By offering a generous severance package to their departing CEO, Thierry Delaporte, one of the top IT services companies in India, Wipro has created a great buzz in the Indian IT Industry.
How Did This Happen?
There are speculations about this profitable compensation package which includes a significant requirement that underscores the intricacies of executive pay and non- compete agreements in the field.
It appears that the Indian IT major will give Delaporte a whopping severance package of Rs 92.1 crore (around $11 million) after his earlier-than-expected exit from the company, as per the media report.
But there is a catch as always. Basically, this payment is dependent on Delaporte following a crucial requirement which says that he must not engage in any job or advisory roles with another firm for twelve months following his formal exit on May 31, 2024.
In fact,this clause is about restricting an individual from engaging in competing activities for a certain period of time after leaving a company.
This requirement is already listed for Delaporte’s severance package as per the described in his employment agreement with Wipro.
According to this agreement, if he gets dismissed from his job unjustifiably then the company must give him a payout equivalent to his 12-month base salary at the time of termination.
It is noteworthy here that these payments will stop if Delaporte secures a new job within 12 months or he decides to serve as a consultant for any company within that time frame.
Why Would This Happen?
For the unawares, this is not the first time that an IT company is giving a big compensation.
It appears to be quite common practice to provide generous severance packages to CEOs who are leaving, especially if their time in the position is abruptly ended, in the IT industry.
Earlier, Tata Consultancy Services (TCS) approved expenses worth Rs 48 crore for former CEO Rajesh Gopinathan’s departure agreement, during the time of his resignation in 2023.
Similarly, the ex-CEO of Cognizant, Brian Humphries was also given a severance bundle valued at $6.6 million when he left in early 2023.
When it comes to these large severance packages, they are typically consistent with the companies’ contractual requirements or current industry standards.
The main goal behind defining them is to offer fair financial assistance to executives who have had their time in their positions unexpectedly reduced.
