Shareholders do not pose any risk for us: Cognizant
BENGALURU: US-based Cognizant Technology Solutions Corp, which was last year pushed by activist investment firm Elliott Management Corp to change its business model, does not view any of its shareholders as a risk factor. Chief executive officer Francisco D’Souza, in a rare media interview, indicated that Cognizant would always remain open to engaging with and listening to “constructive” suggestions from key shareholders. “Our shareholders are our owners,” D’Souza said on Monday.
That’s unlike Indian peer Infosys Ltd, which in June said in a statutory filing to the US Securities and Exchange Commission that actions by activist shareholders could affect the company and devalue its stock.
“Responding to actions by activist shareholders can divert the attention of our board of directors, management and our employees and disrupt our operations. Such activities could interfere with our ability to execute our strategic plan,” said Infosys.
On June 14, Mint reported that although Infosys stopped short of calling out names, at least three company executives familiar with the development had said that some moves by its founders, who flagged governance lapses at the company, clearly fall in the area of activism. To be sure, that filing preceded this month’s farranging changes at Infosys, with CEO Vishal Sikka quitting and co-founder Nandan Nilekani returning to the company in the role of non-executive chairman.
“In regulatory filings we may disclose things about the business that we are required to disclose based on regulatory requirements,” D’Souza said. “If I were to answer it from a ‘learnings from Elliott’ standpoint, we had a constructive conversation with a shareholder that had ideas about how we should run the business and we arrived at a conclusion point that I think was good for all of our shareholders and were in the best interests of the company in the long run. So, that’s not my definition of a risk,” added D’Souza.
In November last year, Elliott pushed Cognizant to get rid of what it felt was an “antiquated, growth-at-all-costs” business model, and focus instead on total shareholder returns.
D’Souza also highlighted that while Cognizant had discussed the matter with Elliott, the company’s decision to change its business model was taken much earlier in 2016, when Cognizant was re-assessing its five-year goals.
He also dismissed suggestions that Cognizant has ditched its so-called “growth at all costs” mindset. “I wouldn’t characterise the first 22 years of the growth journey at Cognizant as ‘growth at all costs.’ At that phase of the industry, the market opportunity was significant. We needed to catch market share — when we started the company and when we took the company public, we were small. It was the right thing to do — to capture market share. As we transition, it was really important to say to investors that you should now expect us to be focused on growth that is highquality and sustainable...and as part of that, we said we would slowly take margins up.”
Over the past decade, D’Souza, who took over as CEO at Cognizant in 2007, has steered the company from a revenue base of $1.42 billion to $13.49 billion at the end of 2016. In 2010, Cognizant overtook Wipro Ltd, and the next year, surpassed Infosys in terms of quarterly and annual revenues.