8-KLeadership ChangesOther EventsExhibits & Filings

COGNIZANT TECHNOLOGY SOLUTIONS CORP 8-K Report, Executive Changes (Dec 1, 2010)

Filed December 1, 2010For Securities:CTSH

Summary

Cognizant Technology Solutions Corporation (CTSH) filed an 8-K on December 1, 2010, primarily to announce two significant events: the authorization of a $150 million stock repurchase program and the granting of restricted stock units (RSUs) and performance units to its named executive officers. The stock repurchase program, set to occur over the next 12 months, signals management's confidence in the company's valuation and a commitment to returning capital to shareholders. This move could potentially boost the stock price by reducing the number of outstanding shares. The executive compensation awards are structured to align executive interests with long-term company performance and shareholder value. The restricted stock units vest over three years, providing a retention incentive, while the performance units are tied to achieving specific 2011 revenue milestones, with payout levels ranging from 0% to 200% of the awarded units based on revenue performance between $5.46 billion and $6.14 billion. This performance-based component incentivizes executives to drive revenue growth and meet ambitious financial targets.

Key Highlights

  • 1Cognizant authorized a $150 million stock repurchase program to be executed over the next 12 months, funded by cash on hand and operational cash flow.
  • 2The company granted Restricted Stock Units (RSUs) to its top executives, vesting over a three-year period, designed to ensure continued service and retention.
  • 3Performance Units were also awarded to named executives, contingent upon achieving specific 2011 revenue targets.
  • 4Vesting of Performance Units ranges from 0% to 200% based on 2011 revenue hitting milestones between $5.46 billion and $6.14 billion.
  • 5The CEO, Francisco D’Souza, received the largest grants of both RSUs (60,480) and Performance Units (90,720).
  • 6The Compensation Committee retains discretion in determining the achievement of performance milestones and the final issuance of performance units.
  • 7This filing details the compensation arrangements for key officers under the company's 2009 Incentive Compensation Plan.

Frequently Asked Questions

The stock repurchase program is designed to return capital to shareholders and potentially enhance shareholder value by reducing the number of outstanding shares. It also signals management's belief that the company's stock is undervalued at current market prices.

Performance units are tied to Cognizant achieving specific revenue targets for the fiscal year 2011. The percentage of units that vest and are issued depends on whether the company reaches revenue milestones between $5.46 billion (50% vesting) and $6.14 billion (200% vesting). The Compensation Committee has discretion in determining achievement, and units vest over two tranches: 18 months and 36 months post-grant, provided the executive remains employed.

The restricted stock units granted to executives vest in quarterly installments over a period of three years. Full vesting is achieved on the twelfth quarterly vesting date, which was November 30, 2013, provided the executive remained in the company's service through each applicable vesting date.

The President and Chief Executive Officer, Francisco D’Souza, received the largest grants. He was awarded 60,480 restricted stock units and 90,720 performance units.