Cognizant board pleas vote against shareholder proposal

Cognizant’s board has asked shareholders to vote against a proposal that will give shareholders holding 10% or more stake the power to call a special shareholder meeting.

The company's 2022 proxy filing with the US regulator SEC noted that the proposal seeks this right for the shareholders regardless of their length of stock ownership. The board has recommended a vote against the proposal as a safety net against activist investors with short-term goals. A few years ago, Cognizant saw activist investor Elliott Management, which owned 4% in the Nasdaq-listed company, trying to rewire its strategy. Some believe that Elliott's short-term goals did not square with the company's longer-term objectives.

The board said in the proxy statement that it recognises the importance of providing long-term shareholders with the right to call special meetings. "This is why Cognizant’s bylaws permit shareholders holding a 'net long position' of at least 10% of our outstanding shares for one year with the ability to call a special meeting of shareholders," Cognizant said. "These requirements provide a reasonable safeguard against abuse by activist investors with short-term goals. The company’s existing special meeting right is best practice. An overwhelming majority of US-incorporated S&P 500 companies, 88%, either do not permit shareholders to call a special meeting or only permit shareholders to call a special meeting at a higher minimum ownership threshold than Cognizant’s 10% threshold. The company’s existing corporate governance practices and policies already ensure shareholder democracy and board accountability,” the statement said.

The filing also showed that Cognizant CEO Brian Humphries' compensation rose 42.5% to $19.6 million in 2021, from $13.8 million in the year before. Base salary rose to $1.2 million, from $1 million, and bonus increased to $14 million, from $10.6 million. Rajesh Nambiar, EVP and president, digital business and technology, and chairman, Cognizant India, drew $6.8 million in 2021. Nambiar commenced his current role on January 1 last year. The median employee pay was $34,225, making the CEO to median employee pay ratio 575:1.

The company had approximately 330,600 employees at the end of 2021, with 240,000 in India, 40,900 in North America, 15,700 in Continental Europe, and 8,100 in the UK.