Global IT major Cognizant Technology Solutions, also popularly called CTS, has managed to stay in the limelight almost throughout the year. However, not all of it was for a good reason. And now the American firm has made news for asking its high performing senior-level employees to take cash instead of stock options.
Cognizant is said to have told its senior managers and associate directors, who received a rating of EA during the appraisals, to take home cash instead of the stocks they are usually offered and said that this was due to the buyback program that the firm had initiated, reported the Times of India.
The IT giant had in the beginning of 2017 said that it would return $3.4 billion to its shareholders through dividends and share repurchases and intended to carry out the process over a period of two years. In tune, CTS started the share repurchase program in the first quarter of this year and is reportedly paying a quarterly dividend of $0.15 per share.
Even though CTS hasn't really explained the move, principal analyst and CEO of Constellation Research Ray Wang believes that this is due to investor Elliott Management's role in the operations of the firm. He explained that this, in turn, also reduces the cost that the company will have to face with the buyback.
"This is an interesting development. I believe that it is driven by a need to support the stock price. The equity grants, and stock options dilute the outstanding equity. By converting these to cash they are able to accomplish a version of stock buyback, a strategy which they already agreed to with Elliot," TOI quoted Peter Bendor-Samuel, CEO, Everest Group, as saying.
Meanwhile, CTS earlier made news for the voluntary separation offer that it was said to be making to its employees. While the company said that the package was on a voluntary basis and was completely up to the employees to take it up or not, the move hasn't gone down well with many.
Defending its voluntary separation package, Cognizant also said that this is the first time that the company has introduced an offer like this, whereas other firms have been doing it for years.
"While many of our peers regularly offer separation packages to their employees, this is the first time we have done so at Cognizant. Understandably the concept is unfamiliar to lot of our associates," Cognizant president Rajiv Mehta said in a letter to the employees, according to PTI.
"As its name makes it clear, the VSP is voluntary. No one is required or even asked to participate. We believe, this programme benefits associates who have opted in and are seeking to make a change in their career," he added.