As per the reports, Cognizant has linked the compensation of all top executives to its share performance relative to those of direct competitors.
Further, the company has also scrapped its ‘days sales outstanding’ metric, presumably in response to the COVID-19 pandemic.
How Would This Work?
IT major Cognizant has scrapped its ‘days sales outstanding’ metric and has also linked the compensation of all top executives to its share performance relative to those of direct competitors.
Moreover, the decision has been caused by the pandemic’s impact on the firm’s business or not remains uncertain.
According to the reports, the CEO Brian Humphries and other top leaders receive fixed components like basic pay as well as non-fixed ones like performance-based pay.
In 2019, Humphries earned a total annual compensation of about $16.5 million.
Consider the Former CEO Francisco D’Souza, who stepped down from its board in February, earned around $29.2 million including a $750,000 bonus and stock awards accumulated during his time with the company.
How Would This Affect?
Prior to this, only Humphries’ performance-based payment was linked to a ‘relative’ Total Shareholder Returns (TSRs) metric.
It differs from an absolute TSR metric, a relative TSR metric is measured against the S&P 500 Information Technology Index and also against direct competitors such as Infosys, TCS and Wipro.
Now, this new metric will be applicable to all top executives.
Basically, this assigns more direct responsibility for revenue growth to top executives, in what is forecast to be a difficult year for business hit by the COVID-19 pandemic.
Further in performance-based pay, there are two parts – annual cash incentive (ACI) and performance stock units (PSUs).
The weightage given to the overall revenue of the company has been increased in both the components.
The new TSR metric falls under the PSU component.
What Does Cognizant Say?
The company said “TSR metric favored by shareholders helps align management and shareholder interest,” in its proxy statement for 2020.
So far, the company has allowed work-from-home (WFH) for a majority of its offshore teams by provisioning new laptops and encrypting desktops and moving them to the employees’ homes, as well as by enabling the use of BYOD (Bring Your Own Device), providing additional bandwidth connectivity and air cards—all with the appropriate client permissions and security protocols.
Like other firms, Cognizant also strives to ensure business continuity and keep its employee experience in check.
Moreover, it seems a wise decision to change the pay policy slightly then layoff employees or have massive pay cuts.
since last year, the IT firm has already been going through a structuring phase s and has lost many jobs in the process.
According to the new compensation plan, the performance-based payment will be linked to a ‘relative’ Total Shareholder Returns (TSRs) metric.
Further, the new compensation plan assigns top executives more direct responsibility for revenue growth, in what is forecast to be a difficult year for business hit by the COVID-19 pandemic.
It would be interesting to see how the leaders cope up with the crisis and maintain the firm’s market share in the coming future.
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