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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section
14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
| ☑ | Filed by the Registrant | ☐ | Filed by a party other than the Registrant |
| CHECK THE APPROPRIATE BOX: | ||
| ☐ | Preliminary Proxy Statement | |
| ☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
| ☑ | Definitive Proxy Statement | |
| ☐ | Definitive Additional Materials | |
| ☐ | Soliciting Material under §240.14a-12 | |
Cognizant Technology Solutions Corporation
(Name of Registrant as Specified In Its
Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
| PAYMENT OF FILING FEE (CHECK ALL BOXES THAT APPLY): | ||
| ☑ | No fee required | |
| ☐ | Fee paid previously with preliminary materials | |
| ☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11 | |
April 27, 2022
To our shareholders
The Board is pleased with Cognizant’s broad-based progress in 2021. Under the leadership of CEO Brian Humphries and his diverse management team, Cognizant executed a strategy that delivered full-year revenue of $18.5 billion, or year-over-year growth of 11% (10% in constant currency1), the company’s strongest revenue growth since 2015.
Despite intensifying competition for talent across the globe, Cognizant increased its net headcount by 41,000. The company continues its focus on driving diversity and inclusion (“D&I”) throughout its organization of more than 330,000 associates. Doing so is not only the right thing to do but congruent with the company’s core values and essential to attracting and retaining top talent around the world.
During the year, Cognizant deployed $2.3 billion in capital, which included the return of capital to shareholders through share repurchases and dividends, as well as acquisitions. The company believes its capital deployment framework, which anticipates a balanced approach of M&A and return of capital, will support future growth and drive shareholder value.
Performance and strategic priorities
Cognizant entered 2022 with strong commercial momentum, a stronger digital portfolio, deepened strategic partnerships, and a growth strategy designed to capture a large and growing global market opportunity. This strategy, which shapes nearly everything the company does, has four related initiatives: accelerating digital, globalizing the company, increasing client relevance, and repositioning the Cognizant brand, all enabled by supercharging the company’s talent. Foundational to this strategy is a focus on training, career development, total rewards, D&I, and a culture of belonging to deliver a compelling employee value proposition and win the hearts and minds of associates.
In November 2021, Cognizant held a virtual briefing for investors to provide an update on its growth strategy and financial targets, which included a 2022-2024 financial outlook. The company plans to sustain investment in its digital portfolio and international markets.
Transparency and disclosure are among the good governance principles embedded in Cognizant’s business. In keeping with these principles, the company aims to continue providing transparent and effective communications to its investors.
Throughout the prolonged COVID-19 pandemic, Cognizant’s highest priority has remained the health, safety and well-being of associates while maintaining continuity of service for clients. In April 2021, the company launched Operation C3, Cognizant Combats COVID-19, to support its associates in India, their dependents and communities.
The Board continues to work closely with the management team, navigating immediate challenges and monitoring the company’s strategic, operational and commercial progress.
Shareholder engagement
In December 2021 and January 2022, the Chair of our Compensation and Human Capital Committee (the “Compensation Committee”), Leo S. Mackay, Jr., and I met with top shareholders representing approximately 21% of the company’s outstanding shares. We discussed and received their feedback on a number of topics, including our business and strategy, Board composition and refreshment, executive compensation and sustainability efforts. See page 22 for additional information on our shareholder engagement.
| 1 |
Constant currency revenue growth is not a measurement of financial performance prepared in accordance with GAAP. See “Forward-looking statements and non-GAAP financial measures” on page 71 for more information. |
Executive compensation
Following shareholder engagement in 2020 and 2021, some shareholders suggested that the company incorporate environmental and social metrics, including diversity and inclusion goals, in the executive compensation program design. The Compensation Committee evaluated the potential inclusion of such metrics in the 2022 program and approved the use of a gender diversity rate as a measure in its annual incentive program design.
Sustainable business
In the last year, the Board has continued its emphasis on Cognizant’s environmental, social, governance (“ESG”) agenda. Cognizant published an ESG report in June 2021, outlining its approach to integrating ESG considerations into its business strategy. The company followed that report by announcing in October 2021, as a milestone on the journey to become a lower-carbon business, the goal of achieving net zero emissions. Cognizant’s net zero roadmap calls for reducing absolute emissions by 50% from the company’s global operations and supply chain through operational measures by 2030, and reducing absolute emissions by 90% by 2040. The company plans to negate any remaining emissions in both timeframes by using carbon offsets. See page 25.
Building on its long commitment to social responsibility, Cognizant announced early in 2021 a five-year, $250 million philanthropic initiative to advance economic mobility, educational opportunity, diversity, equity, and inclusion as well as health and well-being in communities around the world. Being a socially responsible company also means responding to the larger contexts in which Cognizant operates.
In response to the escalating humanitarian crisis in Ukraine, Cognizant contributed $1 million to organizations delivering assistance across the region. The company joins the international community in hoping that a path to lasting peace can be found soon.
On behalf of my fellow Board members, we invite you to attend the 2022 annual meeting of shareholders and thank you for your continued support.
Sincerely, |
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 MICHAEL PATSALOS-FOX |
| 2022 Proxy Statement | 1 |
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Our purpose Why we exist We engineer modern businesses to improve everyday life. |
Our vision What we aspire to achieve To become the preeminent technology services partner to the Global 2000 C-Suite. |
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Our |
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| Start with a point of view | Seek data, build knowledge | Always strive, never settle | Work as one | Create conditions for everyone to thrive |
Do the right thing, the right way |
| 2 | Cognizant |
| 2022 Proxy Statement | 3 |
Meeting notice and voting roadmap
You are invited to participate in Cognizant’s 2022 annual meeting. If you were a shareholder at the close of business on April 11, 2022, you are entitled to vote at the annual meeting. The agenda for the meeting and the Board’s recommendation with respect to each agenda item are set out below. Even if you plan to attend, we encourage you to submit your vote as soon as possible through one of the methods below.
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John Kim |
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Logistics
The 2022 annual meeting will be a virtual meeting of shareholders conducted via a live webcast. We designed the format of the virtual annual meeting to ensure that our shareholders who attend the virtual annual meeting will be afforded comparable rights and opportunities to participate as they would at an in-person meeting. During the virtual annual meeting, you may ask questions and will be able to vote your shares electronically. To participate in the virtual annual meeting and access the list of shareholders, you will need the 16-digit control number included on your Notice of Internet Availability of Proxy Materials or on your proxy card. A complete list of shareholders will also be available for examination by any shareholder during the ten days prior to the annual meeting for a purpose germane to the meeting by sending an e-mail to our general counsel at the e-mail address set out on page 77 stating the purpose of the request and providing proof of ownership of our common stock. The shareholder list will also be available on the bottom of your screen during the 2022 annual meeting after entering your 16-digit control number on the Notice of Internet Availability or any proxy card that you received, or on the materials provided by your bank or broker.
| Date | Tuesday, June 7, 2022 |
| Time | Online check-in begins: 9:15 a.m. Meeting begins: 9:30 a.m. (all times U.S. Eastern Time) |
| Place | Via live webcast – please visit www.virtualshareholdermeeting.com/CTSH2022 |
Voting
| Who can vote | Shareholders as of our record date, April 11, 2022, are eligible to vote |
| Internet | www.proxyvote.com |
| Telephone* | +1-800-690-6903 |
| Sign, date and return the proxy card |
| * |
The above phone number will work internationally but is only toll-free for callers within the U.S. and Canada. |
Agenda
| 1 | Proposal 1 Election of directors |
Elect the following 11 directors to serve until the 2023 annual meeting of shareholders:
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Zein Abdalla |
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Brian Humphries |
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Vinita Bali |
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Leo S. Mackay, Jr. |
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Maureen Breakiron-Evans |
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Michael Patsalos-Fox |
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Archana Deskus |
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Stephen J. Rohleder |
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John M. Dineen |
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Joseph M. Velli |
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Sandra S. Wijnberg |
| Board recommendation: |
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FOR each director nominee.
| ● | We have built an independent Board with broad and diverse experience and sound judgment that is committed to representing the long-term interests of our shareholders. |
See Board Overview on pages 6 and 7, our director skills matrix on pages 10 and 11 and our director nominees’ biographies starting on page 13.►
| Qualified | Our Board’s key qualifications | |
| 7/11 | Technology and Consulting Services | |
| 5/11 | Talent Management | |
| 4/11 | Security | |
| 5/11 | Regulated Industries | |
| 7/11 | Operations Management | |
| 9/11 | International Business Development | |
| 6/11 | Public Company Leadership | |
| 8/11 | Public Company Governance | |
| 3/11 | Finance, Accounting and Risk Management | |
| Diverse | Our Board’s demographics | |
| • 5/11 born outside the United States | ||
| • 6/11 worked overseas | ||
| • 4/11 racially/ethnically diverse | ||
| • 4/11 female | ||
| Independent | 10/11 directors are independent with four of such directors appointed in the last two years | |
| Engaged | 98% weighted average attendance of director nominees at 2021 Board and committee meetings | |
| 4 | Cognizant |
| 2 |
Proposal 2 |
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Approve, on an advisory (non-binding) basis, the compensation of the company’s named executive officers. | |
Board recommendation:
FOR the approval, on an advisory (non-binding) basis, of our executive compensation.
| ● | Our compensation program ensures that incentives are aligned with our corporate strategies and business objectives. |
| ● | 61% of our CEO’s target direct compensation and 51% of our other NEOs’ target direct compensation is performance-based. |
See “Compensation discussion and analysis (CD&A)” on page 30 ►
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Performance-driven and aligned with strategic priorities and shareholder interests |
Cash
●Base salary provides a stable source of cash income at competitive levels
●Annual cash incentive (ACI) motivates and rewards achievement of short-term company financial objectives
Equity
●Performance stock units (PSUs) incentivize shareholder return and reward achievement of long-term company financial objectives and performance of our common stock
●Restricted stock units (RSUs) reward continued service and long-term performance of our common stock |
2021 Target direct compensation  |
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| Ambitious but attainable targets |
Our performance-based compensation utilizes performance goals that are designed to be ambitious but attainable. In 2021, ACI was achieved at 166.1% of target (for corporate leaders; a portion of the business unit leaders’ results are derived from their business unit performance, resulting in ACI achievement payouts for Mr. Hyttenrauch and Mr. Nambiar of 132% and 124%, respectively). Our 2020/21 PSUs achieved at 88.5%; in addition, the three-year PSUs granted in 2020 and 2021 achieved at 200% as to the 2021 company financial targets. | |||
| 3 |
Proposal 3 |
4 |
Proposal 4 | |
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Ratify the appointment of PricewaterhouseCoopers LLP as the company’s independent registered public accounting firm for the year ending December 31, 2022. |
Consider a shareholder proposal requesting that the Board of Directors take action, as necessary, to amend the company’s special shareholder meeting right. | |||
Board recommendation:
FOR the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2022. ●The Audit Committee is directly involved in the annual review and engagement of PwC to ensure continuing audit independence.
●The continued retention of PwC is in the best interests of the company and its shareholders.
See “Audit matters” on page 62 ► |
Board recommendation:
AGAINST this proposal. See page 64 ► |
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| 2022 Proxy Statement | 5 |
| 6 | Cognizant |
Corporate governance > Board overview
| 2022 Proxy Statement | 7 |
| 8 | Cognizant |
Corporate governance > Board composition and refreshment
| 2022 Proxy Statement | 9 |
| 10 | Cognizant |
Corporate governance > Board qualifications
| 2022 Proxy Statement | 11 |
Our corporate governance guidelines provide that directors are expected to attend the annual meeting of shareholders. For the 2021 annual meeting, Mr. Humphries acted as Chair and all of the other 10 then-current directors attended virtually.
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Key governance practices Shareholder rights and engagement ✔Annual director elections / no classified Board
✔Proxy access
✔Shareholder right to call a special meeting (10% threshold)
✔Annual vote to ratify selection of independent registered public accounting firm
✔No poison pill
Board of Directors ✔Majority of independent directors (10 of 11 director nominees)
✔Separate Board Chair and CEO positions since 2003
✔Annual Board and committee self-assessments
✔Directors limited to service on no more than three other public company boards (one other board if the director is a public company CEO)
✔Majority voting in director elections
✔Regular executive sessions of independent directors
✔A director who experiences a material change in job responsibilities (other than retirement) is required to offer to resign
✔Annual review of skills, expertise, diversity and other characteristics of individual Board members as part of overall analysis of Board composition
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Board member independence | |
Recent director appointment  Stephen J. Rohleder, the one director nominee appointed to the Board since the 2021 annual meeting, was identified and evaluated through a director search process overseen by the Governance Committee and undertaken with the assistance of an independent director search firm. His appointment as a director in March 2022 was based on his extensive experience in the professional services industry and his experience as a leader in public companies. | ||
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| 12 | Cognizant |
Corporate governance > Director nominees
| 2022 Proxy Statement | 13 |
| 14 | Cognizant |
Corporate governance > Director nominees
| 2022 Proxy Statement | 15 |
| 16 | Cognizant |
Corporate governance > Director nominees
| 2022 Proxy Statement | 17 |
| 18 | Cognizant |
Corporate governance > Board structure and operations
Board structure and operations
Recent committee appointments
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Archana Deskus |
Stephen J. Rohleder |
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In December 2021, Ms. Deskus was appointed to the Management Development and Compensation Committee (now known as the Compensation and Human Capital Committee). |
In April 2022, Mr. Rohleder was appointed to the Finance and Strategy Committee. |
Changes in Board and committee responsibilities
On March 1, 2022, the Board determined that it desired to elevate the responsibility oversight for certain critical topics from the committees that had previously overseen such matters to the full Board.
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Management Development and Compensation Committee |
Oversight of management development |
Full Board of Directors assumed direct oversight responsibility |
| Governance and Sustainability Committee |
Oversight of succession planning for the CEO and other senior executives |
The information on the next two pages reflects these changes in oversight responsibility.
| 2022 Proxy Statement | 19 |
| 20 | Cognizant |
Corporate governance > Board structure and operations
| Management | |||||
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Recent activities and key focus areas
●Reviewing and approving the 2021 financial statements and disclosure enhancements
●Reviewing and selecting the independent auditor for the year ending December 31, 2022
●Overseeing the internal audit department’s annual audit plan and budget
●Overseeing the company’s continued IT and security modernization agenda
●Overseeing material litigation and potential litigation
●Overseeing compliance with legal and regulatory requirements, as well as the company’s code of ethics
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Audit Committee financial experts and financial literacy
Ms. Breakiron-Evans and Ms. Wijnberg are “audit committee financial experts” (per SEC rules), and all members of the committee can “read and understand fundamental financial statements” (per Nasdaq rules).
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Management is responsible for the day-to-day management of the company, including its business, strategy execution and risk management. As part of the ERM program and committee oversight responsibilities under the committee charters, management provides regular updates to the Board and relevant committees. Committee charters | |||
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Recent activities and key focus areas
●Overseeing the capital structure and allocation program, with approximately $1.3 billion in share repurchases and dividends in 2021 (see page 3)
●Overseeing the deployment of $1 billion in capital in 2021 for 7 acquisitions aligned with our strategic priorities (see page 3)
●Overseeing tax strategy and planning, including repatriations
●Real estate strategy
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Recent activities and key focus areas
●Resumption of typical compensation program in 2021 following unusual adjustments to 2020 targets in light of the unanticipated business impact of the COVID-19 pandemic
●In early 2021, granting additional equity awards to select officers for retention purposes
●Undertaking a detailed review of our management development program (prior to the change in responsibilities discussed on page 19), talent engagement and diversity and inclusion efforts, including the addition of a gender diversity metric to the 2022 ACI
●Monitor attrition prevalent in industry and oversee management’s efforts to reduce and mitigate its impact on our organization
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Compensation Committee interlocks and insider participation
During the year ended December 31, 2021, Mses. Bali and Deskus, Messrs. Mackay, Patsalos-Fox and Velli and Mr. John N. Fox, Jr., who served on our Board through June 1, 2021, served on the Compensation Committee. No member of the Compensation Committee was or is a current or former officer or employee of the company or any of its subsidiaries. None of our executive officers serves as a member of the board of directors or compensation committee of any entity that has one or more of its executive officers serving as a member of Cognizant’s board or Compensation Committee.
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Recent activities and key focus areas
●Overseeing the Board’s 2021 self-evaluation process (see page 8)
●Reviewing the company’s exposure to potential changes in immigration laws and regulations
●Reviewing and approving the 2021 political spend disclosures and 2022 U.S. political contributions budget (only committee members who are U.S. citizens)
●Overseeing the company’s enhancement of its ESG program and disclosures
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●Overseeing the company’s efforts to empower and promote women leaders, as well as other diversity and inclusion efforts (see page 24)
●Overseeing the company’s development of its net zero emissions goal and progress on the roadmap towards achieving that goal (see page 25)
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| 2022 Proxy Statement | 21 |
Shareholder engagement
Our Board values the input of our shareholders. It receives quarterly or more frequent updates on shareholder communications and is directly involved in responding to communications where appropriate. It also engages in a formal governance-focused engagement process where select directors meet directly with a number of our large shareholders to solicit the input of shareholders on a proactive basis. We consider the valuable feedback and perspectives of our shareholders, which helps inform our decisions and our strategy, when appropriate. The topics in our formal engagement discussions with our large shareholders mostly focused on the company’s strategy, management engagement with the Board, talent, the progress and goals of our ESG program and other governance topics.
| Winter 2021-2022 formal engagement | ||||
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Attendance | |||
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Our Board Chair and Compensation Committee Chair led the engagement process and meetings with shareholders, supported by representatives from the company’s legal and investor relations functions. | ||||
Shareholder proposals at annual meeting
The Board reviews and takes positions with respect to any shareholder proposals submitted for consideration at the annual meeting. The Board also evaluates the voting results from the annual meeting, including with respect to shareholder proposals.
| 2021 Proposal – shareholder action by written consent As in 2020, for the 2021 annual meeting, we received a proposal requesting that the Board undertake such steps as may be necessary to permit written consent by shareholders entitled to cast the minimum number of votes that would be necessary to authorize the action at a meeting at which all shareholders entitled to vote thereon were present and voting. In light of the voting results below, the Board did not take any action regarding this proposal. |
2022 Proposal – special shareholder | |||
| 18.3% For | 81.7% Against | |||
Employee engagement and global delivery operations review
Travel to India
Typically our Board travels to India, where two-thirds of our employees and the core of our global delivery operations are located, every other year. Over the course of a week, directors meet with employees in a variety of forums, tour a number of our global delivery centers and engage in an in-depth review of our people and operations in India. The Board’s most recent visit to India was in February 2020 and the 2022 visit has been delayed due to the COVID-19 pandemic. The Board hopes to return to India in 2023.
1-on-1 meetings
At our quarterly in-person Board meetings, our directors engage in 1-on-1 meetings, typically over breakfast or lunch, with members of management and high-performing employees. With quarterly Board meetings often held virtually since the start of the COVID-19 pandemic, the 1-on-1 meetings have often been held via videoconference.
Keeping up-to-date with trends and legal developments
NACD membership
The company maintains a subscription for Board members to the National Association of Corporate Directors (“NACD”), a recognized authority focused on advancing board leadership and establishing leading boardroom practices. Our Board members attend programs sponsored by the NACD as well as events and summits sponsored by various universities, accounting firms, law firms and other governance firms, and speak on various topics at these events.
Corporate governance policymaking
Certain of our Board members are actively involved in shaping policy around public company governance. For example, Ms. Breakiron-Evans, one of our Audit Committee financial experts, sits on the NACD Audit Committee Chairs Advisory Board, a group of Fortune 500 audit committee chairs that meets with Public Company Accounting Oversight Board (“PCAOB”) members, the SEC Chief Accountant and the head of the Center for Audit Quality.
Updates from advisors
Our Board members receive periodic updates on corporate governance and executive compensation developments, accounting standards changes and various legal and other topics from internal and external counsel, our independent registered public accounting firm and third-party advisors.
| 22 | Cognizant |
Corporate governance > Sustainable outcomes
We strive to embed environmental, social and governance (“ESG”) considerations into our thinking, decisions, and actions.
Talent development
As a professional services company, our continued success depends on our ability to attract, develop and retain top talent. The Board is actively involved in overseeing our talent management and development as an integral part of its oversight of our business and strategy. Our focus on talent management and development stretches from the Board level to our over 330,000 associates through programs overseen by management and reported on to the Board and its committees that are designed to identify, train and grow future leaders.
Leadership and technical training
We provide our associates with opportunities to develop through a robust learning ecosystem that includes our award-winning Global Academy and Global Leadership Development programs and My.Learning.Studio.
COVID-19
In April 2021, we launched Operation C3, Cognizant Combats COVID-19, to pull together all the resources available to the company to support its associates in India, their dependents and communities. Our Foundation also supported persons with disabilities getting vaccinations against COVID-19.
Employee wellness
We are committed to caring for our associates and their families through multiple stages of life. Select wellness benefits include: paid parental leave, back-up childcare, adoption and surrogacy programs, flexible work arrangements, counseling and relationship support, and work-life balance services.
| Board | Management | ||
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Executive officers |
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●Compensation Committee oversees the evaluation process.
●Board (previously the Compensation Committee) oversees CEO and senior executive succession planning.
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●CEO and Chief People Officer, as appropriate, participate in and assist the Compensation Committee and the Board in executive officer evaluations.
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Senior leadership |
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●Compensation Committee has historically overseen, and now the Board oversees, management’s strategies for and progress in building a robust and diverse leadership pipeline, including hiring, development and movement of senior talent (AVP+, top ~1,000 leaders).
●Governance Committee has periodically reviewed, and now the Board periodically reviews, the pipeline of potential internal successors to the members of the Executive Committee (~50 leaders).
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●Executive Committee (consisting of our CEO and his direct reports) meets monthly, reviews VP+ leadership (including racial/ethnic and gender diversity of executive candidate slates) and oversees global leadership development strategies and approach for managing senior talent (AVP+, top ~1,000 leaders).
●Fast-track development for high-performing and high-potential leadership talent through personalized assessments, executive coaching and executive education programs.
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Leadership pipeline and professionals |
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●Compensation Committee oversees the Company’s general talent engagement (including retention, development and training) and diversity and inclusion programs and policies.
●Board (previously the Compensation Committee) oversees the Company’s management development.
●Board has also had a recent focus on the employee attrition prevalent in industry, its impact on the Company, and efforts to combat it.
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●Executive Committee includes talent management and development as an agenda item at periodic meetings, including deep dives on senior leadership talent, voluntary and involuntary attrition, areas of talent for investment, performance management and meritocracy, diversity and inclusion and driving high performing teams.
●Annual global talent review of our leadership pipeline, plus a diverse set of leadership development opportunities, with targeted investments for our ~4,000 director and above leaders.
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| 2022 Proxy Statement | 23 |
Diversity and inclusion
At Cognizant, we are working every day to create conditions for everyone to thrive. We continue to drive diversity and inclusion throughout our organization to unlock the insights, imagination and innovation of our associates and reflect the diversity of our clients and communities. We have diversity and inclusion training and other programs in every geography where our employees are located, fostering inclusivity throughout our organization and culture. In recognition of our efforts, we are proud to have been named a 2021 top employer in 17 countries. Mr. Humphries also recently joined the Valuable 500, a CEO community working to revolutionize disability inclusion through business leadership and opportunity.
One of the ways we are elevating the experience of work for women is through our global Women Empowered (“WE”) affinity group. WE is committed to developing more women leaders at all levels of our company, providing career growth and leadership development opportunities, and building a community of women across all industries in business and technology. For example, our women’s global leadership development program, Propel, is designed to help shape and mobilize the careers of women in leadership roles across our organization. In 2021, the company reached a critical milestone, exceeding its pledge to put 1,000 women leaders globally through the Propel program.
We strive to provide our diverse talent with the support and tools needed to thrive through affinity groups in our organization. Executive Committee sponsors and executive leaders help shape the strategy and direction of each group.
| ● | Black, Latinx and Indigenous Group supports programming and initiatives that promote career development, mentoring, recruitment, retention and community building. |
| ● | Embrace (LGBTQ+) provides a positive, supportive environment for lesbian, gay, bisexual, transgender, queer and other (“LGBTQ+”) colleagues to be their authentic selves at work and creates a strong community among LGBTQ+ associates and allies, including connecting with our clients’ LGBTQ+ networks to strengthen our client relationships. |
| ● | Pan-Asian Group fosters a safe environment for open dialogue, provides resources to the community for career growth and leadership development and celebrates Pan-Asian heritage. |
| ● | Unite (People with Disabilities & Caregivers) brings together people with disabilities and elevates the dialogue amongst the disabled and caregivers. |
| ● | Veterans Network is committed to hiring and helping to prepare transitioning service members, veterans and military spouses for new jobs. Participates in national and local partnerships, job fairs, career conferences and sponsorships, and provides an internal network of military employees and veterans. |
| ● | Working Parent Group provides a place to share experiences, resources, and voice support for all types of families. |
Board diversity matrix (as of April 27, 2022)
As part of our commitment to diversity, we prioritize diversity on our Board of Directors.
| Total Number of Directors: 11 | ||||||||
| Part 1: Gender Identity | Female | Male | Non-Binary | Did Not Disclose Gender | ||||
| Directors | 4 | 7 | — | — | ||||
| Part 2: Demographic Background | Female | Male | Non-Binary | Did Not Disclose Gender | ||||
| African American or Black | — | 1 | — | — | ||||
| Alaskan Native or American Indian | — | — | — | — | ||||
| Asian (including South Asian) | 2 | — | — | — | ||||
| Hispanic or Latinx | — | — | — | — | ||||
| Native Hawaiian or Pacific Islander | — | — | — | — | ||||
| White | 2 | 5 | — | — | ||||
| Two or More Races or Ethnicities | — | 1* | — | — | ||||
| Did Not Disclose Demographic Background | — | — | — | — | ||||
| LGBTQ+ | — | — | — | — | ||||
| Military Veterans | — | 1 | — | — |
| * | Director did not disclose the specific races or ethnicities |
| 24 | Cognizant |
Corporate governance > Sustainable outcomes
Running a responsible business
Board and management oversight
Running a responsible business starts with our Board and management setting a cultural “tone at the top”. Our Board takes an active role in the oversight of our environmental and sustainability initiatives, ethics and compliance and risk management. Our management promotes and monitors implementation of such initiatives and provides regular progress reports to the Board.
Environmental impact and sustainable business
Our Governance and Sustainability Committee is responsible for overseeing our ESG program. We have continued to undertake investments to enhance our ESG program to, among other things, set a greenhouse gas emissions reduction goal and provide more comprehensive ESG disclosures to our shareholders. In 2021, we published our ESG report incorporating the most applicable elements of key third-party ESG reporting frameworks, including the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB) standards and Task Force on Climate-related Financial Disclosures (TCFD) Recommendations. We outlined the company’s approach to integrating ESG considerations into our business strategy while navigating an ever-changing world, including addressing developments like the COVID-19 pandemic and climate change. Learn more about our ESG program at https://www.cognizant.com/us/en/about-cognizant/esg; information which appears on the website is not part of, and is not incorporated by reference into, this proxy statement.
Emissions goal
In addition, the company announced in 2021 it aims to achieve net zero emissions, a new milestone set out as part of the company’s ongoing ESG agenda to become a more sustainable business. We laid out a net zero roadmap that calls for reducing absolute emissions by 50 percent from the company’s global operations and supply chain by 2030, and by 90 percent by 2040 with plans to negate any remaining emissions, in both the 2030 and 2040 goals, by using carbon offsets.
Verified: Cognizant believes third-party validation is an important hallmark of a goal’s ambition and legitimacy. In the first quarter of 2022, Cognizant submitted its net zero goal to the Science Based Targets initiative (SBTi).
Ethics and compliance
Our commitment to customers, employees, shareholders and society is to act with integrity at all times. This guides everything we do — the way we serve our clients and the work we do to help them build better businesses. We believe it is critical to maintain the highest ethical standards.
Our code of ethics applies to all of our directors, officers and employees and is available on our website. See “Helpful resources” on page 77. We post on our website all disclosures that are required by law or Nasdaq rules concerning any amendments to, or waivers from, any provision of our code of ethics. In order to foster a culture of ethics and compliance, we conduct annual trainings for employees on regulatory compliance topics such as global data privacy and anti-bribery. We also make a compliance hotline available to our employees. The hotline is serviced by a third-party provider that is available by phone or online 24 hours a day, 7 days a week to help ensure any compliance concerns can be reported and addressed in a timely and appropriate manner.
| 2022 Proxy Statement | 25 |
Supporting our communities
At Cognizant, we care deeply about unlocking human potential and living out our purpose to improve everyday life. We know that our success depends on delivering value to all of our stakeholders. We contribute to the progress and prosperity of communities across the globe through our corporate foundations, philanthropic initiatives and associate volunteering efforts. Building on our longstanding investments in corporate social responsibility, Cognizant announced a new, five-year $250 million initiative in 2021 to advance economic mobility, educational opportunity, diversity and inclusion, and health and well-being in communities around the world. Learn more about our work to build resilient communities around the globe at https://www.cognizant.com/impact; information which appears on the website is not part of, and is not incorporated by reference into, this proxy statement.
| Corporate foundations | ||
$60 Million |
Global impact | |
COVID-19 |
India ●Healthcare. The India Foundation enables access to quality healthcare for the under-privileged, focusing on preventing avoidable blindness and promoting women and children’s health. In 2021, the India Foundation’s COVID-19 relief focused on setting up of COVID-19 care facilities, supporting oxygenated beds in COVID Care Centers and hospitals across eight cities of India and supplementing oxygen supplies and critical medical equipment required for lifesaving treatment. The India Foundation also supported persons with disabilities getting vaccinations against COVID-19.
●Education. The India Foundation focuses on enabling access to quality education for students from under-served communities through scholarships for higher education, digital learning, science, technology, engineering and math (STEM) and vocational-technical education.
●Livelihood. The India Foundation’s initiatives in livelihood enable disadvantaged youth, women and the disabled to gain employment through short-term skills training programs.
| |
$2.5 Million |
Corporate philanthropy Cognizant has a small number of people working on behalf of our company in Ukraine. We also have associates of Ukrainian and Russian nationality or descent as well as thousands of associates who live and work in nearby countries. To aid in the humanitarian relief efforts relating to the invasion of Ukraine, Cognizant contributed $1 million in grants in March 2022 to four organizations that are delivering food, water, shelter, healthcare, and economic assistance across the region. Grants were administered through the Cognizant Technology Solutions Charitable Fund. | |
35,000 Volunteers |
Volunteering The Cognizant Outreach program mobilizes our associates’ expertise and enthusiasm through volunteer work. We believe our community work is a key value proposition for our associates. Associates leverage their professional skills and personal talents to volunteer with programs that support inclusion in technology and accelerate community impact. Cognizant Outreach also seeks collaborations with Cognizant strategic partners in causes of mutual interest and leverages partner expertise to scale social value, strengthen our reputation and extend our relationships with the communities we live and work in. During 2021, over 35,000 unique employees in 40 global locations volunteered as part of Cognizant Outreach. |
| 26 | Cognizant |
Corporate governance > Share ownership
Common stock and total stock-based holdings table
The following table sets forth the Cognizant stock-based holdings of our directors, named executive officers for fiscal 2021 (“NEOs”), and directors and executive officers as a group. Information is as of April 5, 2022. The table also sets forth the stock-based holdings of beneficial owners of more than 5% of our common stock as of December 31, 2021. Unless otherwise indicated, the address for the individuals below is our address.
Each of our directors and NEOs owns less than 1% of the total outstanding shares of our common stock. The current directors and executive officers as a group do not own more than 1% of the total outstanding shares.
| Directors | Common Stock |
Total | ||||
| Stock | Options | |||||
| Zein Abdalla | 14,413 | 11,294 | 25,707 | |||
| Vinita Bali | 7,756 | — | 7,756 | |||
| Maureen Breakiron-Evans |
3,063 | 6,926 | 46,430 | |||
| Archana Deskus | 7,768 | — | 7,768 | |||
| John M. Dineen | — | 1,827 | 18,413 | |||
| Leo S. Mackay, Jr. | 30,184 | 1,426 | 36,116 | |||
| Michael Patsalos-Fox |
70,502 | 13,297 | 89,377 | |||
| Stephen J. Rohleder | — | — | 884 | |||
| Joseph M. Velli | 16,967 | — | 16,967 | |||
| Sandra S. Wijnberg | — | — | 9,715 | |||
| Total | 150,653 | 34,770 | 259,133 | |||
| Named Executive Officers |
Common Stock | Total | ||||
| Stock | Options | |||||
| Brian Humphries | 125,107 | — | 678,503 | |||
| Jan Siegmund | 42,810 | — | 177,296 | |||
| Gregory Hyttenrauch | 32,208 | — | 119,002 | |||
| John Kim | 11,876 | — | 60,187 | |||
| Rajesh Nambiar | 13,705 | — | 80,229 | |||
| Total | 225,706 | — | 1,115,217 | |||
| Current Directors and | Common Stock | |||||
| Executive Officers | Stock | Options | Total | |||
| As a group (20 people) |
490,926 | 34,770 | 1,771,289 | |||
| 5% Beneficial Owners | Common Stock |
% Outstanding | ||||
| BlackRock, Inc. | 46,297,327 | 8.9% | ||||
| The Vanguard Group | 41,623,450 | 8.0% | ||||
| Dodge & Cox | 29,235,581 | 5.6% | ||||
Common Stock. This column shows beneficial ownership of our common stock as calculated under SEC rules. Except to the extent noted below, each person included in the table has sole voting and investment power over the shares reported. None of the shares is pledged as security by the named person, although standard brokerage accounts may include non-negotiable provisions regarding set-offs or similar rights. The Stock subcolumn includes shares directly or indirectly held and shares underlying RSUs that will vest within 60 days of April 5, 2022 (except, in the case of directors, for such RSUs with respect to which the settlement has been deferred). Mr. Patsalos-Fox’s stock holdings include 10,000 shares of common stock over which there is shared voting and investment power by Mr. Patsalos-Fox through family trusts or other accounts. The Options subcolumn includes shares that may be acquired under stock options that were exercisable as of or within 60 days of April 5, 2022. The Total subcolumn includes RSUs with respect to which settlement has been deferred by our directors. Total. This column shows the individual’s total Cognizant stock-based holdings, including securities shown in the Common Stock column (as described above), plus non-voting interests that are not convertible into shares of Cognizant common stock within 60 days of April 5, 2022, including, as appropriate, PSUs and RSUs. For our directors as a group, this includes 64,263 RSUs with respect to which the settlement has been deferred. For Mr. Rohleder, this also includes deferred stock units representing shares received in lieu of his pro-rata cash Board and Finance Committee retainers. See pages 28 and 29 for additional details. Current Directors and Executive Officers as a Group. This table includes shares of our current directors and executive officers as of the date of this proxy statement. This table includes: (i) 66,036 RSUs that vest within 60 days of April 5, 2022 (Stock subcolumn and Total column), (ii) 34,770 shares that may be acquired under stock options that are exercisable as of or within 60 days of April 5, 2022 (Options subcolumn and Total column), (iii) 64,263 RSUs with respect to which the settlement has been deferred by our directors, as described above, (iv) 600 deferred stock units held by Mr. Rohleder, as described above, (v) 10,000 shares of common stock over which there is shared voting and investment power by Mr. Patsalos-Fox through family trusts or other accounts (Stock subcolumn and Total column) and (vi) 800 shares of common stock over which there is shared voting and investment power by Robert Telesmanic, our Senior Vice President, Controller and Chief Accounting Officer, through family trusts or other accounts (Stock subcolumn and Total column). 5% Beneficial Owners. This table shows shares beneficially owned by BlackRock, Inc. and affiliated entities, 55 East 52nd Street, New York, NY 10055, The Vanguard Group, 100 Vanguard Blvd., Malvern, PA 19355, and Dodge & Cox, 555 California Street, 40th Floor, San Francisco, CA 91404 as follows: |
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| (# of shares) | BlackRock | Vanguard | Dodge & Cox | |||
| Sole voting power | 40,744,556 | 0 | 27,765,331 | |||
| Shared voting power | 0 | 840,056 | 0 | |||
| Sole dispositive power | 46,297,327 | 39,495,062 | 29,235,581 | |||
| Shared dispositive power | 0 | 2,128,388 | 0 | |||
The information in this table is based solely on a Schedule 13G/A filed by BlackRock with the SEC on February 1, 2022, a Schedule 13G/A filed by Vanguard with the SEC on February 9, 2022 and a Schedule 13G filed by Dodge & Cox with the SEC on February 14, 2022. |
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| 2022 Proxy Statement | 27 |
Discussion and analysis
We use cash and stock-based compensation to attract and retain qualified individuals to serve on the Board. We set compensation for our non-employee directors taking into account the time commitment and experience level expected of our directors. A director who is an employee of the company receives no cash or stock-based compensation for serving as a director.
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2021 NON-EMPLOYEE DIRECTOR |
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Annual Cash Retainer for serving |
$90,000 |
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Additional Annual Cash Retainers |
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For serving as Chair of |
$150,000 |
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For serving as a |
Committee |
Committee |
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Audit Committee |
$20,000 |
$35,000 |
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Finance and |
$15,000 |
$20,000 |
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Compensation and |
$15,000 |
$25,000 |
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Governance and |
$10,000 |
$20,000 |
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Annual RSU Award |
Board |
Board |
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$210,000 |
$260,000 |
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Annual restricted stock unit award made on or as soon as practicable following the date of the annual meeting of shareholders with a grant date fair value as set out above. 100% of the restricted stock units vest on the 1st anniversary of the date of the award. |
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Retirement |
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Advance Payment and Partial Year Service |
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Stock Elections in lieu of Cash Retainers |
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Payment Deferral Elections |
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Director compensation vs. peer group
For purposes of establishing 2021 non-employee director compensation, the Compensation Committee engaged Pay Governance, LLC
(“Pay Governance”), an independent executive compensation advisory firm, to review all elements of director compensation, benchmark such compensation in relation to other comparable companies with which we compete for board talent and provide recommendations to ensure that our director compensation program remains competitive. Pay Governance benchmarked our director compensation against the same group of technology-related firms used by Pay Governance in preparing its recommendations to the Compensation Committee for executive officers for 2021. See “Peer group review” on page 33.
The Compensation Committee considered the benchmarking data and recommendations of Pay Governance in recommending to the Board the cash and stock-based compensation of non-employee directors that became effective following the 2021 annual meeting. Based on the 2021 analysis, the Board approved an increase to the annual cash retainer for the members of the Finance and Strategy Committee from $10,000 to $15,000 and the annual cash retainer for the members of the Governance Committee from $7,500 to $10,000.
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NO HEDGING, SHORT SALES, MARGIN ACCOUNTS OR PLEDGING |
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× No hedging or speculation with respect to Cognizant securities
× No short sales of Cognizant securities
× No margin accounts with Cognizant securities
× No pledging of Cognizant securities |
| See “Hedging, short sale, margin account and pledging prohibitions” on page 48 for additional information on these restrictions. |
| 28 | Cognizant |
Corporate governance > Director compensation
Director compensation table
The following table sets forth certain information regarding the compensation of each of our non-employee directors who served during 2021. The table also sets forth the aggregate number of RSUs and the aggregate number of stock options held by each such non-employee director on December 31, 2021. John N. Fox, Jr. did not stand for re-election at our 2021 annual meeting of stockholders and, accordingly, he did not receive any compensation in 2021.
| 2021 Director Compensation | Director Stock and Option Awards Outstanding | |||||||||
| Name | Fees Earned or Paid in Cash |
Stock Awards |
Total | Aggregate Number of Stock Awards |
Aggregate Number of Stock Options | |||||
| Zein Abdalla | $125,000 | $209,939 | $334,939 | 2,949 | 11,294 | |||||
| Vinita Bali | $120,000 | $209,939 | $329,939 | 2,949 | — | |||||
| Maureen Breakiron-Evans | $120,000 | $209,939 | $329,939 | 36,441 | 13,297 | |||||
| Archana Deskus | $110,000 | $209,939 | $319,939 | 2,949 | — | |||||
| John M. Dineen | $130,000 | $209,939 | $339,939 | 16,586 | 1,827 | |||||
| John N. Fox, Jr. (retired) | — | — | — | 5,083 | — | |||||
| Leo S. Mackay, Jr. | $145,000 | $209,939 | $354,939 | 7,455 | 7,797 | |||||
| Michael Patsalos-Fox | $280,000 | $259,986 | $539,986 | 9,230 | 13,297 | |||||
| Joseph M. Velli | $125,000 | $209,939 | $334,939 | 2,949 | — | |||||
| Sandra S. Wijnberg | $140,000 | $209,939 | $349,939 | 9,715 | — | |||||
Stock Awards. Represents the aggregate grant date fair value of RSUs granted in the 2021 fiscal year under the 2017 Incentive Award Plan approved by shareholders, determined in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718. All directors listed except Mr. Patsalos-Fox and Mr. Fox received an award of 2,949 RSUs with a grant date fair value of $71.19 per share on June 1, 2021. As Board Chair, Mr. Patsalos-Fox received an award of 3,652 RSUs with a grant date fair value of $71.19 per share on June 1, 2021. The reported dollar amounts do not take into account any estimated forfeitures related to continued service vesting requirements. For information regarding assumptions underlying the valuation of equity awards, see Note 17 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (“2021 Annual Report”).
Aggregate Number of Stock Awards. Includes the RSUs granted in 2021 with respect to which the settlement has been deferred for some directors, as set forth in “Deferral of restricted stock units” below. Also includes deferred RSUs granted in prior years held by Ms. Breakiron-Evans (33,492), Mr. Dineen (13,637), Mr. Fox (5,083), Mr. Mackay (4,506), Mr. Patsalos-Fox (5,578) and Ms. Wijnberg (6,766) to be settled following the director’s termination of service on the Board in accordance with the previously elected deferral option.
Deferral of restricted stock units
In late 2020, non-employee directors were provided an option to elect to defer settlement of RSUs that were granted in 2021. The following table sets forth for 2021 the two deferral options available and the directors that elected such deferral options.
| RSUs Deferred Until Earliest to Occur of | ||||||
| Company Change in Control or Director’s Death or Permanent Disability |
Director Leaves the Board | Directors Electing Option | ||||
| Option 1 | Immediate settlement | 100% settles on next July 1st | Dineen, Wijnberg | |||
| Option 2 | 1/3rd settles on each of next three July 1sts | Breakiron-Evans | ||||
Delinquent section 16(a) reports
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) requires our directors, executive officers and holders of more than 10% of our voting stock to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock or other equity securities. Based on a review of those forms provided to us and any written representations, we believe that during the year ended December 31, 2021, our directors, executive officers and holders of more than 10% of our voting stock filed the required reports on a timely basis under Section 16(a), except for a Form 4 for Ursula Morgenstern related to four transactions, which was filed one day after the filing deadline.
Under the Audit Committee’s charter, the committee is responsible for reviewing and approving all transactions between the company and any related person that are required to be disclosed pursuant to Item 404(a) of Regulation S-K. Related persons include our directors and executive officers, certain of our shareholders and immediate family members of the foregoing. The company’s legal staff is primarily responsible for monitoring and obtaining information from our directors and executive officers with respect to potential related person transactions, and for then determining, based on the facts and circumstances, whether the related person has a direct or indirect material interest in any transaction with us. Each year, to help our legal staff identify related person transactions, we require each of our directors, director nominees and executive officers to complete a disclosure questionnaire identifying any transactions with us in which the director or officer or their family members have an interest. In addition, our code of ethics requires all directors, officers and employees who may have a potential or apparent conflict of interest to, in the case of employees, notify our chief compliance officer, or, in the case of directors and executive officers, notify our general counsel. There have been no related person transactions since January 1, 2021.
| 2022 Proxy Statement | 29 |
Compensation discussion and analysis (CD&A)
This compensation discussion and analysis section describes the general objectives, principles and philosophy of the company’s executive compensation program, focused primarily on the compensation of our named executive officers for fiscal 2021 (the “NEOs”).
Compensation program objectives
The Compensation Committee designed the 2021 executive compensation program with the objectives and key features to meet those objectives as set out below.
The Compensation Committee believes that the design of the compensation program, including having the appropriate mix of compensation elements and performance metrics and targets, has a significant impact on driving company performance.
| 1 | 2 | |||||
| Program objectives |
Alignment with |
Short and long-term performance objectives | ||||
| How we get there |
Our strategic priorities |
2021 ACI  2021/23 PSUs  | ||||
| 1 | Accelerating Digital |
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| 2 | Globalizing Cognizant |
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| 3 | Increasing our Relevance to Clients |
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| 4 | Repositioning the Cognizant Brand |
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We set performance metrics for our performance-based compensation program that align with our strategic priorities and that we believe are aspirational but achievable. In 2021, the performance metrics included constant currency revenue growth, profitability (measured through adjusted income from operations and adjusted diluted earnings per share (“EPS”)) and total shareholder return relative to a peer group of companies (“relative TSR”) ( |
A substantial percentage of our NEO compensation is performance-based. This is divided between (i) annual cash incentive (“ACI”), which measures performance over a one-year period and rewards achievement of short-term company financial objectives, and (ii) performance stock units (“PSUs”), which measure performance over a multi-year period and reward long-term company financial objectives and relative TSR ( | ||||
| 30 | Cognizant |
Compensation > CD&A > Compensation program objectives
Key compensation program features
| What we do | What we don't do | |||
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No hedging, speculation, short sales, margin accounts or pledging of Cognizant securities |
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No tax “gross ups” on severance or other change in control benefits |
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Long-term continued employment Provide an incentive for long-term continued employment with our company |
Balanced mix Create an appropriate balance between current and long-term compensation and between performance and non-performance-based compensation |
Competitive Provide competitive compensation packages in order to attract, retain and motivate top executive talent |
No unnecessary risk-taking Ensure that compensation arrangements do not encourage unnecessary risk-taking |
| Long-term equity | Performance-based | Peer group positioning |  |
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A substantial percentage of our NEOs’ target direct compensation consists of long-term equity: (i) restricted stock units (“RSUs”), which vest quarterly over a 3-year period, to reward continued service and long-term performance of our common stock, and (ii) PSUs that have a 3-year performance period with vesting shortly thereafter ( see pages 34 and 35). |
Our NEOs’ target direct compensation includes current compensation in the form of cash, divided between base salary and ACI, and long-term compensation in the form of equity, divided between PSUs and RSUs. Both current and long-term compensation are mixed between stable (base salary and RSUs) and performance-based (ACI and PSUs) compensation ( see pages 34 and 35). |
To ensure our compensation remains competitive, the Compensation Committee engaged Pay Governance as its independent consultant in 2021 and prior years to review and benchmark the compensation we provide relative to our peer group and other market data. Our 2021 peer group was comprised of 17 technology, software and professional service companies selected based on industry, comparable business operations and scale ( see page 33). |
We set stock ownership guidelines to help mitigate potential compensation risk and further align the interests of our NEOs with those of shareholders ( see page 48). We also create a balance between performance and non-performance-based compensation and set performance targets that we believe are aspirational but achievable ( see pages 34 to 40). |
| 2022 Proxy Statement | 31 |
Shareholder engagement and the impact of COVID-19
As part of our annual shareholder engagement program (see page 22), we solicit feedback from our shareholders on our executive compensation program. In 2019, we received a number of suggestions from shareholders (described in our 2020 proxy statement) that we incorporated into the design of our 2020 executive compensation program and continue today.
For 2020 (and continuing in 2021), the Compensation Committee made significant revisions to the company’s performance-based compensation structure to better align with the company’s strategy, peer group, competitor and industry practices, the recommendations of the committee’s independent compensation consultant and feedback from shareholders. Based on the positive feedback received from shareholders on the changes made to the 2020 executive compensation program and the Compensation Committee’s view that the revised program design was achieving its objectives, the committee made no significant changes to the design of the program for 2021. These changes included the following, which may assist in understanding prior years’ compensation for our NEOs in various charts and graphs throughout this proxy statement:
| ● | ACI | |
| ● | eliminated days sales outstanding (“DSO”) as a performance metric, having determined it to be effectively monitored by the Board through other means | |
| ● | increase in the weighting of revenue from 50% to 60% for corporate leaders, aligning with the company’s strategic focus on revenue growth | |
| ● | created more individualized awards for business unit leaders, with 60% of the award based on performance of the applicable business unit – 35% business unit revenue and 25% business unit profit – and 40% of the award based on overall company performance – 25% company revenue and 15% company adjusted income from operations | |
| ● | Additional equity awards — In March 2020 and February 2021, the Compensation Committee granted additional equity awards to longer-serving SVP+ associates due to the additional efforts required during the ongoing changes in company leadership and transformation initiatives underway, the need to bridge the transition from 2-year to 3-year PSUs that occurred between 2019 and 2020 and the retention concerns presented by the 0% payout for the 2018/19 PSUs and subsequently the 2019/20 PSUs. These awards were part of a broader retention program for associates at the level of Assistant Vice President and above. The CEO did not receive such an award, but Mr. Hyttenrauch received such an award (see pages 35 and 44). | |
| ● | COVID-19 impacts and adjustments — In addition, the Compensation Committee’s compensation decisions and our NEO’s compensation in 2020 were impacted by COVID-19. After initial setting of the targets, there were no COVID-19 related adjustments to the 2021 ACI as the program returned to its typical structure. | |
| ● | In mid-2020, to maintain the incentive value of the ACI awards in light of the unanticipated business impact of the COVID-19 pandemic, the ACI program was revised to measure Q1 performance (25% weighting) based on the original pre-COVID-19 targets established in early 2020 and Q2 through Q4 performance (75% weighting) based on revised targets. A maximum payout of 85% of target was simultaneously established to ensure the lowered expectations for the year did not result in an above-target payout. The company’s ultimate 2020 performance would have resulted in a 0% payout based on the original targets but exceeded the revised targets, resulting in our 2020 NEOs receiving the maximum 85% payout. | |
| ● | The PSU awards were not adjusted for COVID-19. In February 2021, the Compensation Committee determined a 0% achievement for the 2019/20 PSUs (performance measurement period covering 2019 through 2020) as the threshold levels of performance were not achieved. | |
| ● | We utilize adjusted operating margin (see page 3 for recent performance on this measurement) rather than adjusted income from operations | |
| ● | We considered previously received suggestions from shareholders and our own view regarding the importance of including environmental and social (E&S) metrics, including diversity and inclusion goals, in the executive compensation program design. Such metrics were not included in the 2021 program design due to significant enhancements to the company’s E&S efforts already in process for 2021. For 2022, the Compensation Committee revised the ACI to add two metrics at 5% weighting each (10% in total) for all NEOs and other executive officers as follows. | |
| ● | The first relates to E&S and is focused on gender diversity globally and developing and retaining talent. | |
| ● | The second relates to increasing the percentage of revenue related to our higher value services, fixed bid and outcome-based engagements that leverage our strategic services delivery model. | |
| 32 | Cognizant |
Compensation > CD&A > Compensation setting process
| 2022 Proxy Statement | 33 |
Reward continued service and long-term performance of our common stock
We grant RSUs, which typically vest quarterly over a three-year period, to reward continued service and long-term performance of our common stock.
Performance stock units (PSUs)
Incentivize shareholder return and reward achievement of long-term company financial objectives and performance of our common stock
Our Compensation Committee designed the 2021/23 PSU awards granted to our NEOs to tie a substantial portion of executive compensation to the attainment of long-term goals across three metrics that it believes are valued by our shareholders:
| ● | constant currency revenue growth (50% weighting); |
| ● | adjusted diluted EPS (25% weighting); and |
| ● | total shareholder return (TSR) (25% weighting) of our common stock on a relative basis as compared to a peer group detailed in the “Total shareholder return (TSR)” graphic on page 37. |
As further described in “Performance-based compensation – performance by award” on page 36, the 2021/23 PSU awards have a 3-year performance measurement period. The Compensation Committee established targets for the revenue and adjusted diluted EPS components upfront in February 2021 as three separate 1-year goals, one for each fiscal year during the performance period (1/3rd weighting each), in each case measured as a percentage increase over prior year actuals. For 2021, the targets were for 5% constant currency revenue growth and a 13% increase in adjusted diluted EPS as compared to 2020.
The relative TSR component is measured over the full 3-year performance period, with payout with respect to the metric capped at 100% in the event the TSR of the company’s common stock on an absolute basis of share price growth and dividends over the performance period is negative. The relative TSR target was set at the 50th percentile vis-à-vis the comparator group of companies. The maximum possible number of PSUs that may vest is 200% of target.
| 34 | Cognizant |
Compensation > CD&A > Primary compensation elements
Base salary
Stable source of cash income at competitive levels
The base salary component of an NEO’s target direct compensation is included to provide financial stability and certainty to balance against the performance-based compensation elements.
Annual cash incentive (ACI)
Motivate and reward achievement of short-term company financial objectives
The Compensation Committee designed our 2021 ACI program to stimulate and support a high-performance environment by tying such incentive compensation to the attainment of short-term goals across two metrics aligned with our company’s financial objectives that it believes are valued by our shareholders:
| ● | constant currency revenue growth (60% weighting); and |
| ● | adjusted income from operations (40% weighting) for our CEO, CFO and other corporate leaders. |
For those NEOs overseeing business units, 60% of the award was based on performance of the applicable business unit – 35% business unit revenue and 25% business unit profit, and 40% of the award was based on overall company performance – 25% company revenue and 15% company adjusted income from operations.
The Compensation Committee reviews the target direct compensation of our NEOs on an annual basis and makes periodic adjustments based on individual performance and contributions, market trends and competitive environment for talent, increases in the cost of living, internal pay equity, the scope, responsibility and business impact of the individual’s position, the individual’s potential for increased responsibility and promotion over the award term, and the value of equity compensation that the individual has previously been awarded. No specific weight is assigned to any of the above criteria relative to the others, but rather the Compensation Committee uses its judgment in combination with market and other data. The Compensation Committee evaluates the total mix of cash versus equity-based compensation, short-term versus long-term compensation and performance-based versus fixed compensation with reference to market practices and compensation program objectives.
Target direct compensation excludes additional awards that may be made from time to time for retention purposes or individual achievement (see additional equity awards (RSUs and 2020/21 PSUs (2-year) granted in 2020 and RSUs granted in 2021) granted to Mr. Hyttenrauch). It also excludes new hire awards, such as sign-on bonuses or one-time equity grants, upon joining the company that are not intended to be recurring (such as the sign-on grant made to Mr. Nambiar in February 2021), that are designed to compensate a new hire for compensation being lost as a result of leaving a prior employer or additional costs of joining the company, or are needed as additional incentive for a new hire to join the company. Equity vesting acceleration upon retirement similarly is not included in target direct compensation. See pages 41 to 46 for additional details on target direct compensation and any excluded awards.
| 2022 Proxy Statement | 35 |
Performance-based compensation – performance by metric
The graphs below show actual company performance versus the corresponding performance targets for the company’s performance-based compensation elements.
Presentation notes
| ● | After initial setting of the targets, there were no COVID-19 related adjustments to the 2021 ACI as the program returned to its typical structure. The 2020 ACI targets were adjusted in mid-2020 for the unanticipated business impact of the COVID-19 pandemic. 2020 ACI award payout was limited to 85% of target notwithstanding the company significantly exceeding the COVID-adjusted targets. |
| ● | No adjustment made to PSU targets notwithstanding the unanticipated business impact of the COVID-19 pandemic, resulting in zero attainment for the 2020 performance period for both the 2020/21 PSUs (2-year) and the 2020/22 PSUs (3-year). |
| ● | Revenue targets are initially set in constant currency. All targets are initially set assuming no acquisitions beyond those that have been announced by the company at the time of target setting. |
| ● | Adjusted income from operations, non-GAAP diluted earnings per share (EPS) and adjusted diluted EPS are not measurements of financial performance prepared in accordance with GAAP. See “Forward-looking statements and non-GAAP financial measures” on page 71 for more information. |
| Key | GAAP or market metric Actual company revenue (GAAP) and total shareholder return (TSR) (market metric) |
Non-GAAP Actual company non-GAAP diluted earnings per share (EPS) |
Adjusted Actual company adjusted income from operations and adjusted diluted earnings per share (EPS) | |||
Revenue
(in billions)
| ● | Strong, consistent revenue growth is a key company objective |
| ● | Aspirational but achievable targets and significant weighting; revenue weighting for 2020 and 2021 ACI increased from 50% to 60% as days sales outstanding (DSO) metric, previously weighted 10%, was dropped as a metric in 2020 |
| ● | For comparability with actual company results, targets presented herein were adjusted to include the impact of foreign currency exchange movements and revenue generated by acquisitions that were announced following the target setting process |
Adjusted income from operations
(in millions)
| ● | Increased profitability is a key company objective |
| ● | Aspirational but achievable targets and significant weighting |
| ● | For comparability with actual company results, at the end of the year targets were adjusted (as reflected herein) to include the results of acquisitions that were announced following the target setting process and, in 2021, the 2021 class action settlement loss |
| 36 | Cognizant |
Compensation > CD&A > Performance-based compensation – performance by metric
Non-GAAP / adjusted diluted earnings per share (EPS)
| ● | Increased profitability is a key company objective |
| ● | Aspirational but achievable targets |
| ● | Weighting decreased from 50% to 25% in 2020 with the addition of a relative TSR metric |
| ● | Adjusted diluted EPS utilized for awards granted in 2019, 2020 and 2021 to align with the company’s revised non-GAAP financial metric |
| ● | For comparability with actual company results, at the end of the year targets were adjusted (as reflected herein) by the results of acquisitions that were announced following the target setting process and, in 2021, the per share impact of the 2021 class action settlement, net of tax |
Total shareholder return (TSR) and relative TSR
To incentivize shareholder return, absolute TSR and relative TSR were utilized as performance metrics for the PSUs awarded to Mr. Humphries in 2019 upon his joining the company and relative TSR was utilized as a performance metric for all PSU awards granted in 2020 and 2021.
Relative TSR:
Peer Group for Relative TSR on Annual PSUs: S&P 500 Information Technology Index + Additional Competitors (Capgemini, CGI, EPAM Systems, Genpact, HCL, Infosys, Tata Consulting Services and Wipro)
Peer Group for Relative TSR on 2019/23 CEO PSUs (New Hire): S&P 500 Information Technology Index
| 2022 Proxy Statement | 37 |
Performance-based compensation – performance by award
The information below shows the awards granted in 2021 and prior years with performance periods covering 2021.
| ● | Revenue targets are initially set in constant currency. All targets are initially set assuming no acquisitions beyond those that have been announced by the company at the time of target setting. | |
| ● | For comparability with actual company results, targets presented herein were adjusted as follows: | |
| ● | Revenue targets were adjusted to include the impact of foreign currency exchange movements and revenue generated by acquisitions that were announced following the target setting process | |
| ● | Adjusted income from operations and adjusted diluted EPS targets were each adjusted by results generated by acquisitions that were announced following the target setting process and, in 2021, by the impact of the 2021 class action settlement loss | |
| ● | Target increases in the tables are as initially set by the Compensation Committee and assume no acquisitions beyond those that had been announced at the time of target setting. | |
| ● | Achieved increases (decreases) reflect the following adjustments: | |
| ● | Revenue increase (decrease) achieved is on a constant currency basis and was adjusted to exclude revenue generated by acquisitions that were announced following the target setting process | |
| ● | Adjusted income from operations and adjusted diluted EPS increase (decrease) achieved were each adjusted by results generated by acquisitions that were announced following the target setting process and, in 2021, by the impact of the 2021 class action settlement loss | |
| ● | Adjusted income from operations and adjusted diluted EPS are not measurements of financial performance prepared in accordance with GAAP. See “Forward-looking statements and non-GAAP financial measures” on page 71 for more information. | |
| ● | Achievement shown for 2021 ACI applies to corporate leaders; a portion of the business unit leaders’ results are impacted by their business unit performance; achievement levels for Mr. Hyttenrauch and Mr. Nambiar were 132% and 124%, respectively. | |
Performance awards paid in early 2022:
| 38 | Cognizant |
Compensation > CD&A > Performance-based compensation – performance by award
PSUs for future payment (awards made through 2021):
| 2022 Proxy Statement | 39 |
| 40 | Cognizant |
Compensation > CD&A > Compensation by NEO
This section includes compensation information for and provides an overview of the compensation decisions made with respect to our NEOs.
Three views of compensation
To assist shareholders in understanding the compensation arrangements for our NEOs, we provide the following three views of compensation:
Target Direct Compensation – The Compensation Committee utilizes target direct compensation to review, evaluate and make decisions, typically early in the year, with respect to the compensation of our NEOs. This view is intended to capture the annual compensation that would be delivered to an NEO in a theoretical, steady environment where the same annual compensation was granted in multiple years and the company’s performance was at target across all such years. The Compensation Committee believes this view is most appropriate for its decision-making, including evaluation against the compensation practices of comparable companies with which we compete for talent, as it is designed to capture the annual compensation an NEO would be expected to earn, assuming company performance at target, based on the decisions of the Compensation Committee in the year of such decision. Target direct compensation excludes additional cash and equity awards that are made for new hires, retention or other purposes that are not intended to be recurring.
Realized Compensation – To supplement the SEC-required disclosure, we provide a realized compensation view that is designed to capture the compensation actually received by an NEO in a given year. We calculate realized compensation by using the reported W-2 income for an NEO (or, in the case of NEOs who are not resident in the U.S., the comparable information as if they had received a W-2) for a given year and substituting the actual ACI paid in such year (which relates to the prior year given such incentives are paid in the first quarter of the following year) with the ACI earned for such year. Realized compensation is not a substitute for the amounts reported as SEC compensation.
| Target Direct Compensation |
SEC Compensation |
Realized Compensation |
|||||
| Other | All other compensation as required by SEC rules, including sign-on bonuses upon joining the company and perquisites | All other reported W-2 income | |||||
| Non-Qualified Deferred Compensation | Nambiar only: change in value during the year of the post-employment benefit payable under the India Gratuity Plan | Nambiar only: change in value during the year of the post-employment benefit payable under the India Gratuity Plan | |||||
| Bonus | Nambiar only: Pro-rated portion of sign-on bonus and cash in light of delay of equity grants | Nambiar only: Pro-rated portion of sign-on bonus and cash in light of delay of equity grants | |||||
| RSUs | Grant date fair value of the RSUs targeted to vest each year, excluding additional awards | Grant date fair value of the RSUs granted during the year | Actual value as of the vesting date of RSUs that vested during the year | ||||
| PSUs | Target value of the PSUs to vest each year, excluding additional awards | Grant date fair value of the PSUs granted during the year, calculated with respect to relative TSR as an award with a “market condition” under applicable accounting rules | Actual value as of the vesting date of PSUs that vested during the year | ||||
| ACI | Target ACI for the year | Actual ACI earned for the year | Actual ACI earned for the year | ||||
| Base Salary | Target base salary for the year (generally equal to actual base salary) | Actual base salary for the year (and, for Mr. Kim, cash paid in lieu of unused vacation) | Actual base salary for the year |
The table above summarizes the manner in which the various compensation elements for a given year are included in target direct compensation, SEC compensation and realized compensation. See Executive Compensation Tables beginning on page 51 for additional information regarding these items.
| 2022 Proxy Statement | 41 |
|
Committee assessment and target direct compensation The specific components of Mr. Humphries’ 2021 target direct compensation were as follows: (i) base salary of £925,000 (approximately $1,230,000; a 16% increase vs. 2020), (ii) ACI target of 2x base salary (£1,850,000, or approximately $2,460,000; a 16% increase vs. 2020), (iii) PSUs of $8,400,000 (35% increase vs. 2020) and (iv) RSUs of $5,600,000 (35% increase vs. 2020). The 2021/23 PSUs granted in 2021 had the same metrics, targets and performance period as such PSUs granted to the other NEOs, as compared to the 2019/23 CEO PSUs (New Hire) granted in 2019 that were specific to him. These increases reflect the assessment of Mr. Humphries’ accomplishments in aligning the Company behind a clear purpose and vision, investing in ESG, enhancing diversity and inclusion initiatives, refreshing the leadership team, reinvigorating the Company’s commercial momentum, and investing in the future, both organically and through a clearly defined acquisition strategy. In addition, Mr. Humphries led the company through a ransomware attack and began executing a significant investment strategy to bolster and modernize the company’s IT and security infrastructure. This leadership and growth strategy allowed the company to reach $18.5 billion in revenue and return $1.3 billion to shareholders through share repurchases and dividends in 2021. SEC compensation The grant date fair value of the PSUs required to be included in 2020 and 2021 SEC compensation is slightly higher than the target award value due to the relative TSR component being an award with a “market condition” under applicable accounting rules. Realized compensation Certain numbers shown in the graphs above were converted to US$ based on a £1 = $1.28 exchange rate, the twelve-month average for fiscal year 2020 and a £1 = $1.33 exchange rate, the twelve-month average for fiscal year 2021. |
 |
| 42 | Cognizant |
Compensation > CD&A > Compensation by NEO
| Jan Siegmund |  |
Key responsibilities and career highlights | |||
| CFO | |||||
| Age | Cognizant Tenure | Public Company Boards | |||
| 57 | 2 years | The Western Union | |||
| Company (WU) | |||||
| Education | |||||
| Technical University Karlsuhe - M.A. | |||||
| University of California, Santa Barbara - M.A. | |||||
| Technical University of Dresden, Germany - Doctorate | |||||
|
Committee assessment and target direct compensation The specific components of Mr. Siegmund’s 2021 target direct compensation were as follows (with each such component being consistent with his 2020 target direct compensation on an annualized basis: (i) base salary of $800,000, (ii) ACI target of 1x base salary ($800,000), (iii) PSUs of $2,250,000 and (iv) RSUs of $2,250,000. SEC compensation Realized compensation |
 |
| 2022 Proxy Statement | 43 |
|
Gregory Hyttenrauch |
|
Key responsibilities and career highlights | ||
|
Age Education Cognizant Tenure |
 |
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|
Committee assessment and target direct compensation The specific components of Mr. Hyttenrauch’s 2021 target direct compensation were as follows: (i) base salary of £487,000 (approximately $648,000), (ii) ACI target of 1x base salary (£487,000 or approximately $648,000), (iii) PSUs of $1,150,000 and (iv) RSUs of $1,150,000. His ACI award was based 40% on the overall company ACI metrics and targets like the other NEOs, with the remaining 60% based on metrics and targets specific to the North American business unit: (i) 35% based on constant currency revenue growth of the business unit and (ii) 25% based on business unit profit. Also in February 2021, the Compensation Committee granted an additional equity award due to the additional efforts required of Mr. Hyttenrauch during the ongoing changes in company leadership and transformation initiatives underway and retention considerations. As such, the Compensation Committee approved an additional $1,000,000 of RSUs SEC compensation Realized compensation Certain numbers shown in the graphs above were converted to US$ based on a £1 = $1.33 exchange rate, the twelve-month average for fiscal year 2021. |
 |
| 44 | Cognizant |
Compensation > CD&A > Compensation by NEO
|
John Kim |
|
Key responsibilities and career highlights | ||
|
Age Education Cognizant Tenure |
 |
|||
|
Committee assessment and target direct compensation The specific components of Mr. Kim’s 2021 target direct compensation were as follows: (i) base salary of $650,000, (ii) ACI target of 1x base salary ($650,000), (iii) PSUs of $1,000,000 and (iv) RSUs of $975,000. However, in order for Mr. Kim’s annual realized equity awards to reach targeted levels quickly, he was awarded an aggregate of $1,650,000 RSUs in connection with his annual and promotion grants. SEC compensation Realized compensation |
 |
| 2022 Proxy Statement | 45 |
|
Rajesh Nambiar |
|
Key responsibilities and career highlights | ||
|
Age Education Cognizant Tenure |
 |
|||
|
Committee assessment and target direct compensation The specific components of Mr. Nambiar’s 2021 target direct compensation were as follows: (i) base salary of ₹43,824,000 (approximately $600,000 inclusive of the Company’s 12% matching contribution to the India Provident Fund; for 2021, the base salary was prorated to approximately $519,000 plus a $22,775 Company matching contribution to the India Provident Fund), (ii) ACI target of 1x base salary (₹43,824,000 or approximately $600,000, which was prorated to approximately $519,000* for 2021), (iii) PSUs of $1,000,000 and (iv) RSUs of $1,000,000. In addition, in order for Mr. Nambiar’s annual realized equity awards to reach targeted levels quickly, he was awarded $437,500 RSUs in connection with his promotion. Approximately 42% of Mr. Nambiar’s 2021 ACI award (representing the period from January 1 to June 4 when he assumed his current role) was based on the overall company ACI metrics and targets. The remainder of his ACI award was based 40% on the overall company ACI metrics and targets, with the remaining 60% based on metrics and targets specific to the Digital Business and Technology business unit: (i) 35% based on constant currency revenue growth of the business unit and (ii) 25% based on business unit profit. In February 2021, the Compensation Committee also granted an additional $2,250,000 of RSUs SEC compensation Realized compensation *In India, ACI is calculated using the base salary amount including the 12% matching contribution to the India Provident Fund. However, such a matching contribution is not required to be made on the ACI payment. For comparability to our other NEOs, Mr. Nambiar’s ACI is shown as being calculated based on the actual 88% of his base salary that he received and the percentage payout is shown accordingly throughout this proxy statement. If it had been shown based on the full base salary including the matching contribution, his 2021 ACI payout percentage would have been 119%.
Certain numbers shown in the graphs above were converted to US$ based on an approximately ₹1 = $0.013 exchange rate, the twelve-month average for fiscal year 2021. |
 |
| 46 | Cognizant |
Compensation > CD&A > Other elements of compensation
Other elements of compensation
Broad-based programs
Our executive officers are eligible to participate in our broad-based medical, dental, vision, life and accidental death insurance programs.
Our U.S.-based executive officers are additionally eligible to participate in our 401(k) savings plan, 2004 Employee Stock Purchase Plan (as amended and restated, the “ESPP”), and the Cognizant Technology Solutions Supplemental Retirement Plan (the “CSRP”) on the same basis as other U.S.-based employees (or executives in the case of the CSRP) generally. Under the 401(k) savings plan, we match employee contributions at the rate of 50% for each dollar contributed during each pay period, up to the first 6% of eligible compensation contributed during each pay period, subject to applicable U.S. Internal Revenue Service (“IRS”) limits. The matching contributions vest immediately.
Our U.S.-based executive officers who are subject to contribution restrictions under our 401(k) savings plan due to statutory limits that apply to highly-compensated employees are eligible to participate in the CSRP on the same basis as other U.S.-based employees generally. The CSRP is a nonqualified savings plan in which the employee’s contributions are made on a post-tax basis to an individually owned, portable and flexible retirement plan held with a life insurance company. The CSRP works alongside established qualified retirement plans such as our 401(k) savings plan or can be the basis for a long-term stand-alone retirement savings plan. We provide a fully vested incentive match (taxable as current compensation at the time of the match) following the same formula as our 401(k) savings plan. Because the CSRP is not subject to the same IRS non-discrimination rules as our 401(k) savings plan, employees that face limitations on their 401(k) contributions due to these rules can avail themselves of the CSRP without forgoing the company match. Although there is a limit in the amount of employer contributions, there is no limit to the amount an employee may contribute to the CSRP, and it can be used in concert with other retirement strategies that may be available outside of the company. The CSRP allows participants to choose between a tax-deferred variable retirement annuity and a variable (equity investment) life insurance plan. Both the annuity and the life insurance plan offer the ability to exchange the policy for a guaranteed retirement income that cannot be outlived. The CSRP also offers a range of investment options for the executive to choose from, as well as managed portfolios (similar to those offered in most 401(k) plans).
Our U.K.-based executive officers are eligible to participate in our U.K. group personal pension plan on the same basis as other U.K.-based employees generally. Under this plan, we match employee contributions of up to 10% of eligible salary (depending on the employee’s job grade), subject to applicable statutory annual allowance limits. For any excess pension contributions over the annual allowance limits, which an employee is eligible for under the terms of such employee’s contract of employment, such employee is paid such contribution value as a cash allowance, subject to applicable tax law.
Our India-based executive officers are eligible to participate in our broad-based medical insurance, life and accidental death insurance, as well as in the India Provident Fund and India Gratuity Plan, which are statutory benefit programs, on the same basis as all other regular Indian-based employees generally. Under the India Provident Fund, we make a matching contribution equal to 12% of the employee’s “basic” salary, which is a component of the employee’s total salary. This contribution immediately vests. The India Gratuity Plan provides for a lump-sum payment, based on number of years of service, to an employee upon termination of employment from the company.
The 401(k) savings plan, CSRP, U.K. group personal pension plan, India Provident Plan, India Gratuity Plan and other generally available benefit programs allow us to remain competitive for employee talent. We believe that the availability of the aforementioned broad-based benefit programs generally enhances employee morale and loyalty.
| 2022 Proxy Statement | 47 |
Supplemental retirement programs
We do not have any nonqualified deferred compensation programs, pension plans or pre-tax supplemental executive retirement plans for our NEOs, except for the CSRP, which is designed for certain employees whose participation in our 401(k) savings plan is limited by IRS regulations and described under “Broad-based programs” on page 47.
Perquisites
We seek to maintain an egalitarian culture in our facilities and operations. The company’s philosophy is to provide a minimal number of personal benefits and perquisites to its executives and generally only when such benefits have a strong business purpose.
We incur expenses to ensure that our employees, including our executive officers, are accessible to us and our customers at all times and to promote our commitment to provide our employees and executives with the necessary resources and technology to allow them to operate “around the clock” in a “virtual office” environment. However, we do not view these expenses as executive perquisites because they are essential to the efficient performance of executives’ duties and are comparable to the benefits provided to a broad-based group of our employees. We also provide personal security services to certain of our executive officers where we believe the provision of such services is in the interest of the company, and we may reimburse executives for approved travel expenses where an immediate family member accompanies an executive to attend a business function at which such family member is generally expected to attend. In addition, the company provides Mr. Humphries with a corporate apartment in New York as a result of his frequent travel to our New York office and provides Mr. Hyttenrauch with a corporate apartment in New York as a result of his expatriate assignment in our New York office.
Company policies impacting compensation
Executive stock ownership guidelines
 |
Our stock ownership guidelines are designed to further align the interests of our NEOs with those of our shareholders. Under the guidelines, each NEO is required over time to hold a number of shares with a value equal to the applicable multiple of annual base salary. The annual base salary and stock price utilized in the calculation is the annual base salary and stock price applicable as of the date an individual becomes an NEO. Compliance is required within five years of an officer becoming an NEO, subject to limited exceptions for hardship or other personal circumstances as determined by the Compensation Committee. As of April 5, 2022, none of our NEOs had yet reached their five-year deadline for compliance with the stock ownership guidelines; however, Mr. Humphries already held sufficient shares to be in compliance with our stock ownership guidelines. |
Hedging, short sale, margin account and pledging prohibitions
Our insider trading policies include the following prohibitions:
| × |
No Hedging |
All of the company’s directors, executive officers and other employees are prohibited from purchasing or selling puts, calls and other derivative securities of the company or any other derivative security that provides the equivalent of ownership of any of the company’s securities or an opportunity, directly or indirectly, to profit from the change in value of the company’s securities. |
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| × |
No Short Sales |
All of the company’s directors, executive officers and other employees are prohibited from engaging in short sales of company securities, preventing such persons from profiting from a decline in the trading price of the company’s common stock. |
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| × |
No Margin |
All of the company’s directors, executive officers and other employees are prohibited from using company securities as collateral in a margin account. |
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| × |
No Pledging |
All of the company’s directors, executive officers and other employees are prohibited from pledging company securities as collateral for a loan, or modifying an existing pledge. |
| 48 | Cognizant |
Compensation > CD&A > Company policies impacting compensation
Clawback policy
We maintain a clawback policy, which applies to all NEOs and certain other members of management.
|
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When Clawback Policy May Apply |
Compensation Subject to Clawback |
| |
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Company is required to prepare an accounting restatement due to material noncompliance by the company with any financial reporting requirement under the securities laws that is caused directly or indirectly by any current or former employee’s gross negligence, willful fraud or failure to act that affects the performance measures or the payment, award or value of any compensation that is based in whole or in part on the achievement of financial results by the company (“incentive compensation”) |
Incentive compensation actually received during the preceding three years less amount that would have been received based on restated financial results |
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…and to the extent the restatement is caused by an employee’s willful fraud or intentional manipulation of performance measures that affects incentive compensation, for such employee… |
Same as above, but clawback may cover the entire period the employee was subject to the clawback policy |
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Employee engages in illegal or improper conduct that causes significant financial or reputational harm to the company |
Any portion of incentive compensation |
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Employee has knowledge of and fails to report to the Board the conduct of any other employee or agent of the company who engages in any of the conduct described above |
Any portion of incentive compensation |
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Employee is grossly negligent in fulfilling his or her supervisory responsibilities to prevent any employee or agent of the company from engaging in any of the conduct described above |
Any portion of incentive compensation |
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Equity grant practices
The Compensation Committee or the Board approves the grant of stock-based equity awards, such as PSUs and RSUs, at its regularly scheduled meetings or by written consent (to be effective on the date of the meeting or receipt of all signed consents, or a later date). In addition, the Compensation Committee has authorized, subject to various limitations, a committee comprised of members of the executive management team to grant stock-based equity awards to certain newly hired and existing employees (including in certain cases employees hired through acquisitions), excluding executive officers and certain other senior employees. None of the Board, Compensation Committee, or executive management team committee engage in any market timing with regards to the stock-based equity awards made to executive officers or other award recipients. It is the company’s policy that all stock option grants, whether made by the Board, the Compensation Committee or the executive committee, have an exercise price per share equal to the fair market value of our common stock based on the closing market price per share on the grant date.
Risk assessment
The Compensation Committee believes that its approach to goal setting and setting of targets with payouts at multiple levels of performance assists in mitigating excessive risk-taking that could harm the company’s value or reward poor judgment by executives. Several features of the company’s compensation program reflect sound risk management practices. Notably, the Compensation Committee believes compensation has been allocated among cash and equity and short and long-term compensation elements in such a way as to not encourage excessive risk-taking, but rather to reward meeting strategic company goals that enhance shareholder value. In addition, the Compensation Committee believes that the mix of equity award instruments used under the company’s long-term incentive program (full value awards as well as the multi-year vesting of the equity awards) also minimize excessive risk-taking that might lead to short-term returns at the expense of long-term value creation. We also set stock ownership guidelines for our NEOs to help mitigate potential compensation risk (see page 48). Additionally, prior to determining the performance by the company against the targets for performance-based compensation (ACI and PSUs), the Compensation Committee adjusts the targets for the impact of acquisitions completed during the performance period in order to discourage excessive risk-taking with respect to M&A transactions. In sum, the Compensation Committee believes that the company’s compensation policies do not create risks that are reasonably likely to have a material adverse effect on the company.
| 2022 Proxy Statement | 49 |
Tax considerations – deductibility of executive compensation
U.S. Internal Revenue Code (“IRC”) Section 162(m) imposes a $1 million annual limit on the amount that a public company may deduct for compensation paid to covered employees, which generally includes all current and certain former NEOs (2017 and later), who are employed as of the end of the year. As such, any compensation in excess of the $1 million annual limit that we may pay to a covered employee is not deductible.
Severance benefits
We have entered into executive employment and non-disclosure, non-competition and invention assignment agreements (collectively, the “Employment Agreements”) with each of Mr. Humphries, Mr. Siegmund, Mr. Hyttenrauch and Mr. Kim under which certain payments and benefits would be provided should the NEO’s employment terminate under certain circumstances, including in connection with a change in control (see page 60). We believe that the Employment Agreements achieve two important goals crucial to our long-term financial success, namely, the long-term retention of our NEOs and their commitment to the attainment of our strategic objectives. These agreements will allow our NEOs to continue to focus their attention on our business operations and strategic plans without undue concern over their own financial situations during periods when substantial disruptions and distractions, including a potential change in control, might otherwise prevail. We believe that these severance packages are fair and reasonable in light of market practices for executives of a similar level of experience as our NEOs, the level of dedication and commitment of our NEOs, the contributions our NEOs have made to our growth and financial success and the value we expect to receive from retaining the continued services of our NEOs, including during challenging transition periods following a change in control.
To the Board of Directors of Cognizant Technology Solutions Corporation:
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis set forth in the company’s proxy statement for the 2022 annual meeting of shareholders. The Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in such proxy statement for filing with the Securities and Exchange Commission and incorporated by reference into the company’s Annual Report on Form 10-K for the year ended December 31, 2021.
By the Compensation Committee of the Board of Directors of Cognizant Technology Solutions Corporation
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| VINITA BALI | ARCHANA DESKUS | LEO S. MACKAY, JR. | MICHAEL PATSALOS-FOX | JOSEPH M. VELLI |
| 50 | Cognizant |
Compensation > Executive compensation tables
2021 Summary compensation table
The following 2021 Summary Compensation Table provides certain summary information concerning the compensation earned for services rendered in all capacities to us and our subsidiaries for the years ended December 31, 2019, 2020 and 2021 by our CEO, CFO and each of our three other most highly compensated executive officers who were serving as executive officers at the end of the 2021 fiscal year (collectively, the “NEOs”). No executive officers who would have otherwise been includable in such table on the basis of total compensation for the 2020 fiscal year have been excluded by reason of their termination of employment or change in executive status during that year.
| Name and Principal Position |
Year | Salary | Bonus | Stock Awards |
Non-Equity Incentive Plan Comp. |
Nonqualified Deferred Compensation Earnings |
All Other Comp. |
SEC Total | |||||||||||||||
| Brian Humphries | 2021 | $ | 1,230,262 | — | $ | 14,097,855 | $ | 4,086,930 | — | $ | 272,238 | $ | 19,687,285 | ||||||||||
| CEO | 2020 | $ | 1,026,681 | — | $ | 10,692,541 | $ | 1,745,358 | — | $ | 343,360 | $ | 13,807,940 | ||||||||||
| 2019 | $ | 769,649 | $ | 4,000,000 | $ | 10,346,672 | $ | 658,819 | — | $ | 182,862 | $ | 15,958,002 | ||||||||||
| Jan Siegmund | 2021 | $ | 800,000 | — | $ | 4,526,144 | $ | 1,328,800 | — | — | $ | 6,654,944 | |||||||||||
| CFO | 2020 | $ | 266,667 | $ | 266,667 | $ | 5,656,360 | — | — | — | $ | 6,189,694 | |||||||||||
| Gregory Hyttenrauch | 2021 | $ | 647,716 | — | $ | 3,063,295 | $ | 854,338 | — | $ | 145,394 | $ | 4,710,743 | ||||||||||
| EVP & President, Americas | |||||||||||||||||||||||
| John Kim | 2021 | $ | 654,615 | — | $ | 2,671,429 | $ | 1,079,650 | — | $ | 8,700 | $ | 4,414,394 | ||||||||||
| EVP, General Counsel, | |||||||||||||||||||||||
| Chief Corporate Affairs | |||||||||||||||||||||||
| Officer & Secretary | |||||||||||||||||||||||
| Rajesh Nambiar | 2021 | $ | 519,269 | $ | 97,409 | $ | 5,181,630 | $ | 643,406 | $ | 10,176 | $ | 386,366 | $ | 6,838,256 | ||||||||
| EVP & President, Digital | |||||||||||||||||||||||
| Business and Technology and | |||||||||||||||||||||||
| Chairman, Cognizant India | |||||||||||||||||||||||
Year. Under applicable SEC rules, we have excluded compensation for Mr. Siegmund prior to 2020 and for Mr. Hyttenrauch, Mr. Kim and Mr. Nambiar for years prior to 2021, as they were not NEOs during those years. The effective date for each of Mr. Hyttenrauch, Mr. Kim and Mr. Nambiar commencing in their current roles was January 1, 2021, January 1, 2021 and June 4, 2021, respectively, and each became an NEO during 2021.
Salary. Salaries are paid in the local currency of the resident jurisdiction of each NEO. The local currency for Mr. Siegmund and Mr. Kim is US$. For purposes of this column, (a) each of Mr. Humphries’ salary and Mr. Hyttenrauch’s salary has been converted to US$ from GBP at an exchange rate of £1 = $1.33, the twelve-month average exchange rate for fiscal year 2021, and (b) Mr. Nambiar’s salary has been converted to US$ from INR at an exchange rate of approximately ₹1 = $0.013, the twelve-month average exchange rate for fiscal year 2021. For Mr. Kim, the salary shown includes $4,615 cash paid in lieu of unused vacation (a one-time benefit provided to employees in 2021 in light of the COVID-19 pandemic).
| 2022 Proxy Statement | 51 |
Bonus. From time to time, our Compensation Committee determines that a cash bonus is appropriate in light of an NEO’s individual circumstances.
Mr. Humphries. Mr. Humphries received a one-time cash sign-on bonus upon his joining the company on April 1, 2019 that was designed to compensate him for long-term compensation at Vodafone he forfeited on joining Cognizant and of which $1,000,000 of the after-tax amount he was required to utilize to purchase shares of our common stock during our first open market trading window after April 1, 2019.
Mr. Siegmund. As he joined the company on September 1, 2020, Mr. Siegmund’s offer letter provided him a prorated 2020 ACI award payout at target in lieu of such award payout being based on company performance. As such, the amount of such award is included in “Bonus” instead of under “Non-Equity Incentive Plan Compensation”.
Mr. Nambiar. Mr. Nambiar received a sign-on bonus, a portion of which was paid in November 2021 in the amount of ₹7,344,000, which has been converted to US$ from INR at an exchange rate of approximately ₹1 = $0.013, the twelvemonth average exchange rate for fiscal year 2021.
Stock Awards. Amounts shown in this column represent the aggregate grant date fair value of PSUs and RSUs determined in accordance with FASB ASC Topic 718 granted in each respective year. These amounts reflect the Company’s accounting expense as required by SEC rules and do not correspond to the actual value that will be realized by the NEO. The reported dollar amounts do not take into account any estimated forfeitures related to continued service vesting requirements. See pages 34 to 46 for information on the terms of the RSUs and PSUs granted during 2021. For information regarding assumptions underlying the valuation of stock-based awards, see the notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the applicable fiscal year.
The grant date fair value of stock awards granted in 2021 resulted from PSU and RSU awards with the grant date fair values set out below. The 2021/23 PSUs were part of the target direct compensation (“TDC”) for all NEOs; in addition, Mr. Kim received the grant of additional PSUs on March 29, 2021 in connection with his promotion to his current position and Mr. Nambiar received the grant of additional PSUs and RSUs on June 18, 2021 in connection with his promotion to his current position.
| Mr. Humphries | Mr. Siegmund | Mr. Hyttenrauch | Mr. Kim | Mr. Nambiar | |||||||||||
| 2021-2023 PSUs | |||||||||||||||
| Annual Grant | $ | 8,497,901 | $ | 2,276,193 | $ | 1,163,387 | $ | 151,738 | $ | 758,683 | |||||
| In connection with promotions | — | — | — | $ | 869,737 | $ | 235,599 | ||||||||
| RSUs | |||||||||||||||
| Annual Grant | $ | 5,599,953 | $ | 2,249,951 | $ | 899,922 | — | $ | 1,499,943 | ||||||
| In connection with sign-on | — | — | — | $ | 1,649,954 | $ | 2,687,404 | ||||||||
| grants and promotions | |||||||||||||||
| Additional equity awards | — | — | $ | 999,986 | — | — | |||||||||
| (not included in TDC) | |||||||||||||||
The grant date fair values of PSUs granted to our NEOs during 2021, assuming maximum performance (200%), would be as set out below.
| PSUs, settlement at maximum – 200% | Mr. Humphries | Mr. Siegmund | Mr. Hyttenrauch | Mr. Kim | Mr. Nambiar | ||||||||||
| 2021-2023 PSUs | |||||||||||||||
| Annual Grant | $ | 14,797,794 | $ | 3,963,656 | $ | 2,025,848 | $ | 264,192 | $ | 1,321,098 | |||||
| In connection with promotions | — | — | — | $ | 1,507,175 | $ | 423,069 | ||||||||
The grant date fair value of the portion of the 2021/23 PSUs relating to relative TSR (see pages 34 to 40) are determined in accordance with FASB ASC Topic 718 as an award with a “market condition,” meaning that the potential for maximum performance is built into the grant date fair value calculation.
Non-Equity Incentive Plan Compensation. Amounts shown in this column represent cash incentive awards earned for each respective fiscal year and paid in the first quarter of the following year under our ACI program (see pages 34 to 46). ACI is paid in the local currency of the resident jurisdiction of each NEO. The local currency for Mr. Siegmund and Mr. Kim is US$. For purposes of this column, (a) each of Mr. Humphries’ ACI and Mr. Hyttenrauch’s ACI has been converted to US$ from GBP at an exchange rate of £1 = $1.33, the twelve-month average exchange rate for fiscal year 2021, and (b) Mr. Nambiar’s ACI has been converted to US$ from INR at an exchange rate of approximately ₹1 = $0.013, the twelve-month average exchange rate for fiscal year 2021.
| 52 | Cognizant |
Compensation > Executive compensation tables
All Other Compensation. We provide our NEOs with other benefits that we believe are reasonable, competitive and consistent with our overall executive compensation program. The costs of these benefits for 2021 are shown in the table below.
| Mr. Humphries | Mr. Siegmund | Mr. Hyttenrauch | Mr. Kim | Mr. Nambiar | ||||||||||
| Corporate apartment | $ | 136,618 | — | $ | 60,514 | — | — | |||||||
| Home security services | $ | 7,844 | — | — | — | — | ||||||||
| Corporate apartment cleaning | $ | 2,567 | $ | 2,205 | ||||||||||
| Pension allowance | $ | 120,366 | — | $ | 62,112 | — | — | |||||||
| U. K. group personal pension plan matching | ||||||||||||||
| contribution | $ | 2,660 | — | $ | 2,660 | — | — | |||||||
| India Provident Fund matching contribution | — | — | — | — | $ | 22,775 | ||||||||
| 401(k) matching contribution | — | — | — | $ | 4,760 | — | ||||||||
| CSRP matching contribution | — | — | — | $ | 3,940 | — | ||||||||
| Cash payment for delay in equity issuance | — | — | — | — | $ | 363,591 | ||||||||
| Car allowance | — | — | $ | 7,980 | — | — | ||||||||
| Relocation allowance | — | — | $ | 4,803 | — | — | ||||||||
| Medical insurance | — | — | $ | 2,012 | — | — | ||||||||
| Income protection | $ | 838 | — | $ | 1,652 | — | — | |||||||
| Life assurance | $ | 1,345 | — | $ | 1,456 | — | — | |||||||
| 2022 Proxy Statement | 53 |
2021 Grants of plan-based awards table
The following table provides certain summary information concerning each grant of an award made to an NEO in the 2021 fiscal year under a compensation plan.
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards |
Estimated Future Payouts Under Equity Incentive Plan Awards: Number of Shares of Stock or Units |
All Other Stock Awards: Number of Shares of Stock or Units |
Grant Date Fair Value of Equity Awards | |||||||||||||||||||
| Name | Grant Date | Threshold | Target | Maximum | Threshold | Target | Maximum | |||||||||||||||
| Brian Humphries | 2/23/2021 | $ | 1,230,262 | $ | 2,460,524 | $ | 4,921,048 | |||||||||||||||
| 2/23/2021 | 57,629 | 115,257 | 230,514 | $ | 8,497,901 | |||||||||||||||||
| 2/23/2021 | 76,838 | $ | 5,599,953 | |||||||||||||||||||
| Jan Siegmund | 2/23/2021 | $ | 400,000 | $ | 800,000 | $ | 1,600,000 | |||||||||||||||
| 2/23/2021 | 15,436 | 30,872 | 61,744 | $ | 2,276,193 | |||||||||||||||||
| 2/23/2021 | 30,872 | $ | 2,249,951 | |||||||||||||||||||
| Gregory | 2/23/2021 | $ | 323,858 | $ | 647,716 | $ | 1,295,433 | |||||||||||||||
| Hyttenrauch | 2/23/2021 | 7,890 | 15,779 | 31,558 | $ | 1,163,387 | ||||||||||||||||
| 2/23/2021 | 8,232 | $ | 599,948 | |||||||||||||||||||
| 2/23/2021 | 13,721 | $ | 999,986 | |||||||||||||||||||
| 2/23/2021 | 4,116 | $ | 299,974 | |||||||||||||||||||
| John Kim | 2/23/2021 | $ | 325,000 | $ | 650,000 | $ | 1,300,000 | |||||||||||||||
| 2/23/2021 | 1,029 | 2,058 | 4,116 | $ | 151,738 | |||||||||||||||||
| 3/29/2021 | 5,444 | 10,889 | 21,778 | $ | 869,737 | |||||||||||||||||
| 3/29/2021 | 21,137 | $ | 1,649,954 | |||||||||||||||||||
| Rajesh Nambiar | 2/23/2021 | $ | 259,635 | $ | 519,269 | $ | 1,038,538 | |||||||||||||||
| 2/23/2021 | 5,145 | 10,290 | 20,580 | $ | 758,683 | |||||||||||||||||
| 2/23/2021 | 30,872 | $ | 2,249,951 | |||||||||||||||||||
| 2/23/2021 | 20,581 | $ | 1,499,943 | |||||||||||||||||||
| 6/18/2021 | 1,830 | 3,659 | 7,318 | $ | 235,599 | |||||||||||||||||
| 6/18/2021 | 6,403 | $ | 437,453 | |||||||||||||||||||
Estimated Future Payouts Under Equity Incentive Plan Awards. Represents the range of shares that could vest pursuant to PSU awards. The values set out above are for the 2021/23 PSUs awarded to such individuals in 2021 and included in target direct compensation. For Mr. Kim and Mr. Nambiar, this includes additional awards granted in connection with their promotion to their current positions. See pages 34 to 46 for a description of the terms of the PSUs and the awards to the NEOs.
All Other Stock Awards. Represents RSUs granted in 2021. For Mr. Nambiar, this includes additional awards granted in connection with his promotion to his current position. For Mr. Hyttenrauch and Mr. Nambiar, it includes 13,721 RSUs and 30,872 RSUs respectively, that were granted on February 23, 2021 as additional equity awards that were not included in target direct compensation. See page 34 and pages 41 to 46 for a description of the terms of the RSUs and the awards to NEOs.
| 54 | Cognizant |
Compensation > Executive compensation tables
Outstanding equity awards at fiscal year-end 2021 table
The following table provides certain summary information concerning outstanding equity awards held by the NEOs as of December 31, 2021. Our NEOs did not hold any outstanding option awards as of December 31, 2021.
| Stock Awards | ||||||||||||
| Name | Grant Date | Number of Shares or Units of Stock That Have Not Vested |
Market Value of Shares or Units of Stock That Have Not Vested1 |
Equity Incentive Plan Awards; Number of Unearned Shares, Units or Other Rights That Have Not Vested |
Equity Incentive Plan Awards; Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested1 | |||||||
| Brian Humphries | 4/1/2019 | 6,7712 | $ | 600,723 | ||||||||
| 3/5/2020 | 28,9232 | $ | 2,566,049 | |||||||||
| 2/23/2021 | 57,6292 | $ | 5,112,845 | |||||||||
| 4/1/2019 | 54,1633 | $ | 4,805,3413 | |||||||||
| 3/5/2020 | 104,1214 | $ | 9,237,6154 | |||||||||
| 2/23/2021 | 230,5145 | $ | 20,451,2025 | |||||||||
| Jan Siegmund | 9/1/2020 | 13,0662 | $ | 1,159,216 | ||||||||
| 9/1/2020 | 16,8002 | $ | 1,490,496 | |||||||||
| 2/23/2021 | 23,1542 | $ | 2,054,223 | |||||||||
| 9/1/2020 | 11,1994 | $ | 993,5754 | |||||||||
| 2/23/2021 | 61,7445 | $ | 5,477,9285 | |||||||||
| Gregory Hyttenrauch | 12/2/2019 | 12,7882 | $ | 1,134,551 | ||||||||
| 3/5/2020 | 1,2172 | $ | 107,972 | |||||||||
| 3/5/2020 | 5,0072 | $ | 444,221 | |||||||||
| 2/23/2021 | 6,1742 | $ | 547,757 | |||||||||
| 2/23/2021 | 10,2912 | $ | 913,018 | |||||||||
| 2/23/2021 | 2,5712 | $ | 228,099 | |||||||||
| 3/5/2020 | 2,9196 | $ | 258,9746 | |||||||||
| 3/5/2020 | 16,6864 | $ | 1,480,3824 | |||||||||
| 2/23/2021 | 31,5585 | $ | 2,799,8265 | |||||||||
| John Kim | 12/16/2019 | 2,4332 | $ | 215,856 | ||||||||
| 3/29/2021 | 13,2112 | $ | 1,172,080 | |||||||||
| 3/5/2020 | 2,5024 | $ | 221,9974 | |||||||||
| 5/19/2020 | 2,9136 | $ | 258,4416 | |||||||||
| 2/23/2021 | 4,1165 | $ | 365,1725 | |||||||||
| 3/29/2021 | 21,7785 | $ | 1,932,1445 | |||||||||
| Rajesh Nambiar | 2/23/2021 | 23,1542 | $ | 2,054,223 | ||||||||
| 2/23/2021 | 12,8542 | $ | 1,140,407 | |||||||||
| 6/18/2021 | 4,5752 | $ | 405,894 | |||||||||
| 2/23/2021 | 20,5805 | $ | 1,825,8585 | |||||||||
| 6/18/2021 | 7,3185 | $ | 649,2535 | |||||||||
| 2022 Proxy Statement | 55 |
| 1 | Market value was determined utilizing the closing price of our common stock of $88.72 on December 31, 2021 and the performance level for each award as indicated in footnotes 3 through 6 below. |
| 2 | Amounts shown represent the following with respect to RSUs: |
Mr. Humphries. Awards shown are time-based RSUs that were granted on April 1, 2019, March 5, 2020 and February 23, 2021, respectively, and vest on specified dates if Mr. Humphries is still employed by the company. A total of 55,522 shares are scheduled to vest in each month of 2022 except July and October; a total of 31,397 shares are scheduled to vest in February, March, May, August and November of 2023; and a total of 6,404 shares are scheduled to vest in February of 2024. | |
Mr. Siegmund. Awards shown are time-based RSUs that were granted on September 1, 2020 and February 23, 2021 and vest on specified dates if Mr. Siegmund is still employed by the company. A total of 31,752 shares are scheduled to vest in February, March, May, June, August, September, November and December of 2022; a total of 18,695 shares are scheduled to vest in February, March, May, June, August, September and November of 2023; and a total of 2,573 shares are scheduled to vest in February of 2024. | |
Mr. Hyttenrauch. Awards shown are time-based RSUs that were granted on December 2, 2019, March 5, 2020 and February 23, 2021, respectively, and vest on specified dates if Mr. Hyttenrauch is still employed by the company. A total of 24,234 shares are scheduled to vest in each month of 2022; a total of 11,812 shares are scheduled to vest in January, February, March, May, August and November of 2023; and a total of 2,002 shares are scheduled to vest in February of 2024. | |
Mr. Kim. Awards shown are time-based RSUs that were granted on December 16, 2019 and March 29, 2021, respectively, and vest on specified dates if Mr. Kim is still employed by the company. A total of 10,357 shares are scheduled to vest in March, June, September and December of 2022; a total of 4,405 shares are scheduled to vest in March, June, September and December of 2023; and a total of 882 shares are scheduled to vest in March of 2024. | |
Mr. Nambiar. Awards shown are time-based RSUs that were granted on February 23, 2021 and June 18, 2021, respectively, and vest on specified dates if Mr. Nambiar is still employed by the company. A total of 20,738 shares are scheduled to vest in February, March, May, June, August, September, November and December of 2022; a total of 16,104 shares are scheduled to vest in February, March, May, June, August, September, November and December of 2023; and a total of 3,741 shares are scheduled to vest in February and March of 2024. | |
| 3 | 2019/23 CEO PSUs (New Hire). Represents the number of unearned shares not vested equal to the threshold award for PSUs granted in 2019 with a market condition, as described in FASB ASC Topic 718, and a four-year performance measurement period (April 1, 2019 – April 1, 2023). See pages 37, 39 and 42 for additional information. Based on performance through December 31, 2021, the number of units and the payout value shown above assume a payout at threshold. |
| 4 | 2020/22 PSUs (3-year). Represents the number of unearned shares not vested equal to the target award for PSUs granted in 2020 with a 3-year performance measurement period (combined performance of the company for 2020, 2021 and 2022). See pages 36 to 39 for additional information. After the Compensation Committee determines, based on the performance for fiscal 2020, 2021 and 2022, the number of shares that may vest, such shares are expected to vest no later than March 15, 2023 (subject to continued employment through such date). Based on performance through December 31, 2021, the number of units and the payout values shown above assume a payout at target. |
| 5 | 2021/23 PSUs (3-year). Represents the number of unearned shares not vested equal to the target award for PSUs granted in 2021 with a 3-year performance measurement period (combined performance of the company for 2021, 2022 and 2023). See pages 34 to 39 for additional information. After the Compensation Committee determines, based on the performance for fiscal 2021, 2022 and 2023, the number of shares that may vest, such shares are expected to vest no later than March 15, 2024 (subject to continued employment through such date). Based on performance through December 31, 2021, the number of units and the payout values shown above assume a payout at maximum. |
| 6 | 2020/21 PSUs (2-year). Represents the number of unearned shares not vested equal to the target award for PSUs granted in 2020 with a 2-year performance measurement period (combined performance of the company for 2020 and 2021). See pages 36 to 39 for additional information. The number of units and the payout values shown above assumed a payout at target. After the Compensation Committee determined, based on the performance for fiscal 2020 and 2021, 88.5% of the shares vested on March 15, 2022 (after compliance with the requirement of continued employment through such date). |
| 56 | Cognizant |
Compensation > Executive compensation tables
2021 Option exercises and stock vested table
None of our NEOs held or exercised any options during 2021. The following table provides information about the value realized by the NEOs on stock award vestings during the year ended December 31, 2021.
| Stock Awards | |||||
| Name | Number of Shares Acquired on Vesting Date |
Value Realized on Vesting | |||
| Brian Humphries | 55,887 | $ | 4,304,456 | ||
| Jan Siegmund | 40,380 | $ | 3,066,562 | ||
| Gregory Hyttenrauch | 25,743 | $ | 1,982,046 | ||
| John Kim | 10,359 | $ | 818,086 | ||
| Rajesh Nambiar | 17,273 | $ | 1,333,843 | ||
| Stock Awards. The number of shares shown in the table reflects the gross number of shares each NEO was entitled to receive upon vesting of the underlying PSUs or RSUs. The company reduced the number of shares issued to each NEO by automatically withholding a number of shares with a fair market value as of the vesting date sufficient to satisfy required tax withholdings. Each NEO actually received the following net number of shares (and net value realized on vesting, including any dividend equivalents payable on vesting) following such share withholding: Mr. Humphries, 50,025 ($3,799,048); Mr. Siegmund, 19,771 ($1,484,644); Mr. Hyttenrauch, 13,816 ($1,049,510); Mr. Kim, 5,920 ($ 459,317); and Mr. Nambiar, 9,944 ($763,318). Value realized on vesting is calculated by multiplying the number of shares acquired on vesting by the fair market value of the shares on the respective vesting dates, including any dividend equivalents payable on vesting. |
2021 Pension benefits table
The following table sets forth, for the India Gratuity Plan, the number of years of service credited to Mr. Nambiar under the plan, and the present value of Mr. Nambiar’s accumulated benefit as of December 31, 2021. No payments or benefits were paid to Mr. Nambiar during 2021. Except for Mr. Nambiar’s benefits under the India Gratuity Plan, none of our NEOs were participants in any plan that provided payments or other benefits at, following, or in connection with retirement.
| Name | Plan Name | Number of Years Credited Service |
Present Value of Accumulated Benefit | |||
| Rajesh Nambiar | India Gratuity Plan | 1.08 | 11,586 |
| Under the India Gratuity Plan, Mr. Nambiar will become entitled to a lump sum payment upon his termination of employment, but only if such termination occurs after at least four years and 240 days of employment with Cognizant. The actual dollar amount of such payment will be determined by multiplying the number of years of service with Cognizant by a defined percentage of his final monthly rate of salary. Mr. Nambiar is not eligible for any early retirement benefit under the India Gratuity Plan. See pages 46 and 47 for further details regarding the India Gratuity Plan. |
| 2022 Proxy Statement | 57 |
Equity compensation plan information
The following table provides information as of December 31, 2021 with respect to the shares of our common stock that may be issued under our existing equity compensation plans approved by shareholders, which include the 2017 Incentive Award Plan (the “2017 Plan”), the ESPP, and our prior equity compensation plan, the 2009 Incentive Compensation Plan (the “2009 Plan”). The 2017 Plan succeeded the 2009 Plan. Awards granted under the 2009 Plan remain valid, though no additional awards may be granted to from such plan. For additional information on our equity compensation plans, see Note 17 to the Consolidated Financial Statements in our 2021 Annual Report.
| Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights |
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights |
Number of Securities Available for Future Issuance Under Equity Compensation Plans (excludes securities reflected in first column) | |||
| Equity compensation plans approved by security holders | 6,258,433 | $62.32 | 26,114,757 | |||
| Equity compensation plans not approved by security holders | — | N/A | — | |||
| Total | 6,258,433 | $62.32 | 26,114,757 |
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights. The securities listed in this column exclude purchase rights outstanding under the ESPP. Under such plan, employees may purchase whole shares of common stock at a price per share equal to 95% of the fair market value per share on the last day of the purchase period. As of December 31, 2021, 47,512 shares may be issued pursuant to stock options upon exercise, 3,877,191 shares may be issued pursuant to RSUs upon vesting and 2,333,730 shares may be issued pursuant to PSUs upon vesting. The number of shares that may be issued under the outstanding and unvested PSUs for which the performance measurement period has not ended is based on vesting of the maximum number of award shares (200% of the target number of award shares). The actual number of shares that may vest may range from 0% to 200% of the target number based on the level of achievement of the applicable performance metrics and the continued service vesting requirements. See pages 34 to 40. Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights. As of December 31, 2021, the weighted-average exercise price of outstanding options to purchase common stock was $62.32 (excluding options granted under the ESPP). No weighting was assigned to PSUs or RSUs as no exercise price is applicable to PSUs or RSUs. Number of Securities Available for Future Issuance Under Equity Compensation Plans. The securities listed in this column include 22,181,175 shares available for future issuance under the 2017 Plan. Any shares underlying outstanding awards (which shares are included in the first column of this table) that are forfeited under the 2009 Plan will be available for future issuance under the 2017 Plan. Also includes 3,933,582 shares available for future issuance under the ESPP. As of December 31, 2021, there were no outstanding purchase periods under the ESPP. |
| 58 | Cognizant |
Compensation > CEO pay ratio
We are required by SEC rules and regulations to disclose the annual total compensation for our CEO and an estimate of the median annual total compensation for our worldwide employee population excluding our CEO, and the ratio of annual total compensation for our CEO to the annual total compensation for our median employee. As further described below, we have also included supplemental pay ratio information to show the ratios of the annual total compensation of our CEO to the annual total compensation of our median employees in the United States, the United Kingdom and Western Europe, respectively.
The following table provides information, based on our reasonable estimates, about the relationship between the annual total compensation of our CEO and the annual total compensation of our median employees for the year ended December 31, 2021.
| Category | Median Employee Annual Total Compensation |
CEO Annual Total Compensation |
Pay Ratio (CEO: median employee) | ||||
| CEO Pay to Worldwide Median Employee Pay (SEC-required pay ratio disclosure) |
$ | 34,225 | $19,687,285 | 575 : 1 | |||
| CEO Pay to U.S. Median Employee Pay (Supplemental pay ratio information) |
$ | 106,133 | 185 : 1 | ||||
| CEO Pay to U.K. and Western Europe Median Employee Pay (Supplemental pay ratio information) |
$ | 79,446 | 248 : 1 | ||||
Compensation Included. In identifying the median employees, we used the actual salary, bonus and ACI for 2021 (in each case annualized for full-time employees who joined during 2021) and the grant date fair value of PSUs and RSUs awarded during 2021 for each applicable employee as of December 31, 2021. Where there were multiple employees with the resulting median compensation, we calculated each such employee’s annual total compensation in the same manner as the “SEC Total” of compensation shown for our CEO in the “2021 Summary compensation table” on page 51. We used such annual total compensation to identify the median of such employees and for disclosure of median employee pay herein (averaged where the median fell between two employees).
Currency Conversion. For employees receiving their compensation in a currency other than US$, including our CEO, we translated such compensation to US$ at twelve-month average exchange rates for 2021.
Cost-of-Living Adjustment. We applied a cost-of-living adjustment to the compensation of each of our employees residing in a jurisdiction other than the jurisdiction of our CEO’s principal work location (the United Kingdom) in order to adjust the compensation of such employees to the jurisdiction of our CEO’s principal work location. In making such cost-of-living adjustments, we used the cost-of-living index for the country in which the employee was based for all employees not based in the United Kingdom. Each such cost-of-living index, including that for India (24.6), the location of the worldwide median employee, the United States (70.55), the location of the U.S. median employee, and the United Kingdom (70.64), the location of the U.K. and Western Europe median employee, was used to adjust the applicable compensation of employees to the cost-of-living index for the United Kingdom (70.64). All cost-of-living indexes used were as published by Numbeo.com for mid-year 2021. Without application of a cost-of-living adjustment, and after otherwise utilizing the same process described above to identify the worldwide median employee, the worldwide median employee would have been a full-time, salaried employee located in India with annual total compensation of $13,019. The ratio of the annual total compensation of our CEO to such median employee’s annual total compensation was 1,512 : 1.
| 2022 Proxy Statement | 59 |
Potential payments upon termination or change in control
Overview of potential payments
We have entered into employment agreements with Mr. Humphries, Mr. Siegmund, Mr. Hyttenrauch and Mr. Kim that provide certain benefits if such employees are terminated without Cause or leave for Good Reason (each, a “Qualifying Termination” — see “What is a ‘Qualifying Termination’?” below for more details). Such benefits are adjusted in the event the Qualifying Termination occurs within the 12 months following a change in control. The table below summarizes the benefits under the employment agreements and our retirement, death and disability policy, as applicable to each of our NEOs who remain executive officers as of the date of this proxy statement.
| Unvested PSUs / Performance-Based Awards | ||||||||||||
| Termination Event |
Employment Agreement Version |
Salary and ACI | Benefits | Unvested RSUs/ Time-Based Awards |
Performance Measurement Period Ended; Performance Objectives Satisfied |
Performance Measurement Period Not Ended | ||||||
| Qualifying Termination – no Change in Control | Humphries, Siegmund, Hyttenrauch and Kim | 1x …base salary, payable over 12 months …ACI (100% of target), payable in a lump sum |
18 months of reimbursement for COBRA premiums, as applicable | Acceleration of awards that would otherwise vest in the next 12 months | Acceleration of awards that would otherwise vest in the next 12 months | Forfeited | ||||||
| Qualifying Termination – within 12 months of Change in Control | Humphries, Siegmund, Hyttenrauch and Kim | 2x …base salary, payable over 24 months …ACI (100% of target), payable in a lump sum |
18 months of reimbursement for COBRA premiums, as applicable | Acceleration of entire award | Acceleration of entire award | Vesting of pro-rata amount (based on portion of performance period elapsed and performance results as of change in control date) | ||||||
WHAT IS A “QUALIFYING TERMINATION”? Termination without “Cause” “Cause” is defined as: ●Willful malfeasance or willful misconduct in connection with employment;
●Continuing failure to perform duties requested;
●Failure to observe material policies of the company;
●Commission of any felony or any misdemeanor involving moral turpitude;
●Engaging in any fraudulent act or embezzlement; or
●Any material breach of an employment agreement.
|
Leaving for “Good Reason” “Good Reason” is defined as: ●A material diminution of authority, duties or responsibilities;
●A material diminution in overall compensation package that is not broadly applied to other executives;
●The company’s failure to obtain from its successor the express assumption of an employment agreement; or
●The company’s change, without the executive officer’s consent, in the principal place of his or her work to a location more than 50 miles from the primary work location, but only if the change is after a change in control (provided, however, that, with respect to Mr. Humphries, a change in his principal place of work to New York or New Jersey would not constitute “Good Reason”). |
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| 60 | Cognizant |
Compensation > Potential payments upon termination or change in control
Cash severance payments are contingent on the executive officers executing and not revoking a waiver and release of claims against the company and complying with one-year post-termination non-competition and non-solicitation covenants, a six-month post-termination intellectual property covenant and a perpetual confidentiality covenant (subject to administrator discretion and where permitted by law). Upon any termination of employment, each executive officer will also be entitled to any amounts earned, accrued and owed but not yet paid as of the termination date and any benefits accrued and earned in accordance with the terms of any benefits plans or programs, and these amounts are not conditioned upon the release becoming effective.
Calculation of potential payments
The following table shows potential payments to our NEOs under the employment agreements in effect on December 31, 2021 in the event of a Qualifying Termination prior to or within 12 months following a change in control. After the period of 12 months following a change in control, the potential payments upon a Qualifying Termination, absent another change in control, revert to those prior to a change in control as set forth below. Potential payments are calculated assuming a December 31, 2021 Qualifying Termination date and, where applicable, using the closing price of our common stock of $88.72 on December 31, 2021, as reported on Nasdaq.
| Name | Trigger | Salary and Bonus |
Benefits | Awards Acceleration/ Extension |
Total | ||||||||
| Brian Humphries | Qualifying Termination Prior to Change in Control | $ | 3,690,786 | — | $ | 4,925,912 | $ | 8,616,698 | |||||
| Qualifying Termination Following Change in Control |
$ | 7,381,572 | — | $ | 19,257,031 | $ | 26,638,603 | ||||||
| Death or Disability | $ | 2,460,524 | — | $ | 19,257,031 | $ | 21,717,555 | ||||||
| Retirement | — | — | — | — | |||||||||
| Termination for Other Reasons | — | — | — | — | |||||||||
| Jan Siegmund | Qualifying Termination Prior to Change in Control | $ | 1,600,000 | — | $ | 2,817,037 | $ | 4,417,037 | |||||
| Qualifying Termination Following Change in Control |
$ | 3,200,000 | — | $ | 6,704,127 | $ | 9,904,127 | ||||||
| Death or Disability | $ | 800,000 | — | $ | 6,704,127 | $ | 7,504,127 | ||||||
| Retirement | — | — | — | — | |||||||||
| Termination for Other Reasons | — | — | — | — | |||||||||
| Gregory Hyttenrauch |
Qualifying Termination Prior to Change in Control | $ | 1,295,433 | — | $ | 2,409,014 | $ | 3,704,447 | |||||
| Qualifying Termination Following Change in Control |
$ | 2,590,866 | — | $ | 5,244,328 | $ | 7,835,194 | ||||||
| Death or Disability | $ | 647,716 | — | $ | 5,244,328 | $ | 5,892,044 | ||||||
| Retirement | — | — | — | — | |||||||||
| Termination for Other Reasons | — | — | — | — | |||||||||
| John Kim | Qualifying Termination Prior to Change in Control | $ | 1,300,000 | — | $ | 1,177,314 | $ | 2,477,314 | |||||
| Qualifying Termination Following Change in Control |
$ | 2,600,000 | — | $ | 2,331,562 | $ | 4,931,562 | ||||||
| Death or Disability | $ | 650,000 | — | $ | 2,331,562 | $ | 2,981,562 | ||||||
| Retirement | — | — | — | — | |||||||||
| Termination for Other Reasons | — | — | — | — | |||||||||
| Rajesh Nambiar | Qualifying Termination Prior to Change in Control | — | — | — | — | ||||||||
| Qualifying Termination Following Change in Control |
— | — | — | — | |||||||||
| Death or Disability | $ | 519,269 | — | $ | 4,219,168 | $ | 4,738,437 | ||||||
| Retirement | — | — | — | — | |||||||||
| Termination for Other Reasons | — | — | — | — | |||||||||
| 2022 Proxy Statement | 61 |
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Ratification of appointment of independent registered public accounting firm  The Board unanimously recommends a vote FOR the ratification of the appointment of Pricewaterhouse Coopers LLP as our independent registered public accounting firm for 2022.What are you voting on? |
Review and engagement
The Audit Committee is directly responsible for the appointment, compensation (including negotiation and approval of the audit fees), retention and oversight of the independent registered public accounting firm that audits our financial statements and our internal control over financial reporting. The Audit Committee and its Chair are directly involved in the selection of the lead audit partner at the start of each rotation.
To ensure continuing audit independence:
| ● | The Audit Committee periodically considers whether there should be a change of the accounting firm that is retained, and considers the advisability and potential impact of selecting a different accounting firm; |
| ● | The accounting firm, any covered person in the firm and any of their immediate family members are not permitted to have any direct or material indirect financial interest in or any connection with us in any capacity other than as our auditors, providing audit and permissible non-audit related services; and |
| ● | In accordance with SEC rules and PwC policies, audit partners are subject to rotation requirements to limit the number of consecutive years an individual partner may provide services to our company. For lead audit partners and quality review partners, the maximum number of consecutive years of service in that capacity is five years. |
The members of the Audit Committee and the Board believe that the continued retention of PwC to serve as the company’s independent registered public accounting firm is in the best interests of the company and its shareholders.
Annual meeting attendance
We expect PwC representatives to attend the annual meeting. They will have an opportunity to make a statement if they wish and are expected to be available to respond to appropriate questions from shareholders.
Pre-approval policy and procedures
The Audit Committee has adopted a policy that generally provides that we will not engage our independent registered public accounting firm to render audit or non-audit services unless the service is specifically approved in advance by the Audit Committee or the engagement is entered into pursuant to one of the pre-approval procedures described below. From time to time, the Audit Committee may pre-approve specified types of services that are expected to be provided to us by our independent registered public accounting firm during the next 12 months. Any such pre-approval is detailed as to the particular service or type of services to be provided. The Audit Committee has also delegated to its Chair the authority to approve any audit or non-audit services to be provided to us by our independent registered public accounting firm. Any such approval of services pursuant to this delegated authority is reported on at the next Audit Committee meeting. During 2020 and 2021, the Audit Committee approved all services provided to us by PwC that are subject to the pre-approval procedures in accordance with our pre-approval policy.
| 62 | Cognizant |
Audit matters > Auditor fees
The following table summarizes the fees of PwC, our independent registered public accounting firm, for each of the last two fiscal years.
| Fee Category | 2020 | 2021 | |||
| Audit Fees | $ | 6,147,400 | $ | 5,535,700 | |
| Audit-Related Fees | 5,775,300 | 4,069,400 | |||
| Tax Fees | 641,600 | 1,605,300 | |||
| All Other Fees | 79,200 | 475,900 | |||
| Total | $ | 12,643,500 | $ | 11,686,300 |
Audit-Related Fees. Audit-related fees consist of fees for assurance and related services that are reasonably related to the performance of the audit and are not reported under “Audit Fees”, including independent assessments for service organization control reports and acquisition financial due diligence services.
Tax Fees. Tax fees comprise fees for a variety of permissible services relating to tax compliance, tax planning and tax advice. These services include assistance in complying with local transfer pricing requirements, assistance with local tax audits and assessments, withholding tax and indirect tax matters, preparation and filing of local tax returns, and technical advice relating to local and international tax matters.
Audit Committee report
The Audit Committee has furnished the report set forth below.
To the Board of Directors of Cognizant Technology Solutions Corporation:
The Audit Committee of the Board acts under a written charter, which is available in the “Corporate Governance” section of the “About Cognizant” page of the company’s website located at www.cognizant.com. The members of the Audit Committee are independent directors, as defined in its charter and the rules of The Nasdaq Stock Market LLC. The Audit Committee held 14 meetings during 2021. Management is responsible for establishing and maintaining adequate internal control over financial reporting. The company’s independent registered public accounting firm (“auditor”) is responsible for performing an independent integrated audit of the company’s annual financial statements and management’s assessment of the effectiveness of the company’s internal control over financial reporting. The Audit Committee is responsible for providing independent, objective oversight of these processes.
The Audit Committee has reviewed the company’s audited financial statements for the fiscal year ended December 31, 2021 and has discussed these financial statements with management and the company’s auditor. The Audit Committee has also received from, and discussed with, the company’s auditor various communications that such auditor is required to provide to the Audit Committee, including the matters required to be discussed by, as may be modified or supplemented by, the PCAOB and the SEC. The company’s auditor also provided the Audit Committee with written disclosures and the letter from the auditor required by the applicable requirements of the PCAOB regarding the auditor’s communications with the Audit Committee concerning independence. In addition, the Audit Committee discussed with the auditor its independence from the company. The Audit Committee also considered whether the auditor’s provision of certain other non-audit related services to the company is compatible with maintaining such firm’s independence.
Based on its discussions with management and the auditor, and its review of the representations and information provided by management and the auditor, the Audit Committee recommended to the Board that the audited financial statements be included in the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
By the Audit Committee of the Board of Directors of Cognizant Technology Solutions Corporation
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| MAUREEN BREAKIRON- EVANS |
ARCHANA |
JOHN DINEEN |
LEO S. |
JOSEPH |
SANDRA S. |
| 2022 Proxy Statement | 63 |
Shareholder proposal for the 2022 annual meeting
The company has been advised that John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, California 90278, beneficial owner of 100 shares of the company’s common stock, intends to submit the proposal set forth below at the annual meeting.
Shareholders ask our board to take the steps necessary to amend the appropriate company governing documents to give the owners of a combined 10% of our outstanding common stock the power to call a special shareholder meeting.
Currently it takes a theoretical 10% of all shares outstanding to call for a special shareholder meeting. However the face value of 10% is deceiving because there are big strings attached. All shares not held for a continuous full year are 100% disqualified from formal participation in calling for a special shareholder meeting.
This is particularly damaging because the shareholders who recently purchased Cognizant Technology stock may be the most informed shareholders. Plus such shareholders do not have so much leverage when engaging with management because they are second-class shareholders when it comes to calling for a special shareholder meeting.
Plus the shareholders who own 10% of shares for one full year may determine that they own 20% of CTSH stock when length of stock ownership is factored out.
And it goes downhill from here. Shares that are not held net long are excluded. And shares that do not have the time to vote at the annual meeting are not a prospective class of shares to join a group calling for a special shareholder meeting.
Thus the face value of 10% can slip to 20% of shares held regardless of length of stock ownership and can slip further to 30% of shares held regardless of length of stock ownership that are held net long and that vote at the annual meeting.
A potential 30% stock ownership threshold to call a special shareholder is nothing for management to brag about.
Plus we have no right to act by written consent. A large number of companies provide shareholders with the right to act by written consent and the right to call a special shareholder meeting.
Southwest Airlines and Target are companies that do not provide for shareholder written consent and yet provide for 10% of shares to call for a special shareholder meeting without disqualifying shares held less than a year.
We need an improved right to call for a special shareholder meeting to make up for its hidden hurdles and absolutely no right to act by written consent.
The Board’s statement of opposition
The Board recognizes 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 (the “Long-Term Shareholders”) with the ability to call a special meeting of shareholders. The one year “net long position” requirement is intended to count only those long-term shares over which the requesting shareholders have full, un-hedged ownership rights. These reasonable and limited requirements do not impact the ability of our Long-Term Shareholders to call a special meeting. They are designed to protect the Company and Long-Term Shareholders from short-term activist investors and to better enable management and the Board to pursue the best long-term interests of the Company and all of its shareholders.
These requirements provide a reasonable safeguard against abuse by activist investors with short-term goals. If a special meeting proponent fails to convince the Long-Term Shareholders of at least 10% of our shares to support a special meeting, that failure is a strong indicator that most shareholders do not believe that a special meeting is warranted. Dismantling these reasonable safeguards could give a limited number of shareholders with a hedged or short-term position with the ability to disrupt the Company and its pursuit of the long-term interests of shareholders. Cognizant’s existing special meeting right strikes the appropriate balance between ensuring that shareholders have the ability to call a special meeting to act on extraordinary and urgent matters, while at the same time protecting against a misuse of this right by a small number of shareholders whose interests are not aligned with our long-term interests.
| 64 | Cognizant |
Shareholder proposals > The Board’s statement of opposition
The Company’s existing special meeting right is best practice. An overwhelming majority of U.S.-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. In fact, only 12% of U.S. incorporated S&P 500 companies provide for a special meeting threshold as low as Cognizant’s. Accordingly, Cognizant’s existing ownership threshold to call a special meeting is more shareholder friendly than market practice and represents the best practice among the S&P 500, as supported by many of our investors.
The Company’s existing corporate governance practices and policies already ensure shareholder democracy and Board accountability. In addition to providing shareholders with the right to call a special meeting, the Company has implemented numerous other corporate governance measures to ensure that the Board remains accountable to our shareholders and that give shareholders the ability to directly communicate their views to the Board. In addition, the Board has shown time and again that when it believes a particular action requested by a shareholder is in the best interests of all shareholders, the Board will support that action. For example, following an affirmative shareholder vote at the 2018 annual meeting, the Board amended Cognizant’s bylaws to reduce the percentage of outstanding shares required for shareholders to request a special meeting from 25% to 10%. Other measures that help ensure shareholder democracy and Board accountability include:
| ● | Our Board is de-classified and directors serve one-year terms; |
| ● | We have a majority voting standard for the election of directors; |
| ● | We provide for “proxy access” in our bylaws pursuant to which shareholders can nominate a director candidate to stand for election and have that nominee included in the Company’s proxy materials; |
| ● | The Board greatly values shareholder discussion and input and provides channels for shareholders to communicate directly with members of the Board (as described further under “Communications to the Board from shareholders” on page 67); and |
| ● | We do not have super majority voting provisions in our Certificate of Incorporation and bylaws. |
For all of these reasons, the Board urges you to vote “No” on this proposal.
| 2022 Proxy Statement | 65 |
Shareholder proposals and nominees for the 2023 annual meeting
| Rule 14a-8 Shareholder Proposals |
Director Nominees Via Proxy Access | Other Proposals or Director Nominees | ||||
| Description | SEC rules permit shareholders to submit proposals for inclusion in our proxy statement if the shareholder and the proposal meet the requirements specified in Rule 14a-8 under the Exchange Act (“Rule 14a-8”). | Our by-laws permit a group of shareholders who have owned a significant amount of the company’s common stock (at least 3%) for a significant amount of time (at least three years) to submit director nominees (up to 25% of the Board and in any event not less than two directors) for inclusion in our proxy statement if the shareholder(s) and the nominee(s) satisfy the requirements specified in our by-laws. |
Our by-laws require that any shareholder proposal, including a director nomination, that is not submitted for inclusion in next year’s proxy statement (either under Rule 14a-8 or our proxy access by-laws), but is instead sought to be presented directly at such meeting, must be received by our Secretary in writing not earlier than the close of business on the 120th day and not later than the close of business on the 90th day prior to the anniversary of the preceding year’s annual meeting. In addition, shareholders who intend to solicit proxies in support of director nominees other than the company’s nominees must comply with the requirements of Rule 14a-19. | |||
| When |
Any shareholder proposals submitted in accordance with Rule 14a-8 must be received at our principal executive offices no later than the close of business on December 28, 2022. |
Notice of director nominees under these by-law provisions must be received no earlier than November 28, 2022 and no later than the close of business on December 28, 2022. In the event that the date of the 2023 annual meeting is more than 30 days before or more than 70 days after June 7, 2023, then our Secretary must receive such written notice not earlier than the close of business on the 150th day prior to the 2023 annual meeting and not later than the close of business on the later of the 120th day prior to the 2023 annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the company. |
Shareholder proposals or director nominations submitted under these by-law provisions must be received no earlier than the close of business on February 7, 2023 and no later than the close of business on March 9, 2023. In the event that the date of the 2023 annual meeting is more than 30 days before or more than 70 days after June 7, 2023, then our Secretary must receive any such proposal not earlier than the close of business on the 120th day prior to the 2023 annual meeting and not later than the close of business of the later of the 90th day prior to the 2023 annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the company. The information required by Rule 14a-19 must be provided no later than April 10, 2023. In the event that the date of the 2023 annual meeting is more than 30 calendar days from the previous year, then the Rule 14a-19 notice must be provided by the later of 60 calendar days prior to the date of the annual meeting or the 10th calendar day following the date on which public announcement of the date of such meeting is first made by the company. | |||
| What | Proposals must conform to and include the information required by Rule 14a-8. |
Notice or proposal must include the information required by our by-laws, a copy of which is available on our website or upon request to our Secretary. See “Helpful resources” on page 77. |
Notice must include the information required by our by-laws, a copy of which is available on our website or upon request to our Secretary. See “Helpful resources” on page 77. In addition, notice under Rule 14a-19 must include the information required by Rule 14a-19. | |||
| Where |
Proposal or notice should be sent to our Secretary. See “Helpful resources” on page 77. | |||||
| Please Note |
SEC rules permit management to vote proxies in its discretion in certain cases if the shareholder does not comply with the above deadlines and, in certain other cases, notwithstanding the shareholder’s compliance with these deadlines. The company reserves the right to reject, rule out of order, or take other appropriate action with respect to any proposal that does not comply with the requirements set forth above or other applicable requirements. We intend to file a proxy statement and WHITE proxy card with the SEC in connection with our solicitation of proxies for our 2023 annual meeting. Shareholders may obtain our proxy statement (and any amendments and supplements thereto) and other documents as and when filed with the SEC without charge from the SEC’s website at: www.sec.gov. | |||||
| 66 | Cognizant |
Proxy statement and proxy solicitation
About this proxy statement and the annual meeting
This proxy statement is furnished in connection with the solicitation by the Board of proxies to be voted at our annual meeting to be held on Tuesday, June 7, 2022, at 9:30 am Eastern Time, via live webcast, and at any continuation, postponement or adjournment thereof. Holders of record of shares of our Class A common stock (“common stock”) as of April 11, 2022, the record date, will be entitled to notice of and to vote at the annual meeting and any continuation, postponement or adjournment thereof. As of the record date, there were 521,171,196 shares of common stock issued and outstanding and entitled to vote at the annual meeting. Each share of common stock is entitled to one vote on any matter presented to shareholders at the meeting.
At the annual meeting, our shareholders will be asked to vote on the management proposals and shareholder proposal set forth on pages 4 and 5. The Board recommends that you vote your shares as indicated on pages 4 and 5. If you return a properly completed proxy card, or vote your shares by telephone or over the Internet, your shares of common stock will be voted on your behalf as you direct. If not otherwise specified, the shares of common stock represented by the proxies will be voted in accordance with the Board’s recommendations set forth on pages 4 and 5. We know of no other business that will be presented at the annual meeting. If any other matter properly comes before the shareholders for a vote at the annual meeting, however, the proxy holders named on the company’s proxy card will vote your shares in accordance with their best judgment.
Notice of internet availability of proxy materials
As permitted by SEC rules, Cognizant is making this proxy statement and its 2021 Annual Report available to certain of its shareholders electronically via the Internet. On or about April 27, 2022, we mailed to these shareholders a Notice of Internet Availability of Proxy Materials (the “Internet Notice”) containing instructions on how to access this proxy statement and our 2021 Annual Report and vote online. If you received an Internet Notice by mail, you will not receive a printed copy of the proxy materials in the mail unless you specifically request them. Instead, the Internet Notice instructs you on how to access and review all of the important information contained in this proxy statement and 2021 Annual Report. The Internet Notice also instructs you on how you may submit your proxy over the Internet. If you received an Internet Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials contained on the Internet Notice.
Printed copies of our proxy materials and householding
Some of our shareholders received printed copies of our proxy statement, 2021 Annual Report and proxy card. If you received printed copies of our proxy materials, then instructions regarding how you can vote are contained on the proxy card included in the materials.
The SEC’s rules permit us to deliver a single set of proxy materials to one address shared by two or more of our shareholders. This delivery method is referred to as “householding” and can result in significant cost savings. To take advantage of this opportunity, we have delivered only one set of proxy materials to multiple shareholders who share an address, unless we received contrary instructions from the impacted shareholders prior to the mailing date. We agree to deliver promptly, upon written or oral request, a separate copy of the proxy materials, as requested, to any shareholder at the shared address to which a single copy of those documents was delivered. If you prefer to receive separate copies of the proxy materials, contact Broadridge Financial Solutions, Inc. (“Broadridge”) at 866-540-7095 or in writing at Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717. If you are currently a shareholder sharing an address with another shareholder and wish to receive only one copy of future proxy materials for your household, please contact Broadridge at the above phone number or address.
Solicitation of proxies
The accompanying proxy is solicited by and on behalf of the Board, whose meeting notice is included with this proxy statement, and the entire cost of such solicitation will be borne by us. In addition to the use of mail, proxies may be solicited by personal interview, telephone, e-mail, text and facsimile by our directors, officers and other employees who will not be specially compensated for these services. We have engaged Morrow Sodali Corporate LLC to assist us with the solicitation of proxies. We expect to pay Morrow Sodali LLC a fee of $18,000 plus reimbursement for out-of-pocket expenses for its services. We will also request that brokers, nominees, custodians and other fiduciaries forward soliciting materials to the beneficial owners of shares held by such brokers, nominees, custodians and other fiduciaries. We will reimburse such persons for their reasonable expenses in connection therewith.
Communications to the Board from shareholders
Under procedures approved by a majority of our independent directors, our Chair, General Counsel and Secretary are primarily responsible for monitoring communications from shareholders and, if they relate to important substantive matters and include suggestions or comments that our Chair, General Counsel and Secretary consider to be important for the directors to know, providing copies or summaries to the other directors. In general, communications relating to corporate governance and long-term corporate strategy are more likely to be forwarded than communications relating to ordinary business affairs, personal grievances and matters as to which we tend to receive repetitive or duplicative communications.
| 2022 Proxy Statement | 67 |
The Board will give appropriate attention to written communications that are submitted by shareholders, and will respond if and as appropriate. Shareholders who wish to send communications on any topic to the Board should address such communications to the Board or our General Counsel and Secretary. See “Helpful resources” on page 77.
What is the difference between being a “record holder” and holding shares in “street name”?
A record holder holds shares in his or her name. Shares held in “street name” means shares that are held in the name of a bank or broker on a person’s behalf.
Am I entitled to vote if my shares are held in “street name”?
Yes. If your shares are held by a bank or a brokerage firm, you are considered the “beneficial owner” of those shares held in “street name”. If your shares are held in street name, these proxy materials are being provided to you by your bank or brokerage firm, along with a voting instruction card if such bank or brokerage firm received printed copies of our proxy materials. As the beneficial owner, you have the right to direct your bank or brokerage firm how to vote your shares, and the bank or brokerage firm is required to vote your shares in accordance with your instructions. If your shares are held in street name, and you wish to vote your shares at the annual meeting, you may join the annual meeting live webcast following the instructions provided under “How do I join the annual meeting live webcast?” below.
How many shares must be present to hold the annual meeting?
A quorum must be present at the annual meeting for any business to be conducted. The presence at the annual meeting, via live webcast or by proxy, of the holders of a majority of the shares of common stock outstanding on the record date will constitute a quorum.
Who can attend the annual meeting live webcast?
You may attend the annual meeting only if you are a Cognizant shareholder who is entitled to vote at the annual meeting, or if you hold a valid proxy for the annual meeting.
How do I join the annual meeting live webcast?
The annual meeting will be a virtual meeting of shareholders conducted via a live webcast that provides shareholders the same rights and opportunities to participate as they would have at an in-person meeting. We believe that a virtual meeting will provide expanded shareholder access and participation and improved communications. You will be able to vote your shares electronically at the virtual meeting.
To attend and submit your questions during the virtual meeting, please visit www.virtualshareholdermeeting.com/CTSH2022. To participate and vote during the annual meeting, you will need the 16-digit control number included on your Internet Notice or on your proxy card. Beneficial shareholders who do not have a control number may gain access to and vote at the meeting by logging in to their broker, brokerage firm, bank or other nominee’s website and selecting the shareholder communications mailbox to access the meeting; instructions should also be provided on the voting instruction card provided by your broker, bank, or other nominee. If you lose your 16-digit control number, you may join the annual meeting as a “Guest”, but you will not be able to vote, ask questions or access the list of shareholders as of the record date.
If you encounter any difficulties accessing the virtual meeting during check-in or the meeting, please call the technical support number that will be posted on the virtual shareholder meeting log-in page.
What if a quorum is not present at the annual meeting?
If a quorum is not present at the scheduled time of the annual meeting, the Chair of the meeting is authorized by our by-laws to adjourn the meeting without the vote of shareholders.
Will there be a question and answer session during the annual meeting?
As part of the annual meeting, we will hold a live question and answer session, during which we intend to answer appropriate questions submitted during the meeting that are pertinent to the company and the meeting matters. If there are matters of individual concern to a shareholder and not of general concern to all shareholders, or if a question posed was not otherwise answered, we
| 68 | Cognizant |
Additional information > Annual meeting Q&A
provide an opportunity for shareholders to contact us separately after the meeting through our investor relations website (see page 77). Only shareholders that have accessed the annual meeting as a shareholder (rather than a “Guest”) by following the procedures outlined in “How do I join the annual meeting live webcast?” on page 68 will be permitted to submit questions during the annual meeting. Each shareholder is limited to no more than two questions. Questions should be succinct and only cover a single topic. We will not address questions that are, among other things:
| ● | not pertinent to the business of the company or to the business of the annual meeting; |
| ● | related to material non-public information of the company, including the status or results of our business since our last Quarterly Report on Form 10-Q; |
| ● | related to any pending, threatened or ongoing litigation; |
| ● | related to personal grievances; |
| ● | derogatory references to individuals or that are otherwise in bad taste; |
| ● | substantially repetitious of questions already made by another shareholder; |
| ● | in excess of the two question limit; |
| ● | in furtherance of the shareholder’s personal or business interests; or |
| ● | out of order or not otherwise suitable for the conduct of the annual meeting as determined by the Chair of the meeting or Secretary in their reasonable judgment. |
Additional information regarding the question and answer session will be available in the “Rules of Conduct” available on the annual meeting webpage for shareholders that have accessed the annual meeting as a shareholder (rather than a “Guest”) by following the procedures outlined above in “How do I join the annual meeting live webcast?” on page 68.
What does it mean if I receive more than one Internet Notice or more than one set of proxy materials?
It means that your shares are held in more than one account at the transfer agent and/or with banks or brokers. Please vote all of your shares. To ensure that all of your shares are voted, for each Internet Notice or set of proxy materials, please submit your proxy by phone, via the Internet, or, if you received printed copies of the proxy materials, by signing, dating and returning the enclosed proxy card in the enclosed envelope.
How do I vote by proxy?
We recommend that shareholders vote by proxy even if they plan to attend and vote during the annual meeting. If you are a shareholder of record, there are three ways to vote by proxy:
| ● | Use the Internet. You can vote over the Internet at www.proxyvote.com by following the instructions on the Internet Notice or proxy card; |
| ● | Call. You can vote by telephone by calling +1-800-690-6903 and following the instructions on the proxy card; or |
| ● | Mail Your Proxy Card. You can vote by mail by signing, dating and mailing the proxy card, which you may have received by mail. |
Telephone and Internet voting facilities for shareholders of record will be available 24 hours a day and will close at 11:59 p.m. Eastern Time on June 6, 2022. The above phone number will work internationally but is only toll-free for callers within the U.S. and Canada.
If your shares are held in street name through a bank or broker, you will receive instructions on how to vote from the bank or broker. You must follow their instructions in order for your shares to be voted. Telephone and Internet voting also will be offered to shareholders owning shares through certain banks and brokers.
Can I change my vote after I submit my proxy?
Yes. If you are a registered shareholder, you may revoke your proxy and change your vote by:
| ● | submitting a duly executed proxy bearing a later date; |
| ● | granting a subsequent proxy through the Internet or telephone; |
| ● | giving written notice of revocation to the Secretary of Cognizant prior to the annual meeting; or |
| ● | attending and voting during the annual meeting live webcast. |
Your most recent proxy card or telephone or Internet proxy is the one that is counted. Your attendance at the annual meeting itself will not revoke your proxy unless you give written notice of revocation to the Secretary before your proxy is voted or you vote at the annual meeting.
If your shares are held in street name, you may change or revoke your voting instructions by following the specific directions provided to you by your bank or broker.
| 2022 Proxy Statement | 69 |
Where do I direct requests for materials mentioned in this proxy statement and how do I contact Cognizant’s Secretary?
Please direct requests for materials mentioned in this proxy statement or other inquiries to our Secretary. See “Helpful resources” on page 77 for how to contact our Secretary.
Whom should I contact if I have questions or need assistance voting?
Please contact Morrow Sodali LLC, our proxy solicitor assisting us in connection with the annual meeting. Shareholders in the United States may call toll free at +1-800-607-0088. Banks and brokers and shareholders located outside of the United States may call collect at +1-203-658-9400.
Who will count the votes?
Representatives of Broadridge Financial Solutions, Inc., our inspector of election, will tabulate and certify the votes.
What if I do not specify how my shares are to be voted?
If you submit a proxy but do not indicate any voting instructions, the persons named as proxies will vote in accordance with the recommendations of the Board. The Board’s recommendations for each proposal are set forth on pages 4 and 5, as well as with the description of each proposal in this proxy statement.
How many votes are required for the approval of the proposals to be voted upon and how will abstentions and broker non-votes be treated?
| Proposal | Votes required | Effect of Abstentions and Broker Non-Votes | ||
| Proposal 1: Election of directors | Votes cast “for” exceed votes cast “against”. | No effect. | ||
| Proposal 2: Advisory (non-binding) vote on executive compensation (Say-on-Pay) | Majority of votes cast. | No effect. | ||
| Proposal 3: Ratification of appointment of independent registered public accounting firm | Majority of votes cast. | Abstentions will have no effect; no broker non-votes expected. | ||
| Proposal 4: Special shareholder meeting improvement | Majority of votes cast. | No effect. |
What is an abstention and how will abstentions be treated?
An “abstention” represents a shareholder’s affirmative choice to decline to vote on a proposal. Abstentions are counted as present and entitled to vote for purposes of determining a quorum. Abstentions will have no effect on any of the proposals before the annual meeting.
What are broker non-votes and do they count for determining a quorum?
Generally, broker non-votes occur when shares held by a broker in “street name” for a beneficial owner are not voted with respect to a particular proposal because the broker (i) has not received voting instructions from the beneficial owner and (ii) lacks discretionary voting power to vote those shares. A broker is entitled to vote shares held for a beneficial owner on routine matters, such as the ratification of the appointment of PwC as our independent registered public accounting firm, without instructions from the beneficial owner of those shares. On the other hand, absent instructions from the beneficial owner of such shares, we expect that a broker will not be entitled to vote shares held for a beneficial owner on all of the other proposals to be voted on at the annual meeting. Broker non-votes count for purposes of determining whether a quorum is present.
Where can I find the voting results of the annual meeting of shareholders?
We plan to announce preliminary voting results at the annual meeting and we will report the final results in a Current Report on Form 8-K, which we intend to file with the SEC shortly after the annual meeting.
Cognizant’s annual report on Form 10-K
A copy of Cognizant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, including financial statements and schedules thereto but not including exhibits, as filed with the SEC, will be sent to any shareholder of record on April 11, 2022, without charge, upon written request addressed to our Secretary. See “Helpful resources” on page 77. A reasonable fee will be charged for copies of exhibits. You may also access this proxy statement and our 2021 Annual Report at www.proxyvote.com and at www.cognizant.com.
| 70 | Cognizant |
Additional information > Forward-looking statements and non-GAAP financial measures
Forward-looking statements and non-GAAP financial measures
Forward-looking statements
This proxy statement and the letter to shareholders included with this proxy statement include statements that may constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the accuracy of which are necessarily subject to risks, uncertainties and assumptions as to future events that may not prove to be accurate. These statements include, but are not limited to, express or implied forward-looking statements relating to our expectations regarding our company vision and strategy, our ESG commitments, the growth of our business and our anticipated financial performance. These statements are neither promises nor guarantees, but are subject to a variety of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those contemplated in these forward-looking statements. Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Factors that could cause actual results to differ materially from those expressed or implied include general economic conditions, the competitive and rapidly changing nature of the markets we compete in, the competitive marketplace for talent and its impact on employee recruitment and retention, legal, reputational and financial risks resulting from cyberattacks, the effectiveness of business continuity plans during the COVID-19 pandemic, the continued impact of the COVID-19 pandemic, changes in the regulatory environment, including with respect to immigration and taxes, and the other factors discussed in our most recent Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. Cognizant undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities law.
Non-GAAP financial measures
Portions of our disclosure include non-GAAP financial measures. These non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures should be read in conjunction with our financial statements prepared in accordance with GAAP. The reconciliations of our non-GAAP financial measures to the corresponding GAAP measures set forth below, should be carefully evaluated.
In 2018, we announced a plan to modify our non-GAAP financial measures. Our historical non-GAAP financial measure, non-GAAP diluted earnings per share (EPS), excluded stock-based compensation expense, acquisition-related charges, unusual items, net non-operating foreign currency exchange gains or losses and the tax impact of all applicable adjustments. Our non-GAAP financial measures, adjusted operating margin, adjusted income from operations and adjusted diluted EPS, exclude unusual items. Additionally, adjusted diluted EPS excludes net non-operating foreign currency exchange gains or losses and the tax impact of all applicable adjustments. The income tax impact of each item is calculated by applying the statutory rate and local tax regulations in the jurisdiction in which the item was incurred. Free cash flow is defined as cash flows from operating activities net of purchases of property and equipment. Constant currency revenue growth is defined as revenues for a given period restated at the comparative period’s foreign currency exchange rates measured against the comparative period’s reported revenues.
We believe providing investors with an operating view consistent with how we manage the company provides enhanced transparency into our operating results. For our internal management reporting and budgeting purposes, we use various GAAP and non-GAAP financial measures for financial and operational decision-making, to evaluate period-to-period comparisons, to determine portions of the compensation for our executive officers and for making comparisons of our operating results to those of our competitors. Therefore, it is our belief that the use of non-GAAP financial measures excluding certain costs provides a meaningful supplemental measure for investors to evaluate our financial performance. We believe that the presentation of our non-GAAP financial measures along with reconciliations to the most comparable GAAP measure, as applicable, can provide useful supplemental information to our management and investors regarding financial and business trends relating to our financial condition and results of operations.
A limitation of using non-GAAP financial measures versus financial measures calculated in accordance with GAAP is that non-GAAP financial measures do not reflect all of the amounts associated with our operating results as determined in accordance with GAAP and may exclude costs that are recurring such as our net non-operating foreign currency exchange gains or losses. In addition, other companies may calculate non-GAAP financial measures differently than us, thereby limiting the usefulness of these non-GAAP financial measures as a comparative tool. We compensate for these limitations by providing specific information regarding the GAAP amounts excluded from our non-GAAP financial measures to allow investors to evaluate such non-GAAP financial measures.
| 2022 Proxy Statement | 71 |
Reconciliation to GAAP financial measures
The following table presents a reconciliation of each non-GAAP financial measure to the most comparable GAAP measure for the years indicated.
| (Dollars in millions, except per share data) | 2019 | % of Revenues |
2020 | % of Revenues |
2021 | % of Revenues |
|||||||||||||||
| GAAP income from operations and operating margin | $ | 2,453 | 14.6 | % | $ | 2,114 | 12.7 | % | $ | 2,826 | 15.3 | % | |||||||||
| Class Action Settlement Loss1 | — | — | — | — | 20 | 0.1 | |||||||||||||||
| Realignment charges2 | 169 | 1.0 | 42 | 0.3 | — | — | |||||||||||||||
| 2020 Fit for Growth Plan restructuring charges3 | 48 | 0.3 | 173 | 1.0 | — | — | |||||||||||||||
| COVID-19 charges4 | — | — | 65 | 0.4 | — | — | |||||||||||||||
| Incremental
accrual related to the India Defined Contribution Obligation5 |
117 | 0.7 | — | — | — | — | |||||||||||||||
| Adjusted income from operations and adjusted operating margin | $ | 2,787 | 16.6 | % | $ | 2,394 | 14.4 | % | $ | 2,846 | 15.4 | % | |||||||||
| GAAP diluted EPS | $ | 3.29 | $ | 2.57 | $ | 4.05 | |||||||||||||||
| Effect of the above adjustments, pre-tax | 0.60 | 0.52 | 0.04 | ||||||||||||||||||
| Effect
of non-operating foreign currency exchange losses (gains), pre-tax6 |
0.11 | 0.22 | 0.03 | ||||||||||||||||||
| Tax effect of above adjustments7 | (0.15 | ) | (0.15 | ) | — | ||||||||||||||||
| Tax on Accumulated Indian Earnings8 | — | 0.26 | — | ||||||||||||||||||
| Effect of the equity method investment impairment9 | 0.10 | — | — | ||||||||||||||||||
| Effect of the India Tax Law10 | 0.04 | — | — | ||||||||||||||||||
| Adjusted diluted EPS | $ | 3.99 | $ | 3.42 | $ | 4.12 | |||||||||||||||
| Effect
of stock-based compensation expense and acquisition-related charges11, pre-tax |
0.75 | — | 12 | — | 12 | ||||||||||||||||
| Tax
effect of stock-based compensation expense and acquisition-related charges7 |
(0.16 | ) | — | 12 | — | 12 | |||||||||||||||
| Non-GAAP diluted EPS | $ | 4.58 | — | 12 | — | 12 | |||||||||||||||
| Net cash provided by operating activities | $ | 2,499 | $ | 3,299 | $ | 2,495 | |||||||||||||||
| Purchases of property and equipment | (392 | ) | (398 | ) | (279 | ) | |||||||||||||||
| Free cash flow | $ | 2,107 | $ | 2,901 | $ | 2,216 | |||||||||||||||
| 1 | During 2021, we recorded the Class Action Settlement Loss in “Selling, general and administrative expenses” in our Consolidated Financial Statements. See Note 15 to our Consolidated Financial Statements in our 2021 Annual Report. |
| 2 | As part of our realignment program, we incurred costs associated with our 2019 CEO transition and the departure of our former president, employee separation costs, employee retention costs and professional fees, as applicable. See Note 4 to the Consolidated Financial Statements in our 2021 Annual Report. |
| 3 | As part of our 2020 Fit for Growth plan, we incurred certain employee separation, employee retention and facility exit costs and other charges, as applicable. See Note 4 to the Consolidated Financial Statements in our 2021 Annual Report. |
| 4 | In 2020, we incurred costs in response to the COVID-19 pandemic, including a one-time bonus to our employees at the designation of associate and below in both India and the Philippines, certain costs to enable our employees to work remotely and costs to provide medical staff and additional cleaning services for our facilities. Most of the costs related to the pandemic are reported in “Cost of revenues” in our Consolidated Statements of Operations in our 2021 Annual Report. |
| 5 | In 2019, we recorded an accrual of $117 million related to certain statutory defined contribution obligations of employees and employers in India (the “India Defined Contribution Obligation”) as further described in Note 15 to the Consolidated Financial Statements in our 2021 Annual Report. |
| 72 | Cognizant |
Additional information > Forward-looking statements and non-GAAP financial measures
| 6 | Non-operating foreign currency exchange gains and losses, inclusive of gains and losses on related foreign exchange forward contracts not designated as hedging instruments for accounting purposes, are reported in “Foreign currency exchange gains (losses), net” in our Consolidated Statements of Operations in our 2021 Annual Report. |
| 7 | Presented below are the tax impacts of each of our non-GAAP adjustments to pre-tax income: |
| For the years ended December 31, | ||||||||||||
| (in millions) | 2019 | 2020 | 2021 | |||||||||
| Non-GAAP income tax benefit (expense) related to: | ||||||||||||
| Class Action Settlement Loss | $ | — | $ | — | $ | 6 | ||||||
| Realignment charges | 43 | 11 | — | |||||||||
| 2020 Fit for Growth Plan restructuring charges | 13 | 45 | — | |||||||||
| COVID-19 charges | — | 17 | — | |||||||||
| Foreign currency exchange gains and losses | (1 | ) | 6 | (5 | ) | |||||||
| Incremental accrual related to the India Defined Contribution Obligation | 31 | — | — | |||||||||
| Stock-based compensation expense | 32 | — | 12 | — | 12 | |||||||
| Acquisition-related charges | 55 | — | 12 | — | 12 | |||||||
| 8 | In 2020, we reversed our indefinite reinvestment assertion on Indian earnings accumulated in prior years and recorded $140 million in income tax expense. See Note 11 to the Consolidated Financial Statements in our 2021 Annual Report. |
| 9 | In 2019, we recorded an impairment charge of $57 million on one of our equity investments as further described in Note 5 to the Consolidated Financial Statements in our 2021 Annual Report. |
| 10 | In 2019, the Government of India enacted a new tax regime (“India Tax Law”) effective retroactively to April 2019 that enables domestic companies to elect to be taxed at a lower income tax rate of 25.17%, as compared to the current income tax rate of 34.94%. Once a company elects into the lower income tax rate, a company may not benefit from any tax holidays associated with Special Economic Zones and certain other tax incentives, including Minimum Alternative Tax credit carryforwards, and may not reverse its election. As a result of the enactment of the India Tax Law, we recorded a one-time net income tax expense of $21 million due to the revaluation to the lower income tax rate of our India net deferred income tax assets that we expected to reverse after we elected into the new tax regime. |
| 11 | Acquisition-related charges include amortization of purchased intangible assets included in the depreciation and amortization expense line on our Consolidated Statements of Operations in our 2021 Annual Report, external deal costs, acquisition-related retention bonuses, integration costs, changes in the fair value of contingent consideration liabilities, charges for impairment of acquired intangible assets and other acquisition-related costs, as applicable. |
| 12 | Reconciliations, and the associated inputs to such reconciliations, to the 2020 and 2021 non-GAAP diluted EPS are not presented as the 2020 and 2021 numbers are not presented in this proxy statement or otherwise disclosed publicly. |
| 2022 Proxy Statement | 73 |
| Weblinks | |
| Board of Directors | |
| Cognizant Board | https://www.cognizant.com/about-cognizant/board-of-directors |
| Board Committee Charters | |
| Audit Committee | https://www.cognizant.com/us/en/documents/audit-committee-charter.pdf |
| Compensation and Human Capital Committee | https://www.cognizant.com/us/en/documents/compensation-and-human-capital-committee-charter.pdf |
| Finance and Strategy Committee | https://www.cognizant.com/us/en/documents/finance-and-strategy-committee-charter.pdf |
| Governance and Sustainability Committee | https://www.cognizant.com/us/en/documents/governance-and-sustainability-committee-charter.pdf |
| Financial Reporting | |
| 2021 Annual Report | https://investors.cognizant.com/home/default.aspx#annual-report |
| Cognizant | |
| Corporate Website | https://www.cognizant.com/ |
| Leadership Team | https://www.cognizant.com/about-cognizant/leadership-team |
| Investor Relations | https://investors.cognizant.com |
| Diversity & Inclusion | https://www.cognizant.com/about-cognizant/diversity-and-inclusion |
| Public Policy | https://www.cognizant.com/about-cognizant/public-policy |
| Sustainability | https://www.cognizant.com/about-cognizant/sustainability |
| Governance Documents | |
| By-laws | https://www.cognizant.com/about-cognizant-resources/by-laws.pdf |
| Certificate of Incorporation | https://www.cognizant.com/about-cognizant-resources/certificate-of-incorporation.pdf |
| Code of Ethics | https://www.cognizant.com/codeofethics.pdf |
| Corporate Governance Guidelines | https://www.cognizant.com/about-cognizant-resources/corporate-governance-guidelines.pdf |
Weblinks are provided for convenience only and the content on the referenced websites does not constitute a part of this proxy statement.
| Contacts | |
|
Company Contacts
Board or Secretary
General Counsel
Chief Compliance Officer
...or mail or fax to our principal executive offices, Our Principal Executive Offices
Cognizant Technology Solutions |
To Request Copies of the Internet Notice or Proxy Materials
Broadridge Financial Solutions, Inc. For Questions or Assistance Voting
Morrow Sodali LLC |
| 2022 Proxy Statement | 77 |
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
300 FRANK W. BURR BLVD.
SUITE 36, 6TH FLOOR
TEANECK, NJ 07666
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on June 6, 2022. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
During The Meeting - Go to www.virtualshareholdermeeting.com/CTSH2022
You may attend the meeting via the Internet and vote during the meeting when the polls are open. We recommend, however, that you vote before the meeting even if you plan to participate in the meeting, since you can change your vote during the meeting by voting when the polls are open. Have the information that is printed in the box marked by the arrow ➔XXXX XXXX XXXX XXXX available and follow the instructions.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on June 6, 2022. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
| TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | ||||
| D83663-P70674 | KEEP THIS PORTION FOR YOUR RECORDS | |||
|
DETACH AND RETURN THIS PORTION ONLY |
| The board of directors recommends you vote FOR each of the nominees: | ||||||||||
| 1. | Election of directors to serve until the 2023 annual meeting of shareholders. | |||||||||
| Nominees | For | Against | Abstain | |||||||
| 1a. | Zein Abdalla | ☐ | ☐ | ☐ | ||||||
| 1b. | Vinita Bali | ☐ | ☐ | ☐ | ||||||
| 1c. | Maureen Breakiron-Evans | ☐ | ☐ | ☐ | ||||||
| 1d. | Archana Deskus | ☐ | ☐ | ☐ | ||||||
| 1e. | John M. Dineen | ☐ | ☐ | ☐ | ||||||
| 1f. | Brian Humphries | ☐ | ☐ | ☐ | ||||||
| 1g. | Leo S. Mackay, Jr. | ☐ | ☐ | ☐ | ||||||
| 1h. | Michael Patsalos-Fox | ☐ | ☐ | ☐ | ||||||
| 1i. | Stephen J. Rohleder | ☐ | ☐ | ☐ | ||||||
| 1j. | Joseph M. Velli | ☐ | ☐ | ☐ | ||||||
| 1k. | Sandra S. Wijnberg | ☐ | ☐ | ☐ | ||||||
|
| |||||||||
| The board of directors recommends you vote FOR proposals 2 and 3. | For | Against | Abstain | ||||||
| 2. | Approve, on an advisory (non-binding) basis, the compensation of the company's named executive officers. | ☐ | ☐ | ☐ | |||||
| 3. | Ratify the appointment of PricewaterhouseCoopers LLP as the company's independent registered public accounting firm for the year ending December 31, 2022. | ☐ | ☐ | ☐ | |||||
| The board of directors recommends you vote AGAINST proposal 4. | For | Against | Abstain | ||||||
| 4. | Shareholder proposal requesting that the board of directors take action as necessary to amend the existing right for shareholders to call a special meeting. | ☐ | ☐ | ☐ | |||||
|
Note: To transact such other business as may properly come before the meeting or any continuation, postponement or adjournment thereof. |
|||||||||
|
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. |
||||||
| Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date | |||
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at
www.proxyvote.com.
| D83664-P70674 |
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS OF
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CLASS A COMMON STOCK
JUNE 7, 2022
Please date, sign and mail your proxy card in the envelope provided as soon as possible.
The undersigned shareholder(s) of Cognizant Technology Solutions Corporation hereby appoint(s) Jan Siegmund, Executive Vice President and Chief Financial Officer of the company, John Kim, Executive Vice President, General Counsel, Chief Corporate Affairs Officer and Secretary of the company, Robert Telesmanic, Senior Vice President, Controller and Chief Accounting Officer of the company, and Udele Lin, Vice President and Assistant Secretary of the company, as proxies, with full power of substitution, to vote all shares of the company's Class A Common Stock which the undersigned shareholder(s) is/are entitled to vote at the company's 2022 annual meeting of shareholders or any postponement, continuation or adjournment thereof.
This proxy will be voted in the manner directed herein by the undersigned shareholder. If no direction is made, this proxy will be voted in accordance with the board of directors' recommendations. The proxies are further authorized to vote in their discretion (1) for the election of any person to the board of directors if any nominee named herein becomes unable to serve or for good cause will not serve, (2) on any matter that the board of directors did not know would be presented at the annual meeting by a reasonable time before the proxy solicitation was made, and (3) on such other business as may properly come before the meeting or any continuation, postponement or adjournment thereof.
Continued and to be signed on reverse side
The Board unanimously recommends a vote FOR all the director nominees listed.
Pay for performance, with high percentages of performance-based and long-term equity compensation
See page 34
See page 48
granted upon joining the company.
, which amount is not included in target direct compensation.
The Board unanimously recommends a vote AGAINST this proposal for the reasons discussed in the Board’s Statement of Opposition below.
