CEOs at Indian IT companies like Genpact, Infosys take a cut in their bonuses as growth slows

BENGALURU: For executives of Indian IT firms, the last year has not been kind. CEOs from Genpact and Infosys to Cognizant have seen their performance bonuses shrink as the sector struggles for growth.

US-listed companies, which ask for a non-binding, advisory shareholder vote on the compensation, are saying they have missed their targets and need to be compensated accordingly. Genpact CEO NV Tyagarajan was paid $700,000 out of a 2016 target bonus of $1.12 million, the IT and BPO company said in a proxy filing to the US Securities and Exchange Commission. He was paid $1.33 million in his target bonus for 2015.

“Tyagarajan achieved lower-than target performance on both the financial and strategic metrics included in his scorecard. The 48% decrease in Tyagarajan’s 2016 bonus compared to his 2015 bonus reflects a decrease in the Company multiplier under the bonus plan from 96% in 2015 to 83% in 2016, the impact of lower-than-target Company performance on achievement of the financial metrics in his scorecard, and lower-than-target performance on the strategic metrics in his scorecard,” Genpact said in the proxy.

In terms of realisable pay, Tyagarajan earned $1.41 million in 2016 compared to $2.05 million in 2015. He also forfeited the performance stock units granted to him in 2016 for failure to achieve threshold revenue and adjusted income from operations performance.




Genpact’s revenue rose 6% to $2.57 billion in constant currency terms in 2016 and the company said that it was no longer guaranteed a minimum amount of business from its former parent General Electric. The company’s growth woes mimic those of the rest of the sector. The National Association of Software and Services Companies cut its growth guidance to 8-10% for FY17 and has deferred issuing a target for FY18 as uncertainties such as Brexit and the fate of the US Affordable Care Act curb spending.

The fact that CEOs are also feeling the pain is a rare bright spark for Indian IT employees, who are facing low-to-mid single digit wage hikes and have also seen their variable pay slashed. “Companies cannot give CEOs millions of dollars when they are giving us peanuts. I would be happy that their bonuses are cut but there is a big difference when your $1million bonus is cut and your Rs 2 lakh bonus is cut,” an mid-ranking executive in the Indian IT sector said. He declined to be identified.

Cognizant CEO Francisco D’Souza’s compensation fell by a third in 2016. He took home $8.26 million down from close to $12 million in 2015. And the company has changed some of its performance targets to reflect its new goals.

The Teaneck-New Jersey headquartered company had always placed revenue over margins, which historically hovered at about 19-20%. The company has since said it will target achieving 22% in non-GAAP margins by 2019. Revenue growth also had a greater weightage in the payout formula for performance bonuses, though that will change in 2017.

“For 2017 awards: Revenue reduced to 50% weighting for PSUs to reflect increased Company focus on non-GAAP Operating Margin. Non-GAAP EPS increased to 50% weighting for PSUs; target accounts for $1.5 billion accelerated share repurchase program initiated in March 2017,” Cognizant said in its proxy filing.

Infosys’s CEO Vishal Sikka was issued fewer than a fifth of the stock options he was eligible for as part of his compensation. Sikka was eligible for an annual grant of performance based equity and stock options of $5 Million, subject to achievement of performance targets. Infosys chairman R Seshasayee said that Sikka’s salary would be lower compared to FY16.

“If the targets were not met, as in the case of Vishal, the compensation came down this year as compared to last year. We just acted on the promise we made to shareholders,” Seshasayee told ET. Shareholder advisory firm said the slashing of CEO payouts at a time of slower growth was a feature of good corporate governance.