Kumar, 52, who took over as the boss of the Nasdaq-listed company on 12 January, 2023 after the board sacked his predecessor Brian Humphries, got $20.25 million worth of shares last year, according to a disclosure dated 12 April.
“Mr. Kumar’s annual total compensation for 2023 is substantially higher than the annual total compensation of our former CEO, Mr. Humphries, for 2022 because of certain one-time equity awards that Mr. Kumar received when he assumed the CEO position in January 2023,” said a filing by Cognizant, which follows a January-December fiscal year. Humphries had received $17.9 million in 2022.
Cognizant’s Nasdaq filing referred to the CEO’s performance stock units (PSUs) and restricted stock units (RSUs).
“PSUs with a target value of $3,000,000, and a payout range from 0% to 250% of the target measured over a four-year performance cycle based on absolute total shareholder return of the company’s common stock,” Cognizant informed Nasdaq.
“An equity award consisting of RSUs with a grant date value of $5,000,000, which was a buyout award to replace forfeited equity awards from his previous employer. Because the PSUs are subject to the performance condition described above, the actual payout may differ significantly from the target value attributed to them, including possibly no payout at all,” said the filing.
If CEO remuneration as a percentage of the company’s revenue is taken, then Kumar takes the podium in the Indian IT services space. Kumar’s remuneration is 0.11% of Cognizant’s $19.35 billion in revenue last year. Wipro Ltd’s former CEO Thierry Delaporte, who stepped down earlier this month, got $10.1 million ( ₹83 crore) last year, which was 0.089% of the company’s $11.16 billion in revenue, while C. Vijayakumar’s promised remuneration of $10.65 million ( ₹88 crore) is 0.085% of HCL Technologies Ltd’s $12.58 billion in revenue.
Accenture Plc, which is more than thrice the size of Cognizant, paid $31.55 million in remuneration to chair and CEO Julie Sweet. This implies that Sweet’s remuneration is 0.049% of the $64.1 billion in revenue at Accenture, which follows a September-August fiscal year.
The $6.8 million ( ₹56.4 crore) remuneration of Salil Parekh is 0.037% of the $18.1 billion revenue of Infosys. Tata Consultancy Services Ltd paid $3.5 million ( ₹29.16 crore) or 0.012% of its $27.9 billion in revenue as salary to its former CEO Rajesh Gopinathan, who K. Krithivasan succeeded in June last year.
“The compensation committee reviewed and approved the compensation arrangements set forth in the offer letter and Mr. Kumar’s employment agreement after considering compensation information provided by pay governance for CEOs in the company’s peer group and other information on compensation arrangements for new CEOs,” said a spokesperson for Cognizant.
Because a large percentage of CEO compensation at IT services companies is on account of shares awarded to them, their total remuneration when compared to the median salary of employees also goes up.
Kumar’s compensation is 556 times the median salary of Cognizant employees, the fourth highest, behind Wipro and Accenture. Delaporte’s salary was 916 times the median remuneration of an employee (MRE) while Sweet’s compensation was 633 times at Accenture. Parekh’s pay was 627 times MRE at Infosys while Rajesh Gopinathan and Vijayakumar’s pay was 427 times and 253 times MRE at Tata Consultancy Services Ltd and HCL Technologies, respectively.
“In the past, we have supported the salary of the CEOs of IT companies if the variable component of the CEO salary tends to be a multiple of the fixed salary and the benchmarks that determine variable pay are well defined,” said Amit Tandon, founder and managing director at IiAS, a proxy advisory firm.
Nonetheless, this payout to CEO Kumar, who joined the company from Infosys Ltd, comes when Cognizant struggles to keep up with its peers, including TCS, Infosys and HCL Technologies. Its revenue slipped 0.38% from $19.43 billion in 2022 to $19.35 billion last year, while operating margin declined from 15.3% in 2022 to 13.9%.
Cognizant let go of 3,500 employees or 1% of its workforce last year to shore up its profitability. Consequently, headcount declined 2.1% from 3,55, 300 at the end of December 2022 to 3,47,700 at the end of last year. Cognizant’s workforce in almost all the countries declined: It fell 1.7% to 2,54,000 in India, 1.4% to 40,500 employees in the US, 10.4% in Continental Europe and 7.6% in the United Kingdom.