Cognizant paid $3.8 million in severance payments to ex-CEO

Cognizant Technology Solutions Corp. paid about $3.8 million in severance payments to its former chief Brian Humphries, which is well within the board’s newly instilled policy of capping severance payment to 2.99 times the sum of base pay and bonus.

Humphries’ severance payout included two components - Swiss franc 1.15 million in 12 months’ pay and Swiss franc 2.3 million as a separation bonus, according to the company’s regulatory filings. This translates to about $3.8 million.

Cognizant, which follows a January-December financial year, disclosed that it had paid a bonus of about British pound 1.85 million ($2.25 million) for 2022 and a base salary of $1.24 million to Humphries. This implies that Humphries’ base salary and bonus totaled $3.49 million last year.

Finally, the former boss also got a total of 17,627 restricted stock units and 104,121 performance stock units, which at the current share price of $57.98, are worth $7.1 million.

But Humphries paid some money to get shares at a discounted rate and so the money from shares is not part of the severance payment. Mint could not ascertain the grant price of many of these RSUs made over the last three years.

Humphries, who was sacked as CEO by the board on 9 January, served as a special adviser until 15 March and earned about $210,195 in salary.

The new severance policy by Cognizant comes at a time a board refresh appears to be in the works after Stephen Rohleder took over as chairman on 12 January, the same day, former Infosys executive S. Ravi Kumar was named CEO.

Since the start of the year, two independent members, Nella Domenici and Eric Branderiz, have been inducted. One independent director, Maureen Breakiron-Evans, has decided to end her stint at this year’s annual shareholder meeting.

Mint could not independently ascertain if the new leadership at the board were unhappy with the earlier severance payout and if this prompted them to bring in a new policy.

“It is the policy of the board of directors of Cognizant Technology Solutions Corp. that the company and its subsidiaries will not enter into any new employment agreement or severance or separation arrangement or agreement with any senior executive of the company, or establish any new severance plan or policy covering any senior executive of the company, in each case, that provides for cash severance benefits exceeding 2.99 times the sum of the senior executive’s base salary plus target bonus, without seeking stockholder approval of such severance arrangement,” said a 6 March filing made by Cognizant to the Nasdaq.

“Our severance policy for senior executives reflects strong corporate governance and broader market practices. The disclosure reflects the adoption of this policy, which is similar to those previously adopted by other public companies,” said a spokesperson for Cognizant.

Cognizant, which ended with $19.43 billion in revenue in the year ended December, reported a 5% growth, the slowest among its larger peers. Accenture Plc, Tata Consultancy Services Ltd and Infosys Ltd reported a 22%, 16% and 20%, respectively, last year.

Unlike their global peers, few Indian companies have a policy on severance payments to their executives. The last time the issue of severance created a storm at a company was when Infosys paid ₹17.38 crore in severance to its former chief financial officer Rajiv Bansal in 2017 and $868,250 to its former general counsel David Kennedy. These payments led to a showdown between co-founder N.R. Narayana Murthy and the then chairman, R. Seshasayee, with Murthy questioning if these severance payments were “hush money”. Subsequently, Infosys decided that none of the employees, except the CEO, were eligible for severance payments.