measure. Appendix B
 Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLYTHIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. D86592-P68065 For Against Abstain ! !! ! !! ! !! ! !! ! !! VMWARE, INC. AMENDED AND RESTATED 2007 EQUITY AND INCENTIVE PLAN
3401 HILLVIEW AVE. PALO ALTO, CA 94304 1.PURPOSE; TYPES OF AWARDS; CONSTRUCTION. The purpose Election of Directors Nominees: 1a. Nicole Anasenes 1b. Marianne Brown 1c. Paul Sagan 2. An advisory vote to approve named executive officer compensation, as described in VMware's Proxy Statement. 3. To ratify the VMware, Inc. Amended and Restated 2007 Equity and Incentive Plan is to attract, motivate and retain employees and independent contractors of the Company and any Subsidiary and Affiliate and non-employee directors of the Company, any Subsidiary or any Affiliate. The Plan is also designed to encourage stock ownership by such persons, thereby aligning their interest with those of the Company’s shareholders and to permit the payment of compensation that qualifies as performance-based compensation under Section 162(m) of the Code. Pursuant to the provisions hereof, there may be granted Options (including “incentive stock options” and “non-qualified stock options”), and Other Stock-Based Awards, including but not limited to Restricted Stock, Restricted Stock Units, Stock Appreciation Rights (payable in shares) and Other Cash-Based Awards.
2.DEFINITIONS. For purposes of the Plan, the following terms are defined as set forth below:
(a)“Adoption Date” means June 5, 2017, the date approvedselection by the Board as the adoption dateAudit Committee of the Plan, including the extension of its term as set forth in Section 7(f) below.
(b)“Affiliate” means an affiliate of the Company, as defined in Rule 12b-2 promulgated under Section 12 of the Exchange Act.
(c)“Award” means individually or collectively, a grant under the Plan of Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights or Other Stock-Based Awards or Other Cash-Based Awards.
(d)“Award Terms” means any written agreement, contract, notice or other instrument or document evidencing an Award.
(e)“Beneficial Owner” has the meaning ascribed to such term in Rule 13d-3 of the Exchange Act.
(f)“Board” means theVMware's Board of Directors of PricewaterhouseCoopers LLP as VMware's independent auditor for the Company.
(g)“Cause,” unless otherwise definedfiscal year ending February 3, 2023. The Board of Directors recommends you vote FOR Proposals 1, 2 and 3. NOTE: The proposals to be voted on may also include such other business as may properly come before the Meeting or any adjournment thereof. VMWARE, INC. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the Meeting date. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting - Go to www.virtualshareholdermeeting.com/VMW2022 You may attend the Meeting via the Internet and vote during the Meeting. Have the information that is printed in the Award Terms for a particular Award or in any employment or other agreement between the Grantee and the Company, any Subsidiary or any Affiliate, means:
(i)willful neglect, failure or refusalbox marked by the Granteearrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to perform his or her employment duties (except resulting fromtransmit your voting instructions up until 11:59 P.M. Eastern Time the Grantee’s incapacity due to illness) as reasonably directed by his or her employer;
(ii)willful misconduct byday before the GranteeMeeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the performancepostage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. SCAN TO VIEW MATERIALS & VOTEw
 D86593-P68065 Important Notice Regarding the Availability of his or her employment duties; (iii)Proxy Materials for the Grantee’s indictment for a felony (other than a traffic related offense) or a misdemeanor involving moral turpitude; or
(iv)Annual Meeting: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com. The undersigned hereby appoints each of Zane Rowe, VMware's Chief Financial Officer and Executive Vice President, and Amy Fliegelman Olli, VMware's Executive Vice President, General Counsel and Secretary, as proxies, each with full power of substitution, to represent and to vote at the Grantee’s commissionAnnual Meeting of an act involving personal dishonesty that results in financial, reputational, or other harm to the Company, any Affiliate or any Subsidiary, including, but not limited to, an act constituting misappropriation or embezzlementStockholders of property.
(h) “Code” means the Internal Revenue Code of 1986, as amended from time to time.
(i)“Committee” means the Compensation and Corporate Governance Committee of the Board or such other Board committee delegated authority by the Board to administer and oversee this Plan. Unless other determined by the Board, the Committee will be comprised solely of directors who are (a) “non-employee directors” under Rule 16b-3 of the Exchange Act, (b) “outside directors” under Section 162(m) of the Code and (c) who otherwise meet the definition of “independent directors” pursuant to the applicable requirements of any national stock exchange upon which the Stock is listed. Any director appointed to the Committee who does not meet the foregoing requirements should recuse himself or herself from all determinations pertaining to Rule 16b-3 of the Exchange Act and Section 162(m) of the Code.
(j)“Company” means VMware, Inc., a corporation organized under the laws of the State of Delaware or any successor corporation.
(k)“Covered Employee” has the meaning set forth in Section 162(m)(3) of the Code.
(l)“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and as now or hereafter construed, interpreted and applied by regulations, rulings and cases.
(m)“Fair Market Value” means the closing sales price per share of Stock on the principal securities exchange on which the Stock is traded (i) on the date of grant or (ii) on such other date on which the fair market value of Stock is requiredcorporation, to be calculated pursuant toheld on July 12, 2022 at 8:30 a.m., Pacific Time, via the terms of an Award, provided that if there is no such sale onInternet at www.virtualshareholdermeeting.com/VMW2022 and at any adjournments thereof, all the relevant date, then on the last previous day on which a sale was reported; if the Stock is not listed for trading on a national securities exchange, the fair market value of Stock will be determined in good faith by the Committee.
(n)“Grantee” means a person who, as an employee, independent contractor or non-employee director of the Company, a Subsidiary or an Affiliate, has been granted an Award under the Plan.
(o) “ISO” means any Option designated as and intended to be and which qualifies as an incentive stock option within the meaning of Section 422 of the Code.
(p)“NQSO” means any Option that is designated as a nonqualified stock option or which does not qualify as an ISO.
(q)“Option” means a right, granted to a Grantee under Section 6(b)(i), to purchase shares of Stock. An Option may be either an ISO or an NQSO.
(r)“Other Cash-Based Award” means a cash-based Award granted to a Grantee under Section 6(b)(iv) hereof, including cash awarded as a bonus or upon the attainment of Performance Goals or otherwise as permitted under the Plan.
(s)“Other Stock-Based Award” means an Award granted to a Grantee pursuant to Section 6(b)(iv) hereof, that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Stock, each of which may be subject to the attainment of Performance Goals or a period of continued employment or other terms and conditions as permitted under the Plan.
(t)“Parent” means Dell Technologies Inc., a Delaware corporation.
(u)“Performance Goals” means an objective formula or standard determined by the Committee with respect to each performance period utilizing one or more of the following factors and any objectively verifiable adjustment(s) thereto permitted and pre-established by the Committee: (i) (A) earnings including operating income, (B) earnings before or after (1) taxes, (2) interest, (3) depreciation, (4) amortization, or (5) special items or book value per share (which may exclude nonrecurring items), or (C) growth in earnings before interest, tax, depreciation or amortization; (ii) pre-tax income or after-tax income; (iii) earnings per common share (basic or diluted); (iv) operating profit; (v) revenue, revenue growth or rate of revenue growth; (vi) return on assets (gross or net), return on investment, return on capital, return on invested capital or return on equity; (vii) returns on sales or revenues; (viii) operating expenses; (ix) stock price appreciation; (x) cash flow, free cash flow, cash flow from operations, cash flow return on investment (discounted or otherwise), net cash provided by operations, or cash flow in excess of cost of capital; (xi) implementation or completion of critical projects or processes; (xii) economic value created; (xiii) cumulative earnings per share growth; (xiv) operating margin or profit margin; (xv) common stock price or total stockholder return; (xvi) cost targets, reductions, savings, productivity or efficiencies; (xvii) strategic business criteria, consisting of one or more objectives based on meeting specified market penetration, geographic business expansion, customer satisfaction, employee satisfaction, human resources management, supervision of litigation, information technology, goals relating to acquisitions, divestitures, joint ventures or similar transactions, research or development collaborations or budget comparisons; (xviii) personal professional objectives, including any of the foregoing performance goals, the implementation of policies and plans, the negotiation of transactions and the development of long term business goals; and (xix) any combination of, subset or component of, or a specified increase in, any of the foregoing. Where applicable, the Performance Goals may be expressed in terms of attaining a specified level of the particular criteria or the attainment of a percentage increase or decrease in the particular criteria, and may be applied to one or more of the Company, a Subsidiary or Affiliate, or a division or strategic business unit of the Company, or may be applied to the performance of the Company relative to a market index, a group of other companies or a combination thereof, all as determined by the Committee. The Performance Goals may include a
threshold level of performance below which no payment will be made (or no vesting will occur), levels of performance at which specified payments will be made (or specified vesting will occur), and a maximum level of performance above which no additional payment will be made (or at which full vesting will occur). Objectively verifiable adjustment(s) to Performance Goals can include but are not limited to adjustment(s) to reflect: (1) the impact of specific corporate transactions; (2) accounting or tax law changes; (3) asset write-downs; (4) significant litigation or claim adjustment; (5) foreign exchange gains and losses; (6) disposal of a segment of a business; (7) discontinued operations; (8) refinancing or repurchase of bank loans or debt securities; or (9) unbudgeted capital expenditures. Each of the foregoing Performance Goals will be subject to certification by the Committee; provided that, to the extent an Award is intended to satisfy the performance-based compensation exception to the limits of Section 162(m) of the Code and then to the extent consistent with such exception, the Committee has the authority to make equitable adjustments to the Performance Goals in recognition of unusual or non-recurring events affecting the Company or any Subsidiary or Affiliate or the financial statements of the Company or any Subsidiary or Affiliate, in response to changes in applicable laws or regulations or related to the disposal of a segment of a business or related to a change in generally accepted accounting principles.
(v) “Plan” means this Amended and Restated VMware, Inc. 2007 Equity and Incentive Plan, as amended from time to time.
(w)“Restricted Stock” means an Award of shares of Stock to a Grantee under Section 6(b)(ii) that is subject to certain restrictions and to a risk of forfeiture.
(x)“Restricted Stock Unit” means a right granted to a Grantee under Section 6(b)(iii) of the Plan to receive shares of Stock subject to certain restrictions and to a risk of forfeiture.
(y)“Rule 16b-3” means Rule 16b-3, as from time to time in effect promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act, including any successor to such Rule.
(z)“Stock” means shares ofVMware's Class A common stock, par value $0.01$.01 per share, ofthat the Company.
(aa)“Stock Appreciation Right” means an Award that entitles a Grantee upon exerciseundersigned would be entitled to the excess of the Fair Market Value of the Stock underlying the Award over the base price established in respect ofvote if present. The undersigned instructs such Stock.
(ab)“Subsidiary” means any entity in an unbroken chain of entities beginning with the Company if, at the time of granting of an Award, each of the entities (other than the last entity in the unbroken chain) owns stock possessing 50%proxies or more of the total combined voting power of all classes of stock in one of the other entities in the chain.
3.ADMINISTRATION.
(a)The Plan will be administered by the Committee or, at the discretion of the Board, the Board. In the event the Board is the administrator of the Plan, references hereintheir substitutes to the Committee will be deemed to include the Board. The Board may from time to time appoint a member or members of the Committee in substitution for or in addition to the member or members then in office and may fill vacancies on the Committee however caused. Subject to applicable law, the Board or the Committee may delegate to a sub-committee or individual the ability to grant Awards to employees who are not subject to potential liability under Section 16(b) of the Exchange Act with respect to transactions involving equity securities of the Company at the time any such delegated authority is exercised.
(b)The decision of the Committee as to all questions of interpretation and application of the Plan will be final, binding and conclusive on all persons. The Committee has the authority in its discretion, subject to and not inconsistent with the express provisions of the Plan, to administer the Plan and to exercise all the power and authority either specifically granted to it under the Plan or necessary or advisable in the administration of the Plan, including without limitation, the authority to grant Awards; determine the persons to whom and the time or times at which Awards will be granted; determine the type and number of Awards to be granted, the number of shares of Stock to which an Award may relate and the terms, conditions, restrictions and Performance Goals relating to any Award; determine Performance Goals no later than such time as is required to ensure that an underlying Award which is intended to comply with the requirements of Section 162(m) of the Code so complies; determine whether, to what extent, and under what circumstances an Award may be settled, canceled, forfeited, accelerated, exchanged, or surrendered (including upon a “change in control” or similar transaction); to make adjustments in the terms and conditions (including Performance Goals) applicable to Awards; construe and interpret the Plan and any Award; prescribe, amend and rescind rules and regulations relating to the Plan; to determine the terms and provisions of the Award Terms (which need not be identical for each Grantee); and make all other determinations deemed necessary or advisable for the administration of the Plan. The Committee may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Award Terms granted hereunder in the manner and to the extent it deems expedient to carry the Plan into effect and will be the sole and final judge of such expediency. No Committee member will be liable for any action or determination made with respect to the Plan or any Award.
4.ELIGIBILITY.
(a)Awards may be granted to officers, employees, independent contractors and non-employee directors of the Company or of any of the Subsidiaries and Affiliates; provided, that (i) ISOs may be granted only to employees (including officers and directors who are also employees) of the Company or any of its “related corporations” (as defined in the applicable regulations promulgated under the Code) and (ii) Awards may be granted only to eligible persons who are not employed by the Company or a Subsidiary if such persons perform substantial services for the Company or a Subsidiary.
(b)No ISO may be granted to any employee of the Company or any of its Subsidiaries if such employee owns, immediately prior to the grant of the ISO, stock representing more than 10% of the voting power or more than 10% of the value of all classes of stock of the Company or Parent or a Subsidiary, unless the purchase price for the stock under such ISO is at least 110% of its Fair Market Value at the time such ISO is granted and the ISO, by its terms, will not be exercisable more than five years from the date it is granted. In determining the stock ownership under this paragraph, the provisions of Section 424(d) of the Code will control.
(c)No Award, except for Restricted Stock, may be granted to any employee or independent contractor who is subject to Section 409A of the Code if such person is an employee or independent contractor of an Affiliate that is not a Subsidiary, unless such Award conforms to the requirements of Section 409A.
5.STOCK SUBJECT TO THE PLAN.
(a)The maximum number of shares of Stock reserved for the grant or settlement of Awards under the Plan (the “Share Limit”) is 145,167,881, subject to adjustment as provided herein, not including shares of stock added to the Share Limit pursuant to Section 5(c).
(b)Shares issued pursuant to Awards under the Plan may, in whole or in part, be authorized but unissued shares or shares that have been or may be reacquired by the Company in the open market, in private transactions or otherwise. If any shares subject to an Award (other than Awards substituted or assumed pursuant to Section 5(c) herein) are forfeited, canceled, exchanged or surrendered or if an Award otherwise terminates or expires without a distribution of shares to the Grantee, the shares of stock with respect to such Award will, to the extent of any such forfeiture, cancellation, exchange, surrender, termination or expiration, again be available for Awards under the Plan.
(c)The Company may substitute or assume equity awards of acquired entities in connection with mergers, reorganizations, separations, or other transactions to which Section 424(a) of the Code applies. The number of shares of Stock reserved pursuant to Section 5 will be increased by the corresponding number of equity awards assumed and, in the case of a substitution, by the net increase in the number of shares of Stock subject to equity awards before and after the substitution.
(d)Subject to the Share Limit and Section 5(g), the aggregate maximum number of shares of Stock that may be issued pursuant to the exercise of ISOs will be 145,167,881 shares of Stock.
(e)Subject to the Share Limit and Section 5(g), the aggregate number of shares of Stock that may be issued pursuant to Awards granted during any fiscal year to any single individual may not exceed 3,611,400 shares of Stock.
(f)The maximum value of Awards granted during a single fiscal year under this Plan or under any other equity plan maintained by the Company, taken together with any cash fees paid during such fiscal year for services on the Board, will not exceed $1,000,000 in total value for any non-employee director, except that such limit will be $1,250,000 for any non-employee director serving as the lead director of the Board or chair of the Board. Such applicable limit will include the value of any stock awards that are received in lieu of all or a portion of any annual committee cash retainers or other similar cash based payments.
(g)Except as provided in an Award Term or as otherwise provided in the Plan, in the event of any extraordinary dividend or other extraordinary distribution (whether in the form of cash, Stock, or other property), recapitalization, stock split, reverse split, reorganization, merger, consolidation, spin-off, recapitalization, combination, repurchase, or share exchange, or other similar corporate transaction or event, the Committee will make such equitable changes
or adjustments as it deems necessary or appropriate to any or all of (i) the number and kind of shares of Stock or other property (including cash) that may thereafter be issued in connection with Awards (including, but not limited to changes or adjustments to the limits specified in Sections 5(d) and (e)) or the total number of Awards issuable under the Plan, (ii) the number and kind of shares of Stock or other property issued or issuable in respect of outstanding Awards, (iii) the exercise price, grant price or purchase price relating to any Award, (iv) the Performance Goals, and (v) the individual limitations applicable to Awards; provided that, with respect to ISOs, any adjustment will be made in accordance with the provisions of Section 424(h) of the Code and any regulations or guidance promulgated thereunder, and provided further that no such adjustment will cause any Award hereunder which is or becomes subject to Section 409A of the Code to fail to comply with the requirements of such section.
6.SPECIFIC TERMS OF AWARDS.
(a)General. Subject to the terms of the Plan and any applicable Award Terms, (i) the term of each Award will be for such period as may be determined by the Committee, and (ii) payments to be made by the Company or a Subsidiary or Affiliate upon the grant, maturation, or exercise of an Award may be made in such forms as the Committee determines at the date of grant or thereafter, including, without limitation, cash, Stock or other property, and may be made in a single payment or transfer, in installments, or, subject to the requirements of Section 409A of the Code on a deferred basis.
(b)Awards. The Committee is authorized to grant to Grantees the following Awards, as deemed by the Committee to be consistent with the purposes of the Plan. The Committee will determine the terms and conditions of such Awards, consistent with the terms of the Plan. Options and Stock Appreciation Rights (“SARs”) are subject to a minimum one-year vesting period following grant, with the exception that up to 5% of the available shares of Stock reserved for grant may be subject to such Awards without such minimum vesting period. Subject to compliance with the requirements of Section 409A of the Code, an Award may provide the Grantee with the right to receive dividend or dividend equivalent payments with respect to Stock actually or notionally subject to the Award, which payments will be credited to an account for the Grantee, and may be settled in cash or Stock, as determined by the Committee. Any such dividend or dividend equivalents will be settled in cash or Stock to the Grantee only if, when and to the extent the related Award vests. The value of dividend or dividend equivalent payments payable with respect to any Award that does not vest will be forfeited.
(i)Options. The Committee is authorized to grant Options to Granteesact on the following terms and conditions:
(A)The Award Terms evidencing the grant of an Option under the Plan will designate the Optionmatters as an ISO or an NQSO.
(B)The exercise price per share of Stock purchasable under an Option will be determined by the Committee, but in no event may the exercise price of an Option per share of Stock be less than the Fair Market Value of a share of Stock as of the date of grant of such Option. The purchase price of Stock as to which an Option is exercised must be paid in full at the time of exercise; payment may be made in cash, which may be paid by check, or other instrument acceptable to the Company, or, with the consent of the Committee, in shares of Stock, valued at the Fair Market Value on the date of exercise (including shares of Stock that otherwise would be distributed to the Grantee upon exercise of the Option), or if there were no sales on such date, on the next preceding day on which there were sales or (if permitted by the Committee and subject to such terms and conditions as it may determine) by surrender of outstanding Awards under the Plan, or the Committee may permit such payment of exercise price by any other method it deems satisfactory in its discretion. In addition, subject to applicable law and pursuant to procedures approved by the Committee, payment of the exercise price may be made pursuant to a broker-assisted cashless exercise procedure. Any amount necessary to satisfy applicable federal, state or local tax withholding requirements must be paid promptly upon notification of the amount due. The Committee may permit the amount of tax withholding to be paid in shares of Stock previously owned by the employee, or a portion of the shares of Stock that otherwise would be distributed to such employee upon exercise of the Option, or a combination of shares of such Stock and other property, except that the amount of tax withholding to be satisfied by withholding shares of Stock and other property will be limited to the extent necessary to avoid adverse accounting consequences, including but not limited to the Award being classified as a liability award.
(C)Options will be exercisable over the exercise period (which may not exceed ten years from the date of grant), at such times and upon such conditions as the Committee may determine, as reflected in the Award Terms; provided that, the Committee has the authority to accelerate the exercisability of any outstanding Option at such time and under such circumstances as it, in its sole discretion, deems appropriate.
(D)Upon the termination of a Grantee’s employment or service with the Company and its Subsidiaries or Affiliates, the Options granted to such Grantee, to the extent that they are exercisable at the time of such termination, will remain exercisable for such period as may be provided in the applicable Award Terms, but in no event following the expiration of their term. The treatment of any Option that is unexercisable as of the date of such termination will be as set forth in the applicable Award Terms.
(E)Options may be subject to such other conditions, as the Committee may prescribe in its discretion or as may be required by applicable law.
(ii)Restricted Stock.
(A)The Committee may grant Awards of Restricted Stock under the Plan, subject to such restrictions, terms and conditions, as the Committee may determine in its sole discretion and as evidenced by the applicable Award Terms (provided that any such Award is subject to the vesting requirements described herein). The vesting of a Restricted Stock Award granted under the Plan may be conditioned upon the completion of a specified period of employment or service with the Company, any Subsidiary or an Affiliate, upon the attainment of specified Performance Goals or upon such other criteria as the Committee may determine in its sole discretion.
(B)The Committee will determine the purchase price, which, to the extent required by law, may not be less than par value of the Stock, to be paid by the Grantee for each share of Restricted Stock or unrestricted Stock or stock units subject to the Award. The Award Terms with respect to such Award will set forth the amount (if any) to be paid by the Grantee with respect to such Award and when and under what circumstances such payment is required to be made.
(C)Except as provided in the applicable Award Terms, no shares of Stock underlying a Restricted Stock Award may be assigned, transferred, or otherwise encumbered or disposed of by the Grantee until such shares of Stock have vested in accordance with the terms of such Award.
(D)Upon the termination of a Grantee’s employment or service with the Company and its Subsidiaries or Affiliates, the Restricted Stock granted to such Grantee will be subject to the terms and conditions specified in the applicable Award Terms.
(iii)Restricted Stock Units. The Committee is authorized to grant Restricted Stock Units to Grantees, subject to the following terms and conditions:
(A)At the time of the grant of Restricted Stock Units, the Committee may impose such restrictions or conditions to the vesting of such Awards as it, in its discretion, deems appropriate, including, but not limited to, the achievement of Performance Goals. The Committee has the authority to accelerate the settlement of any outstanding award of Restricted Stock Units at such time and under such circumstances as it, in its sole discretion, deems appropriate, subject compliance with the requirements of Section 409A of the Code.
(B)Unless otherwise provided in the applicable Award Terms or except as otherwise provided in the Plan, upon the vesting of a Restricted Stock Unit there will be delivered to the Grantee, as soon as practicable following the date on which such Award (or any portion thereof) vests, that number of shares of Stock equal to the number of Restricted Stock Units becoming so vested.
(C)Upon the termination of a Grantee’s employment or service with the Company and its Subsidiaries or Affiliates, the Restricted Stock Units granted to such Grantee will be subject to the terms and conditions specified in the applicable Award Terms.
(iv)Other Stock-Based or Cash-Based Awards.
(A)The Committee is authorized to grant Awards to Grantees in the form of Other Stock-Based Awards or Other Cash-Based Awards, as deemed by the Committee to be consistent with the purposes of the Plan. The Committee will determine the terms and conditions of such Awards, consistent with the terms of the Plan, at the date of grant or thereafter, including the Performance Goals and performance periods. Stock or other securities or property delivered pursuant to an Award in the nature of a purchase right granted under Section 6(iv) may be purchased for such consideration, paid for at such times, by such methods, and in such forms, including, without limitation, Stock, other Awards, notes or other property, as the Committee will determine, subject to any required corporate action.
(B)With respect to a Covered Employee, the maximum value of the aggregate payment that any Grantee may receive with respect to Other Cash-Based Awards pursuant to this Section 6(b)(iv) in respect of any annual performance period is $5,000,000and for any other performance period in excess of one year, such amount multiplied by a fraction, the numerator of which is the number of months in the performance period and the denominator of which is twelve. No payment may be made to a Covered Employee prior to the certification by the Committee that the Performance Goals have been attained. The Committee may establish such other rules applicable to the Other Stock- or Cash-Based Awards to the extent not inconsistent with Section 162(m) of the Code.
(C)Payments earned in respect of any Cash-Based Award may be decreased or, with respect to any Grantee who is not a Covered Employee, increased in the sole discretion of the Committee based on such factors as it deems appropriate.
7.GENERAL PROVISIONS.
(a)Nontransferability, Deferrals and Settlements. Unless otherwise determined by the Committee or provided in an Award Term or set forth below, but in accordance with the Code and any applicable laws, Awards will not be transferable by a Grantee except by will or the laws of descent and distribution and will be exercisable during the lifetime of a Grantee only by such Grantee or his guardian or legal representative. Any attempted assignment or transfer of an Award will be null and void and without effect, except as herein provided, including without limitation any purported assignment, whether voluntary or by operation of law, pledge, hypothecation or other disposition, attachment, divorce, trustee process or similar process, whether legal or equitable, upon such Award. The Committee may permit Grantees to elect to defer the issuance of shares of Stock or the settlement of Awards in cash under such rules and procedures as established under the Plan to the extent that such deferral complies with Section 409A of the Code and any regulations or guidance promulgated thereunder.
(b)Leave of Absence; Reduction in Service Level. The Committee may determine, in its discretion (i) whether, and the extent to which, an Award will vest during a leave of absence, (ii) whether, and the extent to which, a reduction in service level (for example, from full-time to part-time employment), will cause a reduction, or other change, in an Award, and (iii) whether a leave of absence or reduction in service will be deemed a termination of employment or service for the purpose of the Plan and the Award Terms. The Committee will also determine all other matters relating to whether the employment or service of a recipient of an Award is continuous for purposes of the Plan and the Award Terms.
(c)No Right to Continued Employment, etc. Nothing in the Plan or in any Award granted or any Award Terms, promissory note or other agreement entered into pursuant hereto confers upon any Grantee the right to continue in the employ or service of the Company, any Subsidiary or any Affiliate or to be entitled to any remuneration or benefits not set forth in the Plan or the applicable Award Terms or to interfere with or limit in any way the right of the Company or any such Subsidiary or Affiliate to terminate such Grantee’s employment or service.
(d)Clawback/Recoupment
(i)All Awards granted under the Plan will be subject to recoupment in accordance with any clawback policy that the Company determines to adopt pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law. In addition, the Committee may impose additional clawback, recovery or recoupment provisions in an Award agreement as the Committee determines necessary or appropriate, including but not limited to a reacquisition right in respect of previously acquired shares of Stock or other cash or property upon the occurrence of Cause as determined by the Committee.
(ii)In the event of a restatement of incorrect financial results, the Committee will review all Awards held by executive officers (within the meaning of Rule 3b-7 of the Exchange Act) of the Company that (i) were earned based on performance or were vesting during the course of the financial period subject to such restatement or (ii) were granted during or within one year following such financial period. If any Award would have been lower or would not have vested, been earned or been granted based on such restated financial results, the Committee will, if it determines appropriate in its sole discretion and to the extent permitted by governing law, (a) cancel such Award, in whole or in part, whether or not vested, earned or payable or (b) require the Grantee to repay to the Company an amount equal to all or any portion of the value of any gains from the grant, vesting or payment of the Award that would not have been realized had the restatement not occurred.
(iii)If a Grantee’s employment or service is terminated for Cause, all unvested (and, to the extent applicable, unexercised) portions of Awards will terminate and be forfeited immediately without consideration. In addition, the Committee may in its sole discretion and to the extent permitted by applicable law cause the cancellation of all or a portion of any outstanding vested Awards held by such Grantee or payable to such Grantee or require such Grantee to reimburse the Company for all or a portion of the gains from the exercise of, settlement or payment of any of the Grantee’s Awards realized after the event giving rise to Cause first occurred.
(e)Taxes. The Company, any Subsidiary and any Affiliate is authorized to withhold from any Award granted, any payment relating to an Award under the Plan, including from a distribution of Stock, or any other payment to a Grantee, amounts of withholding and other taxes due in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Company and Grantees to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award. This authority includes authority to withhold or receive Stock or other property and to make cash payments in respect thereof in satisfaction of a Grantee’s tax obligations; provided, however, that the amount of tax withholding to be satisfied by withholding Stock or other property will be limited to the extent necessary to avoid adverse accounting consequences, including but not limited to the Award being classified as a liability award.
(f)Stockholder Approval; Amendment and Termination. The Board may amend, alter or discontinue the Plan and outstanding Awards thereunder, but no amendment, alteration, or discontinuation may be made that would impair the rights of a Grantee under any Award theretofore granted without such Grantee’s consent, or that without the approval of the stockholders (as described below) would, except in the case of an adjustment as provided in Section 5, increase the total number of shares of Stock reserved for the purpose of the Plan. In addition, stockholder approval will be required with respect to any amendment with respect to which shareholder approval is required under the Code, the rules of any stock exchange on which Stock is then listed or any other applicable law. Unless earlier terminated by the Board pursuant to the provisions of the Plan, the Plan will terminate on the tenth anniversary of the Adoption Date.No Awards may be granted under the Plan after such termination date.
(g)No Rights to Awards; No Stockholder Rights. No Grantee haves any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Grantees. No Grantee has any right to payment or settlement under any Award unless and until the Committee or its designee determines that payment or settlement is to be made. Except as provided specifically herein, a Grantee or a transferee of an Award has no rights as a stockholder with respect to any shares covered by the Award until the date of the issuance of such shares.
(h)Unfunded Status of Awards. The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to a Grantee pursuant to an Award, nothing contained in the Plan or any Award will give any such Grantee any rights that are greater than those of a general creditor of the Company.
(i)No Fractional Shares. No fractional shares of Stock will be issued or delivered pursuant to the Plan or any Award. The Committee will determine whether cash, other Awards, or other property will be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto will be forfeited or otherwise eliminated.
(j)Regulations and Other Approvals.
(i)The obligation of the Company to sell or deliver Stock or pay cash with respect to any Award granted under the Plan is subject to all applicable laws, rules and regulations, including all applicable federal and state securities laws, and the obtaining of all such approvals by governmental agencies as may be deemed necessary or appropriate by the Committee.
(ii)Each Award is subject to the requirement that, if at any time the Committee determines, in its absolute discretion, that the listing, registration or qualification of Stock issuable pursuant to the Plan is required by any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the grant of an Award or the issuance of Stock, no such Award may be granted or payment made or Stock issued, in whole or in part, unless listing, registration, qualification, consent or approval has been effected or obtained free of any conditions not acceptable to the Committee.
(iii)In the event that the disposition of Stock acquired pursuant to the Plan is not covered by a then current registration statement under the Securities Act of 1933, as amended (the “Securities Act”), and is not otherwise exempt from such registration, such Stock will be restricted against transfer to the extent required by the Securities Act or regulations thereunder, and the Committee may require a Grantee receiving Stock pursuant to the Plan, as a condition precedent
to receipt of such Stock, to represent to the Company in writing that the Stock acquired by such Grantee is acquired for investment only and not with a view to distribution.
(iv)Section 409A. This Plan is intended to comply and will be administered in a manner that is intended to comply with Section 409A of the Code and will be construed and interpreted in accordance with such intent. To the extent that an Award, issuance or payment is subject to Section 409A of the Code, it will be awarded or issued or paid in a manner that will comply with Section 409A of the Code, including proposed, temporary or final regulations or any other guidance issued by the Secretary of the Treasury and the Internal Revenue Service with respect thereto. Any provision of this Plan that would cause an Award, issuance or payment to fail to satisfy Section 409A of the Code will have no force and effect until amended to comply with Section 409A of the Code (which amendment may be retroactive to the extent permitted by applicable law). Notwithstanding anything to the contrary in this Plan (and unless the Award Terms specifically provides otherwise), if the shares of Stock are publicly traded and a Grantee is a “specified employee” for purposes of Section 409A of the Code and holds an Award that provides for “deferred compensation” under Section 409A of the Code, no distribution or payment of any amount shall be made upon a “separation from service” before a date that is six months following the date of such Grantee’s “separation from service” (as defined in Section 409A of the Code without regard to alternative definitions thereunder) except that in case of the Grantee’s death, such distribution or payment will be made as soon as practicable following the Grantee’s death or as otherwise set forth in an agreement with the Grantee.
(k)Governing Law. The Plan and all determinations made and actions taken pursuant hereto is governed by the laws of the State of Delaware without giving effect to the conflict of laws principles thereof. Notwithstanding anything to the contrary herein, the Committee, in order to conform with provisions of local laws and regulations in foreign countries in which the Company or its Subsidiaries operate, has sole discretion to (i) modify the terms and conditions of Awards made to Grantees employed outside the United States, (ii) establish sub-plans with modified exercise procedures and such other modifications as may be necessary or advisable under the circumstances presented by local laws and regulations, and (iii) take any action which it deems advisable to obtain, comply with or otherwise reflect any necessary governmental regulatory procedures, exemptions or approvals with respect to the Plan or any sub-plan established hereunder.
(l)Merger or Consolidation. If the Company is the surviving corporation in any merger or consolidation (other than a merger or consolidation in which the Company survives but in which a majority of its outstanding shares are converted into securities of another corporation or are exchanged for other consideration), any Award granted hereunder will pertain and apply to the securities which a holder of the number of shares of stock of the Company then subject to the Award is entitled to receive. In the event of a (i) dissolution or liquidation of the Company, (ii) sale or transfer of all or substantially all of the Company’s assets or (iii) merger or consolidation in which the Company is not the surviving corporation or in which a majority of its outstanding shares are converted into securities of another corporation or are exchanged for other consideration, the Company must, contingent upon consummation of such transaction, either (a) arrange for any corporation succeeding to the business and assets of the Company to (x) assume each outstanding Award, or (y) issue to the Grantees replacement Awards (which, in the case of Incentive Stock Options, satisfy, in the determination of the Committee, the requirements of Section 424 of the Code), for such corporation’s stock that will preserve the value, liquidity and material terms and conditions of the outstanding Awards; or (b) make the outstanding Awards fully exercisable or cause all of the applicable restrictions to which outstanding Stock Awards are subject to lapse, in each case, on a basis that gives the holder of the Award a reasonable opportunity, as determined by the Committee, following the exercise of the Award or the issuance of shares of Common Stock, as the case may be, to participate as a stockholder in any such dissolution, liquidation, asset sale or transfer, merger or consolidation, and the Award will terminate immediately following consummation of any such transaction. The existence of the Plan will not prevent any such change or other transaction, and no Participant hereunder has any right except as herein expressly set forth. Notwithstanding the foregoing provisions of this Section 7(m), Awards subject to and intended to satisfy the requirements of Section 409A of the Code will be construed and administered consistent with such intent.
Appendix C
VMWARE, INC.
AMENDED AND RESTATED 2007 EMPLOYEE STOCK PURCHASE PLAN
Section 1. Purpose of Plan
The VMware, Inc. Amended and Restated 2007 Employee Stock Purchase Plan (the “Plan”) is intended to provide a method by which eligible employees of VMware, Inc. (“VMware”) and its subsidiaries (collectively, the “Company”) may use voluntary, systematic payroll deductions or other contributions (as described in Section 5 below) to purchase VMware’s class A common stock, $.01 par value, (“stock”) and thereby acquire an interest in the future of VMware. For purposes of the Plan, a subsidiary is any corporation in which VMware owns, directly or indirectly, stock possessing 50% or more of the total combined voting power of all classes of stock unless the Board of Directors of VMware (the “Board of Directors”) or the Committee (as defined below) determines that employees of a particular subsidiary shall not be eligible.
The Plan is intended qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”). Notwithstanding the foregoing, the Board of Directors may establish comparable offerings under the Plan that are not intended to qualify under Code Section 423. Such offerings will be designated as being made under the non-423 component of this Plan.
For purposes of this Plan, if the Board of Directors so determines, the employees of VMware and/or of any designated subsidiary will be deemed to participate in a separate offering under the 423 component of the Plan, even if the dates of the applicable offering period of each such offering are identical, provided that the terms of participation are the same within each separate offering as determined under Code Section 423.
Section 2. Options to Purchase Stock
Under the Plan, no more than 32,300,000 shares of stock are available for purchase (subject to adjustment as provided in Section 16) pursuant to the exercise of options (“options”) granted under the Plan to employees of the Company (“employees”). All of the shares of stock are available for purchase under the Plan may be used for offerings under the 423 component of the Plan. The stock to be delivered upon exercise of options under the Plan may be either shares of VMware’s authorized but unissued stock, or shares of reacquired stock, as the Board of Directors shall determine.
Section 3. Eligible Employees
Except as otherwise provided in Section 20, each employee who has completed three months or more of continuous service in the employ of the Company, or any lesser number of months established by the Committee (if required under local law), shall be eligible to participate in the Plan provided such inclusion is consistent with requirements under Code Section 423 or offered under the non-423 component.Notwithstanding any other provision herein, individuals who are not contemporaneously classified as employees of VMware or an eligible subsidiary for purposes of VMware’s or the applicable eligible subsidiary’s payroll system are not considered to be eligible employees and shall not be eligible to participate in the Plan. In the event any such individuals are reclassified as employees of VMware or an eligible subsidiary for any purpose, including, without limitation, common law or statutory employees, by any action of any third party, including, without limitation, any government agency, or as a result of any private lawsuit, action or administrative proceeding, such individuals shall, notwithstanding such reclassification, remain ineligible for participation. Notwithstanding the foregoing, the exclusive means for individuals who are not contemporaneously classified as employees of VMware or an eligible subsidiary on the applicable payroll system to become eligible to participate in this Plan is through an amendment to this Plan, duly executed by VMware, which specifically renders such individuals eligible to participate herein.
Section 4. Method of Participation
Option periods of any duration up to 27 months in length shall be determined by the Committee. In the event no period is designated by the Committee, the option periods shall have a duration of six months commencing on the first day following termination of the prior period. For example, if an option period ends on July 31, the following option period would be August 1 through January 31 unless the Committee determines otherwise prior to commencement of such following option period. Each person who will be an eligible employee on the first day of any option period may elect to participate in the Plan by executing and delivering, at least one business day prior to such day, a payroll deduction authorization and/or other required enrollment agreement(s)/form(s) in accordance with Section 5. Such employee shall thereby become a participant
(“participant”) on the first day of such option period and shall remain a participant until his or her participation is terminated as provided in the Plan. VMware may permit participants to elect or indicate whether an enrollment election, once made, will apply to subsequent option periods without being required to submit a new enrollment form. If an employee makes an enrollment election that does not apply to subsequent option periods, the employee will be deemed to have terminated his or her participation with respect to subsequent option periods unless and until the employee submits a new enrollment form in accordance with the Plan.
Section 5. Contributions
A participant may elect to make contributions under the Plan at a rate of not less than 2% nor more than 15% from the participant’s compensation (subject to a maximum of $7,500 per six-month option period and pro-rated for longer or shorter periods, at the Committee’s discretion), by means of substantially equal payroll deductions over the option period; provided, however, where applicable local laws prohibit payroll deductions for the purpose of participation in the Plan, the Committee may permit all participants in a specified separate offering under the 423 component or an offering under the non-423 component of the Plan to contribute amounts to the Plan through payment by cash, check or other means set forth in the enrollment form. Any amount remaining in a participant’s contribution account at the end of an option period representing a fractional share that is rolled over to the contribution account for the next option period pursuant to Section 8 below (a “rollover”) may be used to purchase additional stock; provided that the maximum dollar amount per option period shall be reduced by the amount of any rollover. For purposes of the Plan, “compensation” shall mean all cash compensation paid to the participant by the Company unless otherwise specified by the Board.
A participant may only electundersigned, and to change his or her contribution rate by written notice delivered to VMware (or its designated agent) at least one business day prior to the first day of the option period as to which the change is to be effective. Following delivery to VMware (or its designated agent) of any enrollment form or any election to change the withholding rate of a payroll deduction authorization, appropriate payroll deductions or changes thereto shall commence as soon as reasonably practicable. All amounts withheld in accordance with a participant’s payroll deduction authorization or contributed by other permitted means (if any) shall be credited to a contribution account for such participant.
Section 6. Grant of Options
Each person who is a participant on the first day of an option period shall, as of such day, be granted an option for such period. Such option shall be for the number of shares of stock to be determined by dividing (a) the balance in the participant’s contribution account on the last day of the option period by (b) the purchase price per share of the stock determined under Section 7, and eliminating any fractional share from the quotient. In the event that the number of shares then available under the Plan is otherwise insufficient, VMware shall reduce on a substantially proportionate basis the number of shares of stock receivable by each participant upon exercise of his or her option for an option period and shall return the balance in a participant’s contribution account to such participant without interest (unless otherwise required by local law). In no event shall the number of shares of stock that a participant may purchase during any one six-month option period under the Plan exceed 750 shares of stock (subject to adjustment as provided in Section 16), and pro-rated for longer or shorter periods, at the Committee’s discretion.
Section 7. Purchase Price
The purchase price of stock issued pursuant to the exercise of an option shall be 85% of the fair market value of the stock at (a) the time of grant of the option or (b) the time at which the option is deemed exercised, whichever is less. “Fair market value” shall mean the closing sales price per share of the stock on the principal securities exchange on which the stock is traded or, if there is no such sale on the relevant date, then on the last previous day on which a sale was reported; if the stock is not listed for trading on a national securities exchange, the fair market value of the stock shall be determined in good faith by the Board of Directors.
Section 8. Exercise of Options
If an employee is a participant in the Plan on the last business day of an option period, he or she shall be deemed to have exercised the option granted to him or her for that period. Upon such exercise, VMware shall apply the balance of the participant’s contribution account to the purchase of the number of whole shares of stock determined under Section 6, and as soon as practicable thereafter shall issue and deliver certificates for said shares to the participant (or have the shares deposited in a brokerage account for the benefit of the participant). No fractional shares shall be issued hereunder. Any balance accumulated in the participant’s contribution account that is not sufficient to purchase a full share shall be retainedvote in such account for any remainingmanner as such proxies or subsequent option period, subject to early withdrawal by the participant as provided in Section 10.
Any other monies remaining in the participant’s contribution account under the Plan after the date of exercise shall be returned to the participant or his or her beneficiary (as applicable) in cash without interest (unless otherwise required by local law).
Notwithstanding anything herein to the contrary, VMware shall not be obligated to deliver any shares unless and until, in the opinion of VMware’s counsel, all requirements of applicable federal, state and foreign laws and regulations (including any requirements as to legends) have been complied with, nor, if the outstanding stock is at the time listedtheir substitutes may determine on any securities exchange, unless and until the shares to be delivered have been listed (or authorized to be added to the list upon official notice of issuance) upon such exchange, nor unless or until all other legal matters in connection with the issuance and delivery of shares have been approved by VMware’s counsel.
Section 9. Interest
No interest will be payable on contribution accounts, except asthat may be required by applicable law, as determined by the Committee.
Section 10. Cancellation and Withdrawal
A participant who holds an option under the Plan may cancel all (but not less than all) of his or her option by written notice delivered to the Company, in such form as the Committee may prescribe, provided that VMware (or its designated agent) must receive such notice at least 31 days, or such other number of days determined by the Committee,properly come before the last day of the option period (the “Withdrawal Deadline”)Meeting. THE PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS SPECIFIED. IF NO CHOICE IS SPECIFIED, THEN THIS PROXY WILL BE VOTED "FOR" THE NOMINEES FOR DIRECTOR (PROPOSAL 1), "FOR" THE ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION, AS DESCRIBED IN VMWARE'S PROXY STATEMENT (PROPOSAL 2), AND "FOR" THE RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS VMWARE'S INDEPENDENT AUDITOR FOR THE FISCAL YEAR ENDING FEBRUARY 3, 2023 (PROPOSAL 3). Any participant who delivers such written notice shall be deemed to have canceled his or her option, terminated any applicable payroll deduction authorization with respect to the Plan and terminated his or her participation in the Plan, in each case, as of the date of such written notice. In the event that the date of the Withdrawal Deadline with respect to the applicable option period, shall be a Saturday, Sunday or dayIN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENTS THEREOF. PLEASE MARK, DATE AND SIGN ON REVERSE SIDE AND RETURN PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. ANNUAL MEETING OF STOCKHOLDERS, JULY 12, 2022 THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS Continued on which banks in the State of Delaware are required to close, a participant may cancel his or her option by written notice given on or prior to the last business day immediately preceding such date. Following delivery of any such notice, any balance in the participant’s contribution account will be returned to such participant as soon as reasonably practicable without interest (unless otherwise required by local law). Any participant who has delivered such notice may elect to participate in the Plan in any future option period in accordance with the provisions of Section 4.
Section 11. Termination of Employment
Except as otherwise provided in Section 12, upon the termination of a participant’s employment with the Company for any reason whatsoever, he or she shall cease to be a participant, and any option held by him or her under the Plan shall be deemed canceled, the balance of his or her contribution account shall be returned to him or her without interest (unless otherwise required by local law), and he or she shall have no further rights under the Plan. For purposes of this Section 11, a participant’s employment will not be considered terminated in the case of a transfer to the employment of a subsidiary or to the employment of the Company. However, in the event of a transfer of employment, VMware may transfer participant’s participation to a separate offering or non-423 component offering, if advisable or necessary, considering applicable local law and Code Section 423 requirements. For purposes of the Plan, an individual’s employment relationship is still considered to be continuing intact while such individual is on sick leave, or other leave of absence approved for purposes of this Plan by the Company; provided however, that if such period of leave of absence exceeds three months, and the individual’s right to reemployment is not guaranteed either by statute or by contract, the employment relationship shall be deemed to have terminated on the first day following such three month period.
Section 12. Death of Participant
In the event a participant holds any option hereunder at the time his or her employment with the Company is terminated by his or her death, whenever occurring, then his or her legal representative, may, by a writing delivered to VMware on or before the date such option is exercisable, elect either (a) to cancel any such option and receive in cash the balance in his or her contribution account, or (b) to have the balance in his or her contribution account applied as of the last day of the option period to the exercise of his or her option pursuant to Section 8, and have the balance, if any, in such account in excess of the total purchase price of the whole shares so issued returned in cash without interest (unless otherwise required by local law). In the event his or her legal representative does not file a written election as provided above, any outstanding option shall be treated as if an election had been filed pursuant to subparagraph 12(a) above.
Section 13. Participant’s Rights Not Transferable, etc.
All participants granted options under a specified offering under the 423 component of the Plan shall have the same rights and privileges. Each participant’s rights and privileges under any option granted under the Plan shall be exercisable during his or her lifetime only by him or her, and shall not be sold, pledged, assigned, or otherwise transferred in any manner whatsoever except by will or the laws of descent and distribution. In the event any participant violates the terms of this Section, any options held by him or her may be terminated by VMware and, upon return to the participant of the balance of his or her contribution account, all his or her rights under the Plan shall terminate.
Section 14. Employment Rights
Neither the adoption of the Plan nor any of the provisions of the Plan shall confer upon any participant any right to continued employment with the Company or a subsidiary or affect in any way the right of the participant’s employer to terminate the employment of such participant at any time.
Section 15. Rights as a Shareholder/Use of Funds
A participant shall have the rights of a shareholder only as to stock actually acquired by him or her under the Plan.
All contributions received under the Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such funds, but may do so if required under applicable local law.
Section 16. Change in Capitalization
In the event of a stock dividend, stock split or combination of shares, recapitalization, merger in which VMware is the surviving corporation or other change in VMware’s capital stock, the number and kind of shares of stock or securities of VMware to be subject to the Plan and to options then outstanding or to be granted hereunder, the maximum number of shares or securities which may be delivered under the Plan, the option price and other relevant provisions shall be appropriately adjusted by the Board of Directors, whose determination shall be binding on all persons. In the event of a consolidation or merger in which VMware is not the surviving corporation or in the event of the sale or transfer of substantially all VMware’s assets (other than by the grant of a mortgage or security interest), all outstanding options shall thereupon terminate, provided that prior to the effective date of any such merger, consolidation or sale of assets, the Board of Directors shall either (a) return the balance in all contribution accounts and cancel all outstanding options, or (b) accelerate the exercise date provided for in Section 8, or (c) if there is a surviving or acquiring corporation, arrange to have that corporation or an affiliate of that corporation grant to the participants replacement options having equivalent terms and conditions as determined by the Board of Directors.
In the event of a corporate restructuring, VMware may transfer or terminate participant’s participation to a separate offering or non-423 component offering, if advisable or necessary, considering applicable local law and Code Section 423 requirements.
Section 17. Administration of Plan
The Plan will be administered by the Board of Directors. The Board of Directors will have authority, not inconsistent with the express provisions of the Plan, to take all action necessary or appropriate hereunder, to interpret its provisions, and to decide all questions which may arise in connection therewith. Except with respect to officers of VMware who are subject to the reporting requirements of Section 16 of the Securities Act of 1934, management of VMware is also authorized to resolve participant disputes under the Plan, consistent with the terms of the Plan and any agreements thereunder and any interpretations or guidance issued under the Plan by the Board of Directors or the Committee.
The Board may, in its discretion, delegate its powers with respect to the Plan to the Compensation and Corporate Governance Committee or any other committee at VMware (the “Committee”), in which event all references to the Board of Directors hereunder, including without limitation the references in Section 17, shall be deemed to refer to the Committee. A majority of the members of any such Committee shall constitute a quorum, and all determinations of the Committee shall be made by a majority of its members. Any determination of the Committee under the Plan may be made without notice or meeting of the Committee by a writing signed by all of the Committee members.
Determinations of the Board of Directors, the Committee or where appropriate, management of the Company, shall be conclusive and shall bind all parties.
Section 18. Amendment and Termination of Plan
The Board of Directors may at any time or times amend the Plan or amend any outstanding option or options for the purpose of satisfying the requirements of any changes in applicable laws or regulations or for any other purpose which may at the time be permitted by law, provided that (except to the extent explicitly required or permitted herein) no such amendment will, without the approval of the shareholders of the Company, (a) increase the maximum number of shares available under the Plan, (b) reduce the option price of outstanding options or reduce the price at which options may be granted, (c) change the conditions for eligibility under the Plan, or (d) amend the provisions of this Section 18 of the Plan, and no such amendment will adversely affect the rights of any participant (without his or her consent) under any option theretofore granted.
The Plan may be terminated at any time by the Board of Directors, but no such termination shall adversely affect the rights and privileges of holders of the outstanding options.
Section 19. Approval of Shareholders
The Plan as amended and restated was approved by the stockholders of the Company on June 8, 2017 and subsequent amendments will be approved by the stockholders to the extent required by applicable securities and tax rules and regulations as well as applicable rules of the securities exchange(s) upon which the stock may be listed for trading.
Section 20. Limitations
Notwithstanding any other provision of the Plan:
(a) An employee shall not be eligible to receive an option pursuant to the Plan if, immediately after the grant of such option to him or her, he or she would (in accordance with the provisions of Sections 423 and 424(d) of the Code own or be deemed to own stock possessing 5% or more of the total combined voting power or value of all classes of stock of the employer corporation or of its parent or subsidiary corporation, as defined in Section 424 of the Code.
(b) No employee shall be granted an option under this Plan that would permit his or her rights to purchase shares of stock under all employee stock purchase plans (as defined in Section 423 of the Code) of VMware or any subsidiary or parent corporation to accrue at a rate which exceeds $25,000 in fair market value of such stock (determined at the time the option is granted) for each calendar year during which any such option granted to such employee is outstanding at any time, as provided in Section 423 of the Code.
(c) No employee shall be granted an option under this Plan that would permit him or her to withhold more than $7,500 in each six-month option period, and pro-rated for longer or shorter periods, at the Committee’s discretion, or $15,000 per calendar year, less the amount of any rollover.
(d) No employee whose customary employment is 20 hours or less per week shall be eligible to participate in the Plan, unless otherwise required under applicable law. If participation in the Plan is offered to employees whose customary employment is 20 hours or less, the offering will be made under a separate offering under the 423 component or under the non-423 component of the Plan.
(e) No employee whose customary employment is for not more than five months in any calendar year shall be eligible to participate in the Plan.
(f) No independent contractor shall be eligible to participate in the Plan.
Section 21. Jurisdiction and Governing Law.
The Company and each participant in the Plan submit to the exclusive jurisdiction and venue of the U.S. federal or state courts of Delaware to resolve issues that may arise out of or relate to the Plan or the same subject matter. The Plan shall be governed by the laws of Delaware, excluding its conflicts or choice of law rules or principles that might otherwise refer construction or interpretation of this Plan to the substantive law of another jurisdiction.
Section 22. Compliance with Foreign Laws and Regulations.
Notwithstanding anything to the contrary herein, the Board, in order to conform with provisions of local laws and regulations in foreign countries in which the Company or its subsidiaries operate, shall have sole discretion to (i) adversely
modify the terms and conditions of options granted to participants employed outside the United States to the extent consistent with the U.S. Treasury regulations under Code Section 423; (ii) establish comparable offerings that are not intended to qualify under Code Section 423 with the shares to be taken from the allotment available under this Plan and with modified enrollment or exercise procedures and/or establish such other modifications as may be necessary or advisable under the circumstances presented by local laws and regulations; and (iii) take any action which it deems advisable to obtain, comply with or otherwise reflect any necessary governmental regulatory procedures, exemptions or approvals with respect to the Plan or any sub-plan established hereunder.reverse side
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