VMware, Nutanix and a matter of honour

Rajiv Ramaswami, Nutanix
Rajiv Ramaswami. Image: Nutanix

Billy MacInnes says getting legal against former executives is a common strategy, but not a winning one

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2 December 2021 | 0

Like many, I suspect, I missed the story about VMware suing its former chief operating officer after he left the company in December 2020 and joined Nutanix as CEO two days later.

VMware sued Rajiv Ramaswami (pictured) for alleged “material and ongoing” breaches of his legal and contractual duties. Now, according to CRN, VMware has dropped the lawsuit.

In the original suit, VMware claimed Ramaswami had “demonstrated poor judgement and had a clear and extended period of conflict of interest. He should have disclosed this conflict of interest to VMware so that the company could have taken steps to protect itself. But he did not notify VMware, and thus deprived the company of the ability to do so by concealing his Nutanix-related activities”.

 

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Fast forward 11 months and VMware released a statement announcing the lawsuit had been dismissed and it was “pleased that the matter has been resolved, allowing it to focus on developing exceptional products and services for its customers”.

Unsurprisingly, Nutanix was also pleased with the decision. The company had attacked the lawsuit as “an unfounded attempt to hurt a competitor” in a statement to CRN in January 2021 by Tonya Chin, vice president of corporate communications and investor relations.

Following VMware’s decision to pull the plug, Nutanix told CRN: “VMware’s lawsuit was misguided and inappropriate, as there was no wrongdoing on Mr. Ramaswami’s part. VMware has agreed to dismiss the lawsuit, and we are very pleased that the matter has been favourably resolved.”

One intriguing development during the past 11 months, as CRN notes, was the appointment of Raghu Raghuram, a former colleague of Ramaswami and long time friend, as VMware CEO.

Ramaswami told CRN in June: “Raghu has been a personal friend of mine long before I joined him at VMware. So I’ve known him for more than 20-plus years at this point. He’s a friend. And over the past five years, I’ve worked very closely with him as a colleague.”

What I find interesting about this story is its denouement. There are plenty of instances of people leaving one company to join a rival. And there are almost as many instances where those job changes are accompanied by lawsuits. There are a few that result in the company bringing the suit winning some form of recompense, although not that many that I can recall.

In a lot of cases, these suits tend to be resolved before they reach the courtroom or just fizzle out. Which makes you wonder whether there’s any point in taking them in the first place.

While it’s understandable that the company losing a valuable executive to a rival could be concerned about confidential information being misused and abused, it’s worth noting that anybody who appeared guilty of such a blatant abuse of trust and confidentiality would probably find it very hard to be hired by anyone else in the future.

It’s in the interest of the person who is leaving Company X to maintain confidentiality about its future plans and projects when they join another business. And to do so for the contractually stipulated time period.

But it’s up to the departing executive to ensure he or she maintains that confidentiality, particularly if their new company tries to pressure him or her to divulge sensitive information. It’s their reputation and future employability that’s on the line not their new employer’s.

It may be 11 months after the fact but the case involving Ramaswami, VMware and Nutanix seems to show that, even if the lawyers might not like it, trust is a quality that does not need to be enforced through the courts.


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