Cognizant shareholders ask top executives to realign salary structure with revenue growth

Lower revenue growth coupled with Covid-19 induced recession has prompted Cognizant’s shareholders to ask the company’s top executives to realign the compensation structure with its revenue growth, the NASDAQ-listed firm said in a disclosure to the US market regulator Securities and Exchange Commission (SEC).

"For 2020, significant changes in the programme have been implemented, including a greater emphasis on revenue growth and, for the performance-based equity compensation, the inclusion of a relative total shareholder return metric and a shift to a three-year performance period," Michael Patsalos-Fox, chairman of the board of directors said. 

The disclosure was made in the notice for the information technology firm’s annual general meeting scheduled to be held on June 2 as a virtual event. 

Teaneck, New Jersey headquartered Cognizant, which has sizeable operations in Chennai, is set to declare its first-quarter results on May 7. Cognizant follows the calendar year schedule for its financial accounting.

"Compensation design needs to align with strategy. For both of our performance-based compensation components (annual cash incentive (ACI) and performance stock units (PSUs), we increased the weighting of revenue as compared to adjusted income from operations (in the ACI) and adjusted diluted earnings per share (in the PSUs) to reflect our strategic emphasis on revenue growth," the company said in the disclosure to SEC.

The new changes are going to hit the top management salary as the Covid-19-hit global economy is expected to push the industry revenue growth into negative territory for the first time ever.

Despite the optimistic commentary from top IT firms, the current calendar year/fiscal year is expected to be a washout for the industry. 

Last weekend, Cognizant was hit by Maze ransomware attack, which is also expected to have an impact on the company’s financial performance, it said in a disclosure to the SEC.

Early this month, in a first, Cognizant skipped its earnings guidance for 2020 on account of the unpredictable and unprecedented business environment it anticipates this year. 

The company had projected a 2-4% growth rate for the calendar year 2020, which, incidentally, was also the lowest compared to previous years. 

Indian IT peers such as Wipro and Infosys have suspended guidance too. Global tech giants Accenture reduced its growth forecast while IBM deferred the guidance this week.