Former Cognizant CEO Brian Humphries was “terminated without cause,” according to the Nasdaq-listed company’s regulatory filing (2023 proxy statement).
When an employee is terminated without cause, it indicates that the reason for their dismissal has nothing to do with serious workplace misconduct. In such situations, they continue to be entitled to severance pay.
Humphries resigned as CEO on January 12 and served as a consultant until March 15. Despite widespread speculation that Humphries had been dismissed, the company did not confirm it at the time.
Former Infosys president Ravi Kumar took over as CEO on January 13 after his retirement.
Cognizant fired CEO Humphries.
In his note to shareholders included in the proxy statement, the chairman of the company, Stephen J. Rolheder, stated, “Over the past few years, we believe Cognizant has evolved to embark on a strong development trajectory, become more focused and competitive, and better serve its shareholders and other stakeholders.
The Board has observed sustained strategic and operational advancement throughout this evolution. Inpreparing for 2023, however, the Board acknowledged Cognizant’s need to advance more rapidly, increase its commercial momentum, and accelerate revenue growth. We believed that this necessitated a change in CEO.”
Under Humphries, Cognizant lagged peers in revenue growth by a significant margin, over 100 vice presidents and senior vice presidents resigned, the company withdrew from strategic accounts, had one of the lowest organic growth rates in the IT industry, and its attrition rate remained exceptionally high for many quarters at nearly 30%.
Humphies’ pay dropped from $19.6 million to $17.9 million (a fall of 9 percent).
In 2022, according to the proxy statement, Humphies’ compensation decreased by 9% to $17.9 million from $19.6 million. His non-equity-based compensation decreased from $4 million to $1.7 million. An investor in Cognizant has proposed a vote against termination pay.
The board, however, has requested that shareholders vote against the resolution. According to theproposal, Humphries was paid $20 million annually, which was 575 times the median employee’s pay when the stock price dropped from $81 in 2018 to $36 in 2019.
The Board of Directors of Cognizant recently adopted a new policy prohibiting cash severance benefits in excess of 2.99 times the executive’s base compensation plus target bonus for the year of termination. Anything beyond that threshold will require shareholder approval.
The proxy statement reveals that former EVP Gregory Hyttenrauch was terminated for conduct inconsistent with company policy, after which he received a negotiated separation payment of slightly more than $1 million (considerably less than he would have received had he been terminated without cause) in exchange for an enhanced non-solicitation provision, a non-disparagement provision, and the release of claims against the company.
The statement indicates that EVP Ursula Morgenstern was terminated without cause and received severance pay in accordance with her employment contract last year.